Redrow posts record interim profit and revenue amid 'robust' demand

Housebuilder Redrow posted record interim results on Wednesday, with profit and revenue up as completions rose amid robust demand.

In the six months to the end of December 2017, pre-tax profit was up 26% to £176m on group revenue of £890m, up 20% from the same period a year ago. Earnings per share increased 27% to 39.5p and the company lifted its interim dividend to 9p per share from 6p the year before.

Legal completions in the half rose 14% to 2,811, including the group's Croydon joint venture, and the order book was up 5% to £1.05bn. Meanwhile, the average selling price edged up 9% to £330,000, mainly thanks to the ongoing growth of Redrow's southern business.

Redrow said demand for new homes remains robust with good availability of mortgages at competitive rates. It said that this, along with the government's commitment to increase the supply of new homes, gives it confidence to continue its strategy to grow the business.

In the first half of the year, just under 40% of private reservations used the help to buy scheme.

Meanwhile, the value of private reservations in the first half was up 10% on a like-for-like basis to £795m and net debt fell to £35m from £73m in June.

Chairman Steve Morgan said: "Reservations in the first five weeks of the second half have been in line with the strong comparable period last year.

"We entered the second half with a record order book, and customer traffic and sales remain robust.

"Given the strength of both our order book and land holdings, together with the robust sales market, our growth strategy remains on track. This gives me every confidence it will be another year of significant progress for Redrow."

Canaccord Genuity said this is a "strong" set of results, with pre-tax profit higher than its expectation of £160m. It noted that the shares have sold off recently, down by around 10% over the last month and said the stock looks "very attractive" in absolute terms as well as relative to the sector as it reiterated its 'buy' rating.

Henry Croft, research analyst at Accendo Markets, said: "This record-breaking performance comes against a continued back-drop of Brexit uncertainty for UK Housebuilders, and at odds with a number of peers who failed to see generally positive results releases be rewarded with an accompanying share price reaction. Given Redrow’s smaller position in the market compared with bigger brothers Barratt Developments, Persimmon and Taylor Wimpey, the company can afford to bolster growth through increasing completions and stands out as one of the only housebuilders consistently improving this metric by double digits.

"Crucially, however, is whether this improvement in completions can be maintained after the UK’s departure from the EU without adversely impacting prices and margins, and whether the sector can weather the threat of reduced labour and demand that comes along with Brexit. How the sector navigates the key headwind following the negotiating intermission and the second half of the Brexit theatrical performance will therefore be key. Will they drastically increase volumes and hope demand doesn’t take a hit after Brexit? Or stay steady as she goes, maintain the course and hope slower supply increase will filter through into prices?"

Numis, which lifted its rating on Redrow to 'buy' from 'add', said: "Overall, this is a strong H1 performance and we are increasing 2018 profit before tax estimates from £355m to £365m and 2019 from £395m to £401m - with higher volumes the main driver of the upgrade."

At 0905 GMT, the shares were up 3.1% to 612p.