What house price slowdown? Redrow profits jump by a quarter

Emma Haslett
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Country On The Brink of Recession According To Business Leaders
The company hiked its guidance after a strong performance (Source: Getty)

The dichotomy of the UK housing market continues apace, after housebuilder Redrow announced a jump in pre-tax profits in its full year – allowing it to hike its full year dividend by 70 per cent.

The figures

Pre-tax profits rose 26 per cent to £315m in the year to the end of June, Redrow said today, against revenues of £1.66bn, up 20 per cent on last year's figures.

Legal completions – the number of homes bought – rose 15 per cent to 6,416, while its order book rose 14 per cent to £1.1bn. The average selling price increased seven per cent to £309,800.

Meanwhile, its number of outlets increase three per cent to 132, while it added 5,419 plots to its land bank.

So good was its performance, it has raised guidance to turnover of £2.2bn by 2020, while pre-tax profit is expected to hit £430m. Dividend will rise to 32p per share.

Today it hiked its dividend by 70 per cent to 17p. Shares rose 5.8 per cent to 655.9p in the first minutes of trading.

Read more: Housebuilders are hooked on help to buy

Why it's interesting

The UK's housing market has been decidedly sluggish since last year, with house price growth tumbling in the aftermath of new stamp duty rules and the Brexit vote.

But all the evidence suggests housebuilders are exempt from this, thanks to the government's Help to Buy scheme, which has driven thousands of first-time buyers into their arms. Today Redrow said 1,882 of its private reservations utilised the scheme, just under 35 per cent of its legal completions.

There is potential misery on the horizon: the government has said it will withdraw support for the scheme in 2021. Today Redrow sounded a note of caution, saying: "We look forward to working with government to consider the future of the scheme beyond 2021."

However, analysts were unworried.

"Redrow appears to not to be troubled by concerns about the future of Help to Buy or the impact of Brexit," said Anthony Codling, equity analyst at Jefferies.

"In fact it is so relaxed that the group’s founder and executive chairman Steve Morgan will be transitioning to a non-executive role over the coming year. In our view the fundamental demand for housing outweighs the challenges facing the sector and by tapping into that demand Redrow is not only building more homes but also building bigger profits."

Read more: How the Help to Buy scheme is distorting the London housing market

What Redrow said

Morgan said:

Redrow has continued to build much-needed new homes across England and Wales with completions up 15 per cent to over 5,400.

Our growth strategy has delivered record financial results for the fourth consecutive year.

Read more: One in five first time buyers have been given a hand by Help to Buy

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