Redrow feels the economic squeeze as first half figures decline

Housebuilder, Redrow, reported a fall in half-year revenues and pre-tax profits today, as its warning of difficult times ahead in its November AGM became reality.

It said it expected to feel the effects of the economic downturn and inflationary pressures in its announcement last year, and today, the group, based in Ewloe, near Chester, revealed revenues of £1.031bn for the six months to January 1, 2023, which were £21m worse than the same point last year, albeit a record performance.

Pre-tax profits fell £5m to £198m, compared with the previous year.

Net cash levels declined by £135m to £107m, and the total order book of £1.1bn is £400m worse than the same time a year ago.

However, the interim dividend of 10p per share remains the same.

The group said it has made an encouraging start to the second half, with the volume of private reservations per outlet per week for the five weeks to February 5, of 0.51.

It also announced that air source heat pumps and underfloor heating on the ground floor will, in future, be standard in detached homes on new developments.

Due to the recent change in market conditions the company has withdrawn its guidance for 2024.

The gr0up also made the point that its “strong financial performance was delivered in the context of a broken planning system. At a time when the Government is trying to achieve growth, it remains a major barrier.”

Chief executive, Matthew Pratt, said: “Redrow’s proven business model has played an important role during a time of significant political and economic uncertainty.

“We have award-winning homes and places, a strong forward order book, land acquired in the last few years at good margins, and current cash reserves of £107m. This is despite completing a £100m share buyback exercise on 13th January 2023, just after the financial half-year under review.

“We have experienced a positive start to second half trading. Whilst 2023 will be a challenging year as the market resets, early indications are better than anticipated and the market appears to be finding a new, natural level.”

He added: “Redrow has become the first large housebuilder to begin selling homes which will incorporate air source heat pumps as standard. Underfloor heating will also be provided as standard on the ground floor in our detached homes. The approach has been shaped by customer trials, research and the work of our own in-house design and innovation team.

“We entered the second half with a total order book of £1.1bn, of which £0.8bn was private. Our net private reservation rate for the first five weeks of the second half was an encouraging 0.51 compared to 0.38 in the first half.

“We, therefore, expect to achieve revenue of around £2.05bn for the full financial year, with an operating margin in the region of 18% to 18.5%.”