Redrow smashes earnings forecasts and grows order book 85%
FTSE 250
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16:59 26/04/24
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Household Goods & Home Construction
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Redrow
644.50p
16:40 26/04/24
North-focused housebuilder Redrow lifted profits 91% in the year to end-June and was bullish about the forthcoming 12 months after strong increases to its land bank and order book.
With the government's Help to Buy supporting 35% of completions and the London division making its first significant contribution, revenues grew 43% to £864.5m and profit before tax rose 91% to £132m.
Basic underlying adjusted earnings per share jumped 83% to 28.6p, well ahead of 24.7p consensus forecasts.
The final dividend of 2p, making for a 3p full year payout, was double the 1p from a year before.
With the market recent concerned about a cooling of the UK housing sector, the FTSE 250 group confirmed that new mortgage rules had returned the market to "a more seasonal pattern of activity".
But an 85% increase in the order book to £482m, with the current land bank swelled by 18% to 16,724 plots, chairman Steve Morgan was confident of another year of "significant progress" ahead.
Although the average plot cost has risen to £63,000 from £57,000, primarily as a result of a higher percentage of land being in the south of England, Morgan said that this would enable good growth in the number of outlets during the coming year.
He stressed that, while the sales rate for the last financial year reached a level of 0.70 per week had settled down to 0.64 in recent weeks, "further growth in the business now needs to come primarily from growth in outlets rather than sales rate".
"An increase in the number of outlets is absolutely necessary to enable Redrow, and indeed the house building industry, to increase the supply of new homes to meet the country's needs."
At the year-end Redrow was operating from a total of 103 outlets, a 12% increase year-on-year.
Broker Liberum viewed the results as "very strong", but said the dividend was "a bit mean at only 3p" given the strong earnings.
Shore Capital also pointed out that if the London business was not included, revenues were only up 25%, more in line with typical sector rises.
ShoreCap noted that "returns are lower than the peer group, debt is higher, yield is lower" and that the "the lack of dividend is a drag on the earnings valuation".
But Panmure Gordon thought this was a good statement from the builder, "and with its London business now likely to start increasing as a percentage of the mix, we expect further 'good news' to follow".
With the company saying private completions and the current order book post year end together running 40% ahead year-on-year, analysts are confident about full-year
assumptions, marginally upgrading 2015 forecast assumptions reflecting a better margin performance.
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