Redrow expects turnover to fall 36% to £1.3bn

Flintshire-based house building giant Redrow plc said on Tuesday it expects turnover to fall about 36% to £1.34 billion for the year ended June 28, 2020, and warned profit for 2020 “will be substantially below 2019.”

However, the firm said it enters its new financial year with a record order book of £1.42 billion.

Redrow shares fell about 5% to around 440p, giving the firm a current stock market value of around £1.5 billion. The shares were trading at 848p in February.

In a trading update, Redrow said: “The timing of site closures due to Covid-19 towards the end of March had a profound impact upon the group’s results in a year which was budgeted to be disproportionately weighted to the end of the second-half.”

Redrow said it completed 4,032 homes in the year to the end of June compared to 6,443 in the previous year.

“The group secured 4,222 private reservations in the year with a value of £1.61bn (2019: £1.67bn),” said Redrow.

“In the five weeks since re-opening its sales offices, the group has achieved a net sales rate per outlet per week of 0.56 (2019: 0.59) reflecting strong pent-up demand, especially from buyers using the Government’s Help to Buy scheme.

“As a result of the group’s strong sales performance earlier in the year, and the significant shortfall in legal completions due to the Covid-19 lockdown, the group enters the new financial year with a record order book of £1.42bn (2019: £1.02bn) of which c70% in terms of revenue is contracted.”

On its strategy, Redrow said: “Recent studies have highlighted that the Covid-19 pandemic has shifted home movers’ priorities.

“In particular, there is a desire for more inside and outside space, wanting to live closer to green spaces and having better home workspace.

“Redrow’s reputation for placemaking and its award winning Heritage product ideally position the business to meet these changing customer priorities.

“Following a review of our divisional businesses, we have decided to scale-back our operations in London to focus on the Colindale Gardens development and continue to target the group’s future growth on the higher returning regional businesses and the Heritage product.

“The costs and related significant impairments associated with scaling-back the London business will be provided for in the June 2020 accounts.

“As a consequence of the impact of Covid-19 and making these provisions the profit for 2020 will be substantially below 2019.”

In its outlook, Redrow said: “The prospects for the wider economy and its impact upon the new homes market remains uncertain.

“Despite this, as lockdown restrictions have eased, trading has been encouraging, driven by high customer demand for Help to Buy as more buyers look for support as the mortgage market and economy recovers.

“To ensure the recovery is sustainable, and buyers intending to use the scheme have the opportunity to do so, we urge the Government to approve an extension to the existing scheme beyond March next year or change the scope of the new scheme to provide access to a broader range of buyers.

“The group’s output will inevitably continue to be affected by the ongoing fallout from the Covid-19 pandemic.

“Notwithstanding this, the group’s record order book, excellent product range and dedicated team of talented people, means it is well-placed to deliver a robust performance against an uncertain outlook.”

Redrow executive chairman John Tutte said: “This has been a challenging period for the industry and prevented the group from delivering another set of record results.

“The business has however demonstrated its resilience throughout the crisis and I am immensely grateful for the dedication of my colleagues, the commitment of our wider-workforce and the continuing patience of our customers as we adjust to a new way of working.

“Whilst these extraordinary times have been testing for the business, they have provided us with an opportunity to focus on our core strengths putting product, customer satisfaction and the environment at the heart of a recovery strategy to maximise shareholder returns.”