Redrow Group posted record revenues of £890m in 2017, a 20% increase on 2016, thanks to an increase in legal completions.
There was also a 9% rise in average selling price to £330,000 (2017: £303,000) mainly attributable to the ongoing growth of the group’s southern businesses.
Gross profit was 18% higher at £218m (2017: £185m). The gross margin was 24.5%, which was 10 basis points higher than for the 2017 full year.
Tight cost control limited operating expenses to an increase of just £2m to £43m (2017: £41m). As a result, operating expenses reduced from 5.5% of turnover to 4.8%.
Operating profit was £31m higher at £175m (2017: £144m), with an operating margin of 19.7% (2017: 19.5%).
Pre-tax profits were up 26% to £176m (2017: £140m). Earnings per share at 39.5p were 27% up on the previous year (2017: 31.0p). Net debt at the end of December 2017 was £35m (June 2017: £73m), giving gearing of 3%.
As a result of the strong earnings and cash performance of the business, and in line with our progressive dividend policy, the Board has decided to pay an interim dividend of 9p per share, a 50% increase on last year’s interim dividend.
“Demand for new homes remains robust with good availability of mortgages at competitive rates,” said Steve Morgan, CEO of Redrow. “This, together with the government’s commitment to increase the supply of new homes, provides us with the confidence to continue our strategy to grow the business.”
In the first half of the financial year just under 40% of private reservations utilised Help to Buy. Bosses at Redrow have urged the government to guarentee the scheme’s future beyond 2021.
“I think it’s inconceivable that Help to Buy doesn’t continue in one form or another,” said John Tutte, Chairman or Redrow. “I don’t think there’s ever been a time when first time buyers have been able to get onto the housing ladder without some form of assistance. Recently it’s been help to buy, before that it was lax lending – 100% mortgages and the like. We’re not there anymore and we shouldn’t be there – this is a sensible way to get people onto the housing ladder and move up it.”
The value of private reservations in the first half increased 10% on a like-for-like basis (26 weeks) to £795m (2017: £720m). Total order book at the end of December 2017 was 5% ahead of the prior year at £1.05bn.
“We entered the second half of the current year with an order book comfortably in excess of £1bn,” said Morgan. “Reservations in the first five weeks have been in line with the strong comparable period last year. Given the strength of both our order book and land holdings, together with the robust sales market, our growth strategy remains on track. This gives me every confidence it will be another year of significant progress for Redrow.”