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Redrow hails greater certainty

The housebuilder expects completions to be weighted to the second half of its financial year
February 5, 2020

The mist may be lifting for housebuilders such as Redrow (RDW), after December’s election ushered in a greater degree of political certainty. Closing new home sales had taken longer last year due to increased circumspection among buyers, but the FTSE 250 group ended the year with a record number of private reservations, which were up almost a fifth in value compared with the same time in 2018.

IC TIP: Buy at 826p

As previously flagged, the phasing of some apartment developments, which outgoing non-executive chairman John Tutte described as “very lumpy” by nature, meant the level of completions is expected to be weighted towards the second half of the financial year. Indeed, legal completions were down 14 per cent during the first-half, which explains the decline in revenue. Taking on larger building sites also meant that the group’s outlet numbers – which had previously constrained completion levels – have returned to growth, Mr Tutte said.

The private average selling price was down £4,000 on the prior year at £387,000, although management expects build cost inflation to moderate to around 3 per cent in 2020. As a result, the gross margin is expected to contract slightly to between 23.6 and 23.8 per cent guided for the full-year, compared with 23.9 per cent for the six months to December.

Analysts at house broker Peel Hunt forecast adjusted pre-tax profits of £408m and EPS of 94.2p for the year to June 2020, rising to £419m and 98.5p the following year.

REDROW (RDW)    
ORD PRICE:826pMARKET VALUE:£2.91bn
TOUCH:825-827p12-MONTH HIGH:837pLOW: 528p
DIVIDEND YIELD:3.8%PE RATIO:9
NET ASSET VALUE: 466pNET CASH:£14m
Half-year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201897018541.510.0
201987015737.210.5
% change-10-15-10+5
Ex-div:5 Mar   
Payment:9 Apr