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Solid performance from Redrow

RESULTS: Sales and average prices are up, and the final dividend will be reinstated this year.
February 26, 2013

Redrow (RDW) delivered an impressive first-half performance, pushing operating profits ahead by 51 per cent to £26.2m and boosting the return on capital employed from 6.4 per cent to 8.6 per cent. The housebuilder has recovered significantly since the return of founder Steve Morgan in 2009, and the board confirmed that dividend payments will resume at the end of this year.

IC TIP: Hold at 187p

In the latest trading period, completions rose 3 per cent to 1,202 units, but a greater proportion of these were private sales of traditional family homes, where average prices rose nearly 10 per cent to £224,000. In turn, this helped boost operating margins from 7.5 per cent to 10.2 per cent. Active sales outlets were a little lower at 82, although this was mainly because a higher-than-expected sales rate led to some outlets closing early. In fact, in the past eight weeks, the volume of private reservations have risen 8 per cent to 443 units. The new London development is progressing well, too, with 700 plots acquired with a gross development value of £450m and the region is expected to make a meaningful contribution to profits in the next financial year.

Numis is forecasting full-year pre-tax profits of £55m and EPS of 10.9p (from £43m and 9.8p in 2012), rising to £70m and 13.7p the year after.

REDROW (RDW)
ORD PRICE:187pMARKET VALUE:£692m
TOUCH:186-192p12-MONTH HIGH:203pLOW: 104p
DIVIDEND YIELD:nilPE RATIO:17
NET ASSET VALUE:156pNET DEBT:11%

Half-yearto 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201123315.33.00nil
201225723.04.20nil
% change+10+50+40-