Redrow’s profit sank 66 per cent in the last financial year due to the “profound impact” of the coronavirus pandemic, which prompted the housebuilder to take a £35m hit on pulling out of the London market.
Turnover for the year plunged 37 per cent to £1.34bn as the number of completions plummeted due to the coronavirus lockdown. Completions fell from 2,345 in the fourth quarter of the previous year to just 264 this year.
Redrow, which is one of the UK’s biggest housebuilders, swung to a loss in the second half of the financial year and pre-tax profits for the full year fell sharply from £406m to £140m.
The group ended the period with net debt of £164m, down from net cash of £124m in 2019.
Why it’s interesting
Redrow said this morning that it expects the Covid-19 pandemic to have an “enduring impact upon the market as the economy recovers and consumer experiences during lockdown influence future preferences and priorities”.
As part of its strategy to develop regional divisions Redrow is scaling back its London business, limiting its activities in the capital to its Colindale Gardens development, which has cost the firm £35m.
The FTSE 250-listed housebuilder said there had been strong demand since sales centres reopened in May. Prospective buyers have been keen to use the Help to Buy scheme ahead of next year’s changes and to benefit from the Stamp Duty holiday, which was intended to reignite the housing market after months of lockdown.
However, Redrow said the market was still at risk from the ongoing impact of the pandemic, the possibility of a no-deal exit from the EU and the ending of the Stamp Duty holiday.
What Redrow said
Redrow executive chairman John Tutte said: “The Covid-19 pandemic had a profound impact upon the Group’s performance in the 2020 financial year but we entered the new financial year in a position of strength.
“We have a record order book and brought forward very high levels of work in progress. This was due in part to increased investment earlier in the year in anticipation of strong demand for the Help to Buy scheme ahead of changes to the scheme next year.
“We brought forward an order book of £1.42bn: up 39%, and reservations, in terms of value, in the first eleven weeks of the new financial year, are 12% ahead.
“The Group is well-placed to deliver a robust performance. We have completed substantially more homes in the first few weeks of the new financial year than during the same comparable period last year whilst maintaining a record order book.
“This, combined with reduced investment in London, will deliver strong operating cash flow over the coming months to support our regional growth plans and, subject to market conditions, allow dividend payments to resume in 2021”.