Morgan steers Redrow back into profit
HOUSEBUILDING giant Redrow has swung back into the black in the first full year of trading since founder Steve Morgan regained control of the business.
The company, which is headquartered in Ewloe, Flintshire, revealed that in the year to June 30 it made a pre-tax profit before exceptionals of £700,000, compared with a pre-tax loss of £44.2m last year.
This was partly due to an increase in sales, which increased by 31% to £396.6m as the number of homes sold increased by 25% to 2,587 and the average selling price climbed 9 per cent to £149,300.
Redrow has also dramatically reduced interest payments, as its gearing ratio fell to 11% (73%) following a £150m rights issue completed last October and tighter control of costs.
As a result, its net debt had fallen to £47.1m by its year end, compared with £214.6m at the start of the period.
Chairman Steve Morgan said that the business was in “the best shape it has been for some time” thanks to a new strategy adopted by a new management team.
“The past year has been one of considerable change for Redrow – change that has resulted in a return to profitability,” he said. “We have introduced a great new product which is proving popular with consumers, doubled our build output in response to an improved sales market and embarked on an ambitious land-buying programme.
“At the same time, we have strengthened and restructured our management team, re-opened three regional offices and integrated Harrow Estates into the group. Our regional teams have coped enthusiastically with the changes and we are now well placed to respond to the demands of growing the business in a challenging environment.”
He said the group had returned to its traditional focus on providing a good product coupled with stronger land buying skills – it acquired 3,291 plots during the year across 31 sites. It also launched a new product range known as New Heritage, which has generated higher-than average selling prices.
“While we remain in a period of tough economic conditions and political uncertainty the work that we have done over the past year means that Redrow is in good shape to continue to make progress,” said Morgan.
“We are financially strong with a streamlined and committed management team, improving margins and an excellent new product.”
However, he sounded a note of caution of the plight of first-time buyers, whom he said are often forced into saving up to 20% of the value of their first home in deposits before they are offered a mortgage, compared with a historical precedent of around 6%. He said that until this issue was resolved it would remain “the major constraint” to a recovery in the UK’s housing market.
“Young people need help to get onto the housing ladder one way or another and it is a sad reflection of our society that the average age of an unassisted first time buyer is now 37 years old.
“A healthy housing market is necessary for the UK economy as it generates substantial economic activity, helps mobility of labour and increases Government revenues through taxes and stamp duty.”
He proposed government intervention to improve prospects for first-time buyers, either through an insurance indemnity scheme to bring down the level of deposit required or through a tax break for first-time buyers.
