Record-breaking Redrow warns on Brexit
North West housebuilder Redrow today reported record annual revenues and profits, and called for clarity on Brexit going forward.
The group, based in Ewloe, near Chester, saw turnover for the year to June 18, rise by 16% to £1.92bn. Pre-tax profits of £380m was a 21% improvement on last year.
Redrow’s housing completions rose by 9% to 5,913, and its full year dividend of 28p per share represents a 65% improvement on the previous year.
The group also posted a positive cash position of £63m, against net debt of £73m a year ago.
Throughout the year the staffing numbers rose by 5% to 2,300, while 7,455 plots were added to its current land holdings.
Looking ahead, the group boats a record order book of £1.1bn, up from £1bn in 2017.
Founder and chairman, Steve Morgan, said: “I am delighted to report that Redrow has delivered another year of strong growth and record results.
“This excellent trading performance enabled us to achieve strong cash generation, such that we ended the year with net cash of £63m.
“As a result we are proposing a final dividend of 19p which would give a full year dividend of 28p per share, 65% up on last year.”
He added: “Redrow is committed to growing our output to help the country’s requirement to increase the number of new homes built.
“We have a very strong forward order book, first class land holdings, an excellent balance sheet and we are able to react quickly to changing circumstances.
“However, there is no doubt that clarity over Brexit and the future of ‘Help to Buy’ would improve market sentiment.
“Given that clarity, we will continue to deliver.”
He revealed that in the last financial year, 1,794 of Redrow’s private reservations were secured through the Government’s Help to Buy scheme, a similar level to the previous year.
Russ Mould, investment director at Manchester investment platform AJ Bell, commented this morning: “With a 65% increase in the annual dividend translating into a barely 2% increase in the share price at the opening, Redrow chairman Steve Morgan must be wondering what he has to do to get his firm’s share price going again, as it tries to rally from levels last seen a year ago.
“After all, Redrow, like the house builders’ sector as a whole, comes with a net cash balance sheet, a decent yield and a low earnings multiple. All three suggest the stock – and the sector – looks cheap.
“But when an earnings multiple is low and the dividend yield is high, this is often a two-fold message from investors.
“First, they do not believe the earnings numbers, and therefore are of the view that the shares are not as cheap as they look.
“Second, to compensate themselves for this perceived risk of earnings disappointment, they are demanding a high dividend yield.
“This scepticism is understandable at a time when UK mortgage approvals have fallen year-on-year for 10 consecutive months, the unknown of Brexit is looming, consumer confidence remains soggy – and the builders are starting to press for another extension to the Government’s Help to Buy scheme, which is due to expire in 2021.”
Mr Mould added: “Since demand does not appear to be the problem for the housing market, perhaps affordability is the issue.
“Redrow itself recorded another 7% increase in average selling prices to £332,200, a figure that exceeds the 2007 cyclical peak by some 80%, while volume completions were just 23% higher.
“That helps to explain the gathering calls for a Help to Buy extension, although it remains debatable whether further boosting demand while supply remains relatively constrained is going to help or make matters worse.
“Still, it would not be the biggest shock in the world were the Government to further the life of the scheme, especially as it is currently due to expire in the year before the General Election that is scheduled for 2022.”
