Housebuilders Flying High Despite Property Market Slowdown as Redrow Posts Record Profits

Published On: September 6, 2018Categories: Property1.8 min read

The wider property market may be slowing and price rises pausing on sliding back slightly, at least in the London and South East, but judging by the record set of profits just posted by FTSE 250 housebuilder Redrow, the newbuild sector is robust. Over the year until the end of June, the company managed to record a 21% improvement in pre-tax profits, which came in at £380 million, on 9% growth in the number of new homes completed over the period. In total, construction was completed on 5913 properties.

A strong order book for £1.14 billion in sales going into this year was also a £110 million improvement on the previous year. Revenues totalled £1.92 billion, which was a 16% boost on the previous year and aided by a 7% rise in the average selling price of the properties. For those investing online in Redrow shares, the bumper year has been rewarded with a 65% hike in the dividend to be paid, which has been increased to £0.28 per share. The Redrow share price is at 552.50p into Tuesday afternoon and at almost 14% down on its 647p position at the same time last year can be said to currently represent good value.

Despite the strength of the company’s past year, Steve Morgan, the Redrow chairman, used the opportunity of commenting on the results to fire a warning at the British government. He said that planning red tape had held the company back from completing more homes as well as voicing concern over a lack of forward guidance as to whether the Help to Buy scheme will continue beyond 2021. The first point seems to conflict with recent criticism from London mayor Sadiq Khan that developers in the capital are gaining planning permission but then not starting to build soon enough after that has been secured. He accused them of sitting on developments in the hope of subsequently profiting from higher prices. Morgan, on the other hand, accuses government red tape of slowing the construction process once started.

Redrow has traditionally had a geographical focus on the south of England, where it still generates around 50% of turnover. Currently, the company’s biggest development is 2900-home Colindale Gardens in northwest London. However, this year has seen the homebuilder expand its reach by opening new divisions for the Thames Valley and East Midlands. The property market is currently healthier in the Midlands and more northern regions of the UK.

About the Author: Jonathan Adams

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