Forget slowing UK house prices, Redrow just doubled its profits

Billy Ehrenberg
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There's life in the new-build market yet (Source: Getty)

The figures

Redrow, the British housebuilder, has revealed a bumper set of half-year results (to 31 December) this morning, showing revenue up 54 per cent to £560.6m and pre-tax profit up 92 per cent to £91.2m, in a rosy assessment of the market’s demand for new homes. The impressive results allowed the group to double its interim dividend to 2p per share.

These considerable bumps were driven by an 18 per cent increase in the number of legal completions and a 14 per cent increase in private average selling price, which rose to £300,000. What is more, Redrow managed to reduce its net debt from £173m in June 2014 to £140m by the end of the half.

Why it’s interesting

The housing market in the UK is the subject of much speculation, with reduced rates of growth implying waning demand. While this is undoubtedly true in some areas, such as London, there remains a shortage of housing in the country which is not being met by the number of new builds. The demand for new properties reported by Redrow, and the confidence of the statement by chairman Steve Morgan, shows the group is confident demand will pick up.

What Redrow said

Steve Morgan, chairman of Redrow, said

I am delighted to report Redrow has again generated outstanding results. Our policy of retaining capital to concentrate on growth continues to reap the benefit, with a further substantial rise in both turnover, up 54per cent and pre-tax profits, up 92per cent.

As a result of this strong performance, whilst we continue first and foremost to invest in the ongoing growth of the business, we have also doubled the interim dividend to 2p per share.

Whilst we are only at the beginning of the spring selling season, demand for new homes is strong and the welcomed changes to stamp duty will undoubtedly help home buyers within our market segment. We started the second half with a very strong order book and are expecting to increase the number of active outlets to 115 by June 2015, a 12per cent increase.

In short

A good set of results, with a welcome bonus for shareholders too. Redrow has escaped suffocating in the airless space of the post-crisis housing market and looks strong going into the second half of the financial year.