Redrow profits jump 26% despite slowdown, dividend hiked 70%

FTSE 250 housebuilder Redrow reported a 26% jump in full-year pre-tax profit on Tuesday as it hiked its dividend by 70% and upgraded its guidance.

In the year to the end of June, pre-tax profit rose to a record £315m from £250m the year before as group revenue rose 20% to a record £1.66bn. This was driven by a 15% increase in legal completions to 5,416 and a 7% gain in the average selling price to £309,800. The increase in the average selling price was attributed mainly to the continued growth of the group's southern businesses.

The company had said back in March that it was on track to deliver "at least" £306m in pre-tax profit for the financial year.

Earnings per share were up 27% to 70.2p and the company proposed a final dividend of 11p per share, taking the dividend for the year to 17p, up 70%.

In addition, Redrow said that based on the strength of its current performance and "robust" demand, it now expects to report turnover of around £2.2bn in 2020, profit of around £430m and a dividend of 32p.

The company said it began the current financial year with a record order book, up 14% on the year to £1.1bn, while sales in the first nine were up 8% on a strong comparator last year.

Redrow said overall housing transactions in the UK have fallen due to political uncertainty and the rising cost of moving home, particularly Stamp Duty which, over the last seven years, "has increasingly become a tax on mobility". Nevertheless, demand in the new homes market remains robust and it has not seen any impact from recent domestic and international political events.

Chief executive John Tutte said: "These exceptional results were achieved against an uncertain political and economic backdrop as a result of Brexit and also an ongoing requirement to manage an industry-wide shortage of skills to meet our build programmes."

Numis said the update was "good" and the new longer-term guidance on profit is welcome. The brokerage said guidance for all three metrics is ahead of its expectations and as a result, it upped its estimates. Its pre-tax profit forecast for 2018 rose to £355m from £336m and its estimate for 2019 increased to £395m from £370m.

At 1030 BST, the shares were up 4.5% to 648p.