Redrow profits slump, but sees dividends back in 2021
Full year profits at house builder Redrow slumped by 66% due to the coronavirus pandemic, although reservations rose in the first 11 weeks of the new fiscal year and it expected to resume dividend payments in 2021.
Pre-tax profit plunged to £140m from £406m in the year to June 28 on revenues down 37% to £1.34bn. The order book rose to £1.4bn from £1.02bn.
The company pulled back operations in London during the height of the crisis to concentrate on more high return regional businesses and its higher-end Heritage range of homes at a cost of £35m.
Redrow completed 4,032 homes, compared with 6,443 a year earlier. Finance minister Rishi Sunak in July introduced a stamp duty holiday in an effort to boost the market.
“We have a record order book and brought forward very high levels of work in progress. This was due in part, to increased investment earlier in the year in anticipation of strong demand for the Help-to-Buy scheme ahead of changes to the scheme next year," said chairman John Tutte.
“We have completed substantially more homes in the first few weeks of the new financial year than during the same comparable period last year whilst maintaining a record order book.”
Tutte warned that the recent reduction in the availability of high loan to value products would affect some buyers, particularly those that will not qualify for the government’s controversial Help-to-Buy scheme next year and called for reform of stamp duty on purchases to stimulate the market.
“The immediate priority … must be to support the demand-side through this period of economic uncertainty. The impact of the stamp duty (SDLT) holiday expiring in March to coincide with the changes to the Help to Buy scheme could disrupt a sustainable recovery,” he said.
Hargreaves Lansdown analyst Susannah Streeter said Redrow had responded rapidly to pent-up demand fuelled by the stamp duty holiday and by completing substantially more homes in the first few weeks of the new financial year.
"Refocusing on regional rather than London builds is a shrewd move given the working from home revolution, as people no longer tied to Monday to Friday office work consider moving out of the capital. The big risk on Redrow’s horizon is that the mini housing boom could slump as unemployment rises and the economy struggles to recover."
Streeter said demand for new builds was likely to remain relatively strong given the UK’s housing shortage, with research from the charity Shelter showing that more than 380,000 homes granted planning permission between 2011 and 2019 remain unbuilt.
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