Steve Morgan, chief executive of Redrow (RDW), has defended the government's Help to Buy scheme and slammed the UK planning system, labelling the regime a 'bureacratic mess'. His comments accompany strong annual numbers from the Deeside-based housebuilder, sending the shares 4% higher to 240p.
The £853.5 million cap's revenues rose 26% to £604.8 million in the year to 30 June, with taxable profits advancing 63% to £70 million on improved gross margins of 18.8% (2012: 17.3%). Redrow also pleased with significant earnings per share progression, up 45% to 15.7p and by reinstating the shareholder reward with a 1p final dividend.
Morgan told reporters that Help to Buy was working and condemned as 'almost hysterical' the criticism of the scheme by some politicians such as business secretary Vince Cable who have warned that the scheme might inflate another housing bubble.
From Morgan's perspective, the problem lies not with the government's stimulus measures – which Redrow says 'made a significant contribution to forward sales, but just 3% to private completions' – but rather in the complexities of the UK planning system. Morgan was reported as saying that 'the real issue is that we are not building enough houses', blaming delays on late stage hold-ups in an antiquated and bureaucratic planning process.
A closer look at the results reveals that completions were up 369 on last year at 2,827 new homes, while the average selling price rose from £189,900 to £212,300. Redrow, benefiting from its focus on high quality family homes, boosted its land bank through the acquisition of 4,729 plots last year across 39 sites. Overall, the fully listed builder's land bank increased from 12,356 to 14,162 plots.
The group has steadily upped its exposure to the lucrative Southern market with 52% of Redrow's current land bank now based in the region compared to 43% last year. Progress was reported across all divisions with the exception of South Wales.
Net debt edged up to £91 million from £77 million during the year, which the group says reflects 'increased investment in land and work in progress during the year in line with the growth in the business.' Earlier this month (11 Sep), Redrow announced a new £250 million revolving credit facility (RCF) maturing in March 2018, replacing the £200 million RCF set up in 2010 and giving it debt capacity for further land investment as it continues to grow.