Record reservations give housebuilder confidence for second half trading

Housebuilder Redrow achieved record reservation levels in the first half of its financial year, which the group says will lead to a “considerably more weighted” second half that will offset first half falls in revenues and pre-tax profits.

Announcing its results for the six months to December 31, 2019, today, the group, based in Ewloe, near Chester, revealed turnover of £870m, which was a 10% fall on the previous year’s £970m figure.

Pre-tax profits of £157m were 15% worse that the 2018 level of £185m.

The total order book remained static at £1.2bn, but the group said reservations worth £936m, 18% better than the previous year’s figure of £795m.

Accordingly, the interim dividend has been raised five per cent to 10.5p per share.

Chief executive John Tutte said: “Redrow has once again delivered a robust operational and financial first-half performance consistent with our expectation that revenue will be considerably more weighted than usual to the second half.

“The group delivered a record value of first half reservations at £936m (2019: £795m), a pre-tax profit of £157m (2019: £185m) and ended the period with net cash of £14m (2019: £101m).

“Given our confidence in the full-year performance we have declared an interim dividend of 10.5p, up 5% on the previous year.”

He said: “The market in the first five weeks of the second half has been resilient with the value of reservations up 15% at £180m (2019: £156m).

“Current market conditions, combined with our very strong order book, give me confidence this will be yet another year of progress for Redrow and our expectations for the full year remain unchanged.”

The group said the fall in revenues was due to legal completions reducing from 2,970 to 2,554 in the six month period.

Private completions were down by 99 and social completions were 317 lower and accounted for 19% (2019: 27%) of total completions. The private average selling price was similar to last year at £387,000, compared with £391,000 in 2019.

Overheads increased from £46m to £49m following the opening a new Thames Valley division in July.

The group said the reduction in net cash was due to paying out £149m in dividends and tax in the first-half (2019: £105m).

Redrow acquired 1,946 plots with planning and the owned and contracted land holdings with planning closed at 28,125 plots, compared with 28,566 plots in June 2019.

It said: “Although our cautious approach to land acquisition during a prolonged period of political and economic uncertainty impacted the rate of outlet growth, our strategy to acquire larger sites has reduced the rate at which outlets are now closing.

“As a result, we are expecting outlet growth to be strong in the second-half, despite ongoing delays in the planning system.”

The group is currently operating from 134 outlets, against 128 in 2019: 128 and continues to expect to operate from an average of 131 outlets for the full year, up from 126 in 2019.

Mr Tutte said: “Planned changes to Help to Buy next year will limit the scheme to first-time buyers and introduce regional price caps.

“While we expect this will see demand increase in the short-term from buyers that will not qualify for the scheme in 2021, we continue to urge government to review the caps that, as they stand, will disadvantage buyers in the North and Midlands.

“Due to constrained outlet growth last year and the timing of apartment block completions, we budgeted to deliver significantly more completions than usual in the second-half. We are on-track to do so and our expectations for the full year remain unchanged.”

He also announced that he will step down from his role as executive chairman from July 1, 2020, and return to non-executive chair, and will retire from the board ahead of the AGM in 2021.

His promotion followed the retirement of founder and chief executive Steve Morgan earlier last year, to ensure a smooth transition to a more conventional board structure.