Shares in housebuilder Redrow (RDW) rose 0.4% to 703p after the firm posted a strong increase in full year revenues, announced the resumption of the full year dividend and reinstated its medium-term guidance.

For the period to June, sales were up 45% to £1.94 billion thanks to a 39% increase in legal completions to 5,620 units and higher average selling prices.

NET CASH AGAIN

Higher margins on sales led to a 124% increase in pre-tax profits to £314 million against £140 million the previous year, although these were still some way short of the firm’s pre-pandemic earnings of £406 million.

Nevertheless, year-end net cash soared to £160m against a net debt position of £126 million a year ago and £124 million of net cash in 2019. Also, the total order book was maintained at a record £1.43 billion, and the firm reported ‘encouraging trading’ in the first three months of the current financial year.

A final dividend of 18.5p per share takes the total pay-out to 24.5p, in line with the firm’s policy of maintaining three times dividend cover.

IN GOOD SHAPE

Chairman John Tutte commented: ‘The group entered the year in good shape and well-prepared to take advantage of any bounce-back in demand following the first lockdown. The order book was at a record level and work in progress carried forward was higher than normal, partly due to a conscious decision to increase production in anticipation of higher Help to Buy demand ahead of the original scheme drawing to a close.’

With the extension of the stamp duty holiday from March to September and more people re-evaluating their lifestyle and working needs post-pandemic, the firm saw increased demand for its detached Heritage range which fed through to the order book.

STRATEGY VINDICATED

The firm’s decision to withdraw from the London market by disposing of assets and focusing on its regional business served it well over the past year as more people looked to re-locate away from city centres.

According to the latest land registry data, average UK property prices rose 8% year on year in July, but that disguises a large disparity between London, where prices rose just 2.2%, and regions such as the North East where prices rose more than 10%.

Looking ahead, Redrow reintroduced its medium-term financial guidance with forecasts for 2024 of revenues above £2.2 billion and earnings per share above 90p compared with around 74p for the year just ended.

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Issue Date: 15 Sep 2021