Housebuilder on firm foundations

Sep 12 2007 by Iain Laing, The Journal

HOUSEBUILDER Redrow has hailed a solid annual performance as it battles against rising interest rates and an “inefficient” planning system.

The company posted flat pre-tax profits of £120.5m, in line with expectations, for the year to June 30.

The firm added that the outcome for the current year would depend on the strength of the housing market, as the five rate hikes since last August and uncertainties in the debt markets looked to be dampening consumer confidence.

Chairman Alan Bowkett said: “Redrow delivered a solid performance in the last financial year against a backdrop of successive interest rate rises and an increasingly inefficient and complex planning system.”

Redrow said completions in the year were hampered by delays brought about by the planning system, particularly at its key Signature family homes brand.

Signature completions fell from 4,027 to 3,689, with average selling prices up 1% at £167,900.

Average selling prices of its urban In The City homes jumped 13.7% to £182,000 due to a change in the mix of its developments.

During the period, Redrow more than doubled its output of affordable Debut homes to 502, up from 213 last year.

The higher proportion of affordable homes meant turnover at its homes division was 1.1% lower at £757m.

The affordable homes market has become a prominent issue within the housing industry following unprecedented levels of new initiatives from the Government.

However, Redrow said the key issue in the provision of new, affordable homes is whether Government proposals can resolve the conflict between the drive to increase the number of new homes and resistance among some local authorities to new development.

Sales in the year rose 3.7% to 4,953, boosted by strong market conditions in the South-East and Scotland. Forward order sales were up 6.4% as at the end of June.

Redrow also invested in its land bank and now has 17,700 plots with planning consent, compared to 16,750 last year.

Surplus land sales in the year generated profits of £15.1m, buoyed by a strong land market. The Royal Town Planning Institute (RTPI) yesterday said Redrow’s increase in land with planning permission showed there was no problem “with planning delivering land for development.”

The RTPI added that in its June report Redrow was shown to have the third highest supply of land with detailed planning permission, with 3.6 years’ supply.

Redrow said it had entered the new financial year in a much stronger position, and had geared the business to be able to respond to prevailing market conditions.

The group added it had continued to invest in land in the “important” South-East region, while investment in a large site in Cheswick in Bristol and major forward land holdings in Exeter and Taunton provided it with a strong platform for growth in the South-West and the West Country.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said Redrow had made broad progress, although the pace of growth had slowed.

“Successive interest rate rises have increased the competitive environment across the industry and higher financing costs have added further pressure to group profit margins,” he added.