Housebuilder anticipates a ‘robust set of results’ for the year

Housebuilder Redrow said it continues expect to reinstate interim dividend payments at the half year and to be cash positive for the remainder of the financial year.

In a statement ahead of its annual general meeting today, the group, based in Ewloe, near Chester, said trading has been extremely encouraging.

Announcing a trading update for the 18 week period ending October 30, it revealed it has entered the new financial year in a position of strength which chairman John Tutte said has been reinforced with strong trading since the start of the year.

The construction industry is not affected by this latest national lockdown and Mr Tutte said today: “There has been resolute demand for homes with more space to live and work as customers reflect on their lockdown experiences.”

The value of net private reservations in the 18 weeks to October 30 was five per cent ahead of last year at £630m. Demand in the regions has been particularly strong with the value of reservations 17% ahead.

Pricing has also remained firm with modest gains in the regions. The average selling price of private reservations for the first 18 weeks was two per cent up on last year at £396,000.

Homes turnover for the 18 week period was 48% up on last year at £657m. Mr Tutte said: “This strong performance has not depleted the total forward order book which currently remains close to record levels at £1.5bn, a 10% increase on this time last year.”

He added: “Our balance sheet is strong and at the end of week 18, we had net cash of £115m (2019: net debt £32m). We continue to expect to reinstate dividend payments at the half year and to be cash positive for the remainder of the financial year.”

He said the group is making good progress on scaling-back operations in London and has now exited three of the six sites it decided not to develop, while continuing to make headway on the balance.

“The group’s strategy to focus its future growth in the regions means it is well-positioned to capitalise on the evident shift in buyer priorities as a result of lockdown experiences,” he said.

“This, combined with our disciplined approach to operations, a healthy balance sheet and a strong forward order book, creates a solid platform for the future and puts Redrow on course to deliver a robust set of results this financial year.”

Russ Mould, investment director at Manchester investmdent platform AJ Bell, said: “If you could have told housebuilder Redrow in March that by the Autumn its turnover and reservations would be running ahead of the same period from a year earlier, it would have bitten your hand off and even the whole arm.

“In common with its peer group, the company has benefited from pent-up demand which built during lockdown, aided by the stamp duty holiday introduced by Chancellor Rishi Sunak, and people looking for more space having experienced the restrictions of being stuck indoors.

“While the first two are likely to have a short-term impact – though Redrow and its rivals will be praying that Sunak comes up with more support for the sector in 2021 – the last one could be more of a long-term structural change in the market.

“In this context Redrow points to its premium ‘Heritage Collection’ offer as chiming with potential purchasers looking for extra living space and bigger gardens.

“Undermining the foundations of Redrow’s rebuild job after the pandemic is growing unemployment in the UK – which may be tempered in the short-term by the extension of furlough.

“At least lockdown 2.0 will see the company continue to operate – it will hope that even more stringent measures, with the construction industry forced to down tools as it did in the Spring, aren’t coming down the road.

“Investors will not respond positively if anything derails a pledge to resume dividends at the half year stage.”