Housebuilder Redrow’s profit falls 15 per cent

Housebuilder Redrow hailed what it called a “robust” performance in the six months to December, despite posting a 15 per cent fall in profit amid “an uncertain political and economic background”.

The figures

Redrow revealed profit before tax sank 15 per cent year on year to £157m in the first half of its 2020 financial year. Revenue also dropped 10 per cent to £870m, down from £970m this time last year.

A lack of appetite for new homes fuelled the decline as legal completions fell 14 per cent to 2,554.

But Redrow was quick to point to an 18 per cent rise in private net reservations, up to £936m.

Still, earnings per share slipped 10 per cent to 37.2p while Redrow paid an interim dividend of 10.5p per share, five per cent up on last year’s.

Why it’s interesting

Redrow stuck to full year guidance, saying sales in the last five weeks have proved to be resilient.

Outgoing chairman John Tutte said today he expects revenue to increase in the second half, when Redrow has forecast 60 per cent of its completions to occur.

Redrow attributed the weighting to “constrained outlet growth” last year and the timing of apartment block completions.

Its latest half year results come after Help to Buy pushed the housebuilder to record results last year. But it also warned about the impact of Help to Buy ending in March 2023.

The company said: “we continue to urge the government to review the caps that…will disadvantage buyers in the North and Midlands.” 

Tutte added: “I do think the government might just rethink, given the importance of the north and the midlands [to the General Election result].” 

Today it said Brexit uncertainty had slowed the time it took to sell new homes, especially with complicated selling chains.

However, Redrow reported a jump in confidence following the general election result, freeing it up to buy more land. 

The developer bought a site in North Finchley following the Conservative election victory in December, after holding off during the previous period of political uncertainty.

“People are happy to get beyond the political shenanigans, people are more confident,” executive chairman John Tutte told CityAM

Redrow suffered a shareholder revolt over Tutte’s reappointment as chairman in November’s annual general meeting. Almost a third of investors rebelled against his reappointment after shareholder adviser Pirc said it was “incompatible” to hold an executive role alongside that of chairman.

Tutte will now step down in July, and chief operating officer Matthew Pratt will become chief executive.

Pratt said he was “really proud” to join the team, saying it would be “business as usual” following his appointment. 

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What Redrow said

Chairman 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.

The market in the first five weeks of the second half has been resilient with the value of reservations up 15 per cent 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.