In the battle of the housebuilders reporting their full year results this week, Redrow (RDW) appears to have come out on top.
Like its rival Barratt Developments (BDEV), the firm has reported record pre-tax profit, and has also reported record revenue.
But unlike Barratt, Redrow’s shares opened 2% higher at 579p on the back of its results, while Barratt shares fell 3.4% to 600p yesterday on its figures.
In the year to 30 June, Redrow’s group revenue rose 10% to a record £2.1bn, while pre-tax profit was up 7% to £406m, the first time the firm has crossed the £400m line for profit.
RECORD NUMBERS COUNT FOR LITTLE
But record numbers can sometimes count for little, as Barratt investors will know.
Barratt reported an increased operating margin and record pre-tax profit, but its average selling price was down and the number of houses it completed also disappointed investors. The market responded accordingly as Barratt’s shares fell 3.4% to 600p.
But in the case of Redrow, the number of houses it completed rose 13% to 6,443 over the year, much bigger than the 1.6% rise recorded by Barratt.
Redrow’s average selling price for private homes rose 2% to £389,500, while Barratt’s dipped slightly to £312,000.
AS GOOD AS IT GETS?
Despite the record growth, there are fears that this could be as good as it gets for housebuilders. After all, years of record growth can only continue for so long.
In addition, possible issues from the outcome of Brexit and changes to Help to Buy, which will restrict the scheme to first-time buyers only and see regional price caps introduced, also leave investors cautious over the growth prospects of housebuilders.
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But Redrow executive chairman John Tutte said the firm has a plan for such issues, centred on its Heritage Collection, higher-priced new build homes inspired by the more spacious houses from the 1930s.
The division accounted for 79% of Redrow’s turnover in the year to 30 June 2019.
Tutte said: ‘We are understandably cautious about the post-Brexit future and also the eventual impact of the impending changes to the Help to Buy scheme.
‘We do however have a clear strategy to continue to grow centred on our award winning Heritage Collection that is so popular across a broad range of buyers.’
