Redrow profit tops forecasts

Housebuilder Redrow has posted full-year pre-tax profit ahead of expectations, thanks to a ten per cent rise in selling prices, but warned the outlook for the property market is challenging.

Redrow, one of the smaller listed volume housebuilders, made £25.3m pre-tax profit in the year to the end of June, compared with £0.7m in 2010 and far ahead of analysts' consensus expectation for £18.3m.

Legal completions rose 1.5 per cent to 2,626 while the average selling price rose ten per cent to £164,800, the company said.

"The nature of our land acquisitions over recent times will continue to drive the average selling price in an upwards direction," said chairman Steve Morgan in a statement.

Rival London-focused builder and developer Berkeley on Monday said it would hit its profit target two years earlier than expected due to strong trading in recent months. Rival Bovis has also reported a doubling of first-half profit.

But several analysts have sell ratings on Redrow as they believe its shares are currently expensive compared to its peers.

"The consensus was well beaten but sales, gross margins and EBIT margins were only fractionally better than expected," said Peel Hunt analyst Robin Hardy. "Others in the sector still trade at material discounts and on this basis offer far better value."

Redrow, run by its founder Morgan who made a flamboyant return to the group over two years ago as the market floundered at the bottom of the property crash, said the market remains uncertain as sales rates are flat year-on-year.

Construction overall in the UK is at low levels as builders operate in a weak environment, squeezed by low mortgage approvals and poor consumer confidence.

Sluggish demand for houses is keeping property prices subdued, with house prices falling in August according to mortgage providers.