Interims Press Release
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Tuesday 26 February 2013 Redrow plc Interim results for the six months to 31 December 2012 STRONG PERFORMANCE IN A CHALLENGING MARKET Financial Results H1 2013 H1 2012 Revenue £257.0m £232.8m Pre-exceptional Operating Profit £26.2m £17.4m Profit before tax £23.0m £15.3m EPS (adjusted) 4.8p 3.7p Legal Completions (homes) 1,202 1,168 Private Average Selling Price £224,000 £204,000 Net Debt £65.2m £98.8m Gearing 11% 21% NAV per share £1.56 £1.46 ROCE 8.6% 6.4% Financial highlights Revenues rose 10% to £257.0m driven by a 10% increase in private average selling price to £224,000 Gross margin increased to 18% (2012: 15.4%) as a result of increased sales from sites purchased since 2009, and improved product mix Profit before tax up 50% to £23.0m (2012: £15.3m) EPS (adjusted) increased 30% to 4.8 pence (2012: 3.7 pence) Net debt increased to £65.2m (June 2012: £14m), giving gearing of 11% (June 2012: 2%) Volume of private net reservations up 24% Return on capital employed increased to 8.6% (2012: 6.4%) Operational highlights The New Heritage Collection comprised 87% of private turnover (2012: 60%) Average number of outlets increased to 83 (2012: 72) and expected to rise to 90 by end of June 2013 London region is making good progress and has now acquired a total of 700 plots with a gross development value of £450m. Current land bank at the end of December 2012 was 13,295 plots (June 2012: 12,356 plots). The increase of 939 plots should in turn enable the business to grow volumes for the future Volume of private net reservations in the first eight weeks of 2013 up 8% to 443 Steve Morgan, Chairman of Redrow, said: “Redrow has delivered a strong set of results with another significant improvement in profitability. The backdrop remains challenging, but the stability of the housing market, the gradual improvement in both the planning environment and the mortgage market, together with our distinct focus on our high-quality, differentiated family housing range has meant that we have continued to make good progress. We applaud the Government’s attempts to improve the market through the NewBuy, extension of FirstBuy, and Funding for Lending schemes and if the current trend in reduction of mortgage rates continues, it will undoubtedly assist in the housing market’s gradual return to more normalised conditions. The National Planning Policy Framework has also stimulated some positive changes in the planning environment, albeit this has still got a long way to go. We have started the second half well, with reservations up 8% on the same period last year. Additionally we are on track to increase the number of outlets from 82 to around 90 by June. Given the strong pipeline of new sites and the modest improvement in market conditions, I am cautiously optimistic that Redrow’s strong recovery is set to continue. In line with this, we expect to propose a modest final dividend at the year end.” Enquiries: Redrow plc Steve Morgan, Chairman 01244 527411 Barbara Richmond, Group Finance Director 01244 527411 Tulchan Communications Susanna Voyle/Lucy Legh 020 7353 4200 There will be an analyst and investor meeting at 9.00 am at the London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS. Coffee will be served from 8.30 am. A live audio webcast and slide presentation of this event will be available at 9.00am on www.redrow.co.uk. Participants can also dial in to hear the presentation live at 9.00 am on +44 (0) 20 3426 2845 or UK Toll Free 0808 237 0033. Playback will be available by phone for the next 7 days on the following dial-in numbers: UK & International +44 (0) 20 3426 2807 UK Toll Free 0808 237 0026 Conference Reference: 636279# CHAIRMAN’S STATEMENT I am pleased to report that Redrow continued to make good progress in the six months to the 31 December 2012 in what remain challenging, but gradually improving, market conditions. Group revenue increased 10% in the period to £257m (2012: £232.8m) as a result of an increase in the average selling price of private homes from £204,000 to £224,000. This increase can largely be attributed to the sale of a greater proportion of traditional family homes and the continuing success of The New Heritage Collection. Private volumes increased by 4% to 1,097 (2012: 1,051). Overall volumes, including social, increased to 1,202 (2012: 1,168). Gross margins improved from 15.4% to 18%, resulting in a pre-exceptional operating profit up 50% to £26.2m (2012: £17.4m) and profit before tax also up 50% to £23m (2012: £15.3m). Our net financing costs reduced to £1.7m (2012: £2.1m) due to a lower level of debt as a result of the placing and open offer in May 2012. Normalised earnings per share rose from 3.7 pence to 4.8 pence. Net debt has risen to £65.2m, giving a gearing of 11% compared to £14m and 2% gearing in June 2012. Gearing is expected to increase in the second half as we continue to grow our land bank and progress with the large apartment schemes in London. In September I announced that, subject to economic circumstances, the Board intended to resume the payment of dividends. In line with this, we expect to propose a modest final dividend at the year end. Market The housing market has been stable throughout the last six months, with sales rate per outlet per week in the first half marginally increasing from 0.50 to 0.53. The number of active outlets at the end of the first half was 82, slightly lower than we expected due to the higher sales rate leading to some outlets closing earlier than anticipated. Encouragingly, the volume of private reservations in the first half rose by 24% including London to 1,140 and 19% excluding London. The mortgage market has shown signs of improvement over the last six months. The Government-backed NewBuy scheme, which has helped to re-introduce 95% mortgages, is having a beneficial impact on the new homes market. Even more significantly, we are starting to see the benefit of the Funding for Lending Scheme, which is helping to reduce the cost of mortgages for both the new homes and second hand markets. If the current trend in reduction of mortgage rates continues, it will undoubtedly assist in the housing market’s gradual return to more normalised conditions. The extension of the Government’s FirstBuy funding is also very welcome. It is interesting to contrast the conditions for our industry between Wales and England. In Wales, where NewBuy is not yet available and there is no proposal for an equivalent of FirstBuy, we are not seeing the same stimulus to the new homes market evident in England. This is compounded by the increased build cost in the Principality due to the more onerous planning and regulatory burdens, a situation which will get substantially worse if the proposed changes to the Welsh Building Regulations take effect. As a company with its headquarters in Wales, it is disappointing to note that our South Wales region is the only one of our nine regional businesses not experiencing notable growth. London The new London region is making good progress and has now acquired a total of 700 plots with a gross development value of £450m. Sales on both One Commercial Street and Kingston Riverside are performing slightly ahead of expectations. We expect London to make a meaningful contribution to Group revenue in the next financial year. Land and Planning We are at last starting to see some positive impact on applications as a result of the changes introduced by the National Planning Policy Framework (NPPF). The more progressive Local Authorities are engaging with developers to bring forward land for development. There are, however, still far too many who are failing to deliver a five year land supply. The end result of this is that the appeals process is being used to a far greater extent than it should be. Nevertheless, the more positive planning environment has meant that we have been able to increase our current land bank by 940 plots during the last six months; 720 of these being contributed from our forward land bank. The increase in the land bank should in turn enable the business to grow volumes for the future. The average plot cost is now £51,000 or £44,000 when London is excluded. Our forward land bank has also increased during the period by 2,500 plots, to 25,300. Harrow Estates Harrow Estates has continued to make progress during the period. Remediation is now complete and building operations will shortly be commenced in Horsforth, Leeds. The large site in Cambridge has now secured planning permission and is waiting for final sign-off of the remediation operations from the Local Authority before construction can begin. The proposed Garden Village in Woodford is being progressed with the planners and several new opportunities have recently been secured. Board During the first half, Paul Hampden Smith resigned as a non executive director and Nick Hewson was appointed in his place. Nick has many years’ experience in the property sector, particularly in central London and I am sure he will be a valuable addition to the Board. Current Trading We are anticipating increasing the number of outlets in the second half of the year from an average of 83 to around 90.