Housebuilder Redrow weathers storm of difficult trading conditions

North West housebuilder, Redrow, reported a fall in both turnover and profits today.

In the year to July 2, 2023, the builder, based in Ewloe, near Chester, achieved sales of £2.127bn, compared with £2.140bn the previous year, while pre-tax profits fell from £410m, before exceptional items, to £395m.

The group warned in its interim statement in February that it faced difficult trading conditions, exacerbated by the cost of living crisis and rising inflation.

Its final dividend has been cut from 32p per share to 30p.

However, chief executive Matthew Pratt, described the perfomance as “a strong set of results”.

The group reported 5,436 legal completions during the year, which was below the previous year’s 5,715 figure.

Its total order book also revealed a 41% decline, down from £1.44bn a year ago to £850m for 2023.

CEO, Matthew Pratt, said: “Despite continuing political and economic headwinds, I’m pleased to report that the group has delivered another strong set of results.

“During the year under review, we have taken several important strategic decisions to maximise sustainable value for our stakeholders, while delivering 5,436 homes.

“Cost of living and mortgage affordability continue to have a negative impact on the market. Where appropriate, we’ve used targeted sales incentives to convert buyer interest into reservations.

“Following several consecutive Bank of England base rate increases, we remain hopeful that, as inflation eases, we will see some stability in mortgage rates.

“The reduction in mortgage volatility will enable potential customers to progress the purchase of their home with financial certainty. Reflecting the macro-economic picture and the tougher sales market, our average private reservation rate per week for the year was 0.46 compared to 0.68 in 2022.”

He added: “As expected, the sales market over the summer has been challenging. This has resulted in sales per outlet per week for the first 10 weeks of the new financial year of 0.34 (2023: 0.61).

“Despite these difficult market conditions our strategy remains the right one, and this was clearly demonstrated during the financial year under review.

“Our Heritage Collection serves different parts of the market – from downsizers who want character with energy efficiency, to aspirational home movers who desire quality and space.”

He revealed the difficult conditions have led to some cuts, saying: “We took the difficult decision in July 2023 to reshape the business, closing two of our smaller divisional offices: Thames Valley and Southern. Our outlets were unaffected by this change, and they are now managed by other local divisions. We also reduced a number of roles across our wider teams to reflect market conditions. We have worked closely with affected colleagues to support them throughout this time.”

Looking ahead, he said: “The impact of a record number of consecutive interest rate increases in a short space of time and the general rise in the cost of living, continues to make this a challenging housing market.

“There are signs of economic stability, particularly with mortgage rates, following a sharp and painful period of adjustment for the country.

“The strong fundamentals underpinning the new homes market remain the same. There is a chronic shortage of new homes to keep pace with the country’s current and future needs.”

Russ Mould, investment director at Manchester investment platform AJ Bell, said: “Bad news from housebuilders has become the norm as they adapt to a weakening property market. That might explain why investors have shrugged their shoulders to news from Redrow that its profits could halve in its new financial year.

“Affordability is a big problem for first time buyers and existing homeowners looking to move to a bigger property. Housebuilders argue there is a shortage of homes in the country which means their business is not going to disappear completely.

“However, there is scope for property prices to fall much further given the potential for interest rates to stay higher for longer.”