A rise in the proportion of social housing completions squeezed Redrow’s (RDW) operating margin in the 12 months to June, a consequence of the group's southward geographical expansion. The number of affordable homes finished rose by more than half, accounting for just over a quarter of the group total. While that was higher than executive chairman John Tutte originally expected, the margin is predicted to recover this year as the sales mix normalises.
One benefit of building more houses in the South was a 2 per cent boost to the average private sales price to £324,500, bucking the trend set by peers in recent months. Legal completions were up 13 per cent, although weaker trading at the mid-point of the year and lower volumes and selling prices in London meant the order book was down 11 per cent at £1.02bn.
Given house price inflation is “barely covering” underlying cost growth, management is undertaking savings initiatives, which Mr Tutte says should largely help to maintain margins. At least cash management is improving: around 90 per cent of adjusted cash profits were converted into cash, up from 72 per cent in the prior year, meaning net cash balances almost doubled.
House broker Peel Hunt lifted their forecasts on these numbers, and now expect adjusted pre-tax profits of £408m and EPS of 91.9p for the year to June 2020.
| REDROW (RDW) | ||||
| ORD PRICE: | 571p | MARKET VALUE: | £2.01bn | |
| TOUCH: | 570-571p | 12-MONTH HIGH: | 644p | LOW: 455p |
| DIVIDEND YIELD: | 5.3% | PE RATIO: | 6 | |
| NET ASSET VALUE: | 450p | NET CASH: | £124m | |
| Year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p)* | Dividend per share (p)* |
| 2015 | 1.15 | 204 | 46.7 | 6.3 |
| 2016 | 1.38 | 250 | 58.2 | 10.5 |
| 2017 | 1.66 | 315 | 73.7 | 17.85 |
| 2018 | 1.92 | 380 | 85.3 | 28 |
| 2019** | 2.11 | 406 | 92.3 | 30.5 |
| % change | +10 | +7 | +8 | +9 |
| Ex-div: | 19 Sep | |||
| Payment: | 13 Nov | |||
| *Adjusted for 21 for 20 share consolidation **Dividend does not include 30p additional cash return | ||||
