NO ONE can deny that Redrow's management team has engineered an impressive recovery. With the once moribund housing market showing signs of life, the firm says that sales rates per outlet are comfortably ahead of the same period last year. Falling prices and soaring cancellation rates are also showing signs of stabilisation.
Unlike some of its heavily indebted peers, Redrow’s net debt of around £50m is well within its borrowing facilities of £250m. That’s just as well, as management is sure to ratchet up gearing in the coming months as it starts buying new land for future developments, a sign in itself that things are on the up. The firm has bought around 2,500 new plots on 18 sites since the beginning of the year, and reports that rivals are also busy, with a noticeable increase in activity in the land market in recent months.
That said, the stock is trading at a seven per cent premium to its June 2010 net asset value, while the majority of its peers are actually trading at a discount to their net asset values. This suggests that the successful turnaround story is already priced into the shares, which closed at 151p yesterday. Those shareholders hunting for more value would be best to look at other housebuilders like Berkeley Group and Bellway, who still have some distance to travel in their recoveries.