Against a backcloth of gradually improving conditions in the housebuilding sector, as demonstrated by Persimmon's (PSN) strong update yesterday (18 Apr), Redrow's (RDW) impending third-quarter missive (24 Apr) is hotly anticipated.


Analysts will be looking for further margin progression as well as reaffirmation of the £736 million cap's stated objective to resume dividend payments at the year-end. Should they get both, then the whole sector could get a boost.


As expected, York-headquartered Persimmon flagged a good start to 2013. Visitors to its sites rose 5% during the first fifteen weeks of the year and forward sales, including legal completions, jumped 11% year-on-year to £1.4 billion.


The £3.4 billion cap also announced it would bring forward part of its next capital return, a 95p payment, from June 2015 to 2014.


Redrow, the Deeside-based builder chaired by Wolverhampton Wanderers-owner Steve Morgan, is poised to post a third-quarter trading statement on Wednesday which should give a clearer idea of margin progression for the second half of the year.


February's interims revealed strong growth, with revenues up 10% to £257 million, driven by an increase in volumes at the group level of 2.9%.


Web news - Redrow chart - April 2013


Operating profit increased by 50% to £26.2 million while profits before tax advanced 60% to £24.5 million as margins ramped up on rising volumes.


The pipeline of building sites, or 'outlets', is set to have risen after private net reservations advanced 8% in the first eight weeks of 2013. Revenue growth appears to be largely driven by an increase in the volume of private completions which are mainly in the New Heritage Collection, and account 87% of private revenues.


London represents a growing share of the group's turnover. While the volume of private reservations in the first half rose by 24% including London, this figure was 19% when the capital's contribution is omitted. The group has acquired 700 plots in London with a gross development value of £450 million.


Over at Panmure Gordon, analysts Mark Hughes and Rachael Applegate 'expect the group to report further progress on rolling out new sites. This should be positive for volume growth at the business, which we forecast will be double-digit during the year.'


The duo believes the fully listed firm is trading well in line with peers at a time when Government stimulus through NewBuy and Funding for Lending is helping to revive a mortgage-constrained housing market.


For 2013, Panmure Gordon forecasts a 12.2% increase in volumes to 2,757 units and a 3.7% increase in Redrow's prices to £197,000: 'We therefore currently forecast June 2013 PBT of £54.7 million, EPS of 11.1p, DPS of 1p and NAV of 160p', writes the investment bank, which has a 'hold' rating and 175p published price target for Redrow, a 5% premium to its December 2013 NAV estimate.

Issue Date: 19 Apr 2013