Evidence of the housing market downturn became even more explicit yesterday as housebuilder Redrow announced a halving of profits and a new £450m debt facility to 2011.
Shareholders are also losing out on a third dividend, due to an “unprecedented decline in the fortunes of the UK housing market in a very short period of time”, Redrow said. The company is looking to preserve cash, during a sharp decline in sales activity.
The results follow a survey from the Royal Institution of Chartered Surveyors (RICS), which showed completed sales were just 12.7 per surveyor during August, the lowest response on record.
At the end of June Redrow had forward sales of only 1,189 houses, down 45 per cent from the same time in 2007. As a result, it expected total sales in the year to June 2009 to be “substantially” lower than for the financial year just ended.
In the year to the end of June Redrow sold 3,925 houses, nearly 19 per cent less than in the previous year with most of the reduction in the second half, when reservations plummeted by 55 per cent.
Margins came under pressure as the group offered greater discounts and incentives to secure sales, with the operating margin down from 16.4 per cent to 13 per cent.
The group said it had secured a new three-year £450m banking facility and said it now had an appropriate platform from which to move forward. Chief executive Neil Fitzsimmons said: “I think there is a lot of hard thinking to be done about where interest rate policy now sits but I increasingly think the risks to the economy are on the downside rather than on the upside.”
Fitzsimmons acknowledged the government’s changes to stamp duty but added “more needs to be done to help first time buyers”. He also called for a review of government land proposals to prevent a longer term impact on housing supply.