Shares in home-builder Redrow (RDW) gained 3% to 349p after the firm reported that it was keeping its sites open in order to finish building houses which have already sold and that it was cancelling the interim dividend due to paid next month.
On a positive note, trading in the first 12 weeks of the second half to 20 March has been ‘resilient’ with net reservations up 30% or £121m to £525m thanks to a weekly reservation rate of 0.86 against 0.72 in the same period a year ago.
Net private reservations last week were in line with the previous year but the number of site visitors was ‘substantially down’ and the cancellation rate increased.
STRONG FINANCIALS
Redrow says it is ‘inevitable our sales rate will be seriously impaired over the coming weeks and build output will be significantly affected by labour and material shortages.’
It also acknowledges that fewer outlets will open as local authorities delay planning committee meetings due to the government’s lockdown notice.
However, its order book of £1.4bn represents over 60% of annual revenues and it has £250m of funding on hand. It is also ‘working proactively’ to protect cash flow, putting land purchases on hold and reducing the amount of work in progress across its sites.
Net debt of £116 is expected to fall ‘substantially’ in the next few weeks as a high level of homes are due to complete. By cutting the interim dividend, it has retained £37m of cash which it can use to ease any financing strains.
The firm hasn’t changed its full year outlook, as it is still too early to assess the impact on the building industry and on its business in particular, but investors can probably expect a further trading update in the not too distant future.
Analyst Aynsley Lammin at Cannacord Genuity put his forecasts under review, adding ‘It’s difficult to strike meaningful financial guidance at this stage, but assuming no new reservations for the next 2-3 months followed by a gradual return to normality would be a good estimate at this stage and Redrow is clearly doing sensible things in that context.’
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