Morgan: Planning outlook, mortgage market improving

Shares in Deeside-based house builder fell 5% on Tuesday morning despite strong interim results for the six months to 31 December 2012.

Sales increased to £257m in the first half of the year compared to £232m in the same period last year. This was mainly down to better house prices, as the average price achieved jumped from £204,000 to £224,000.

Pre-tax profit was £23m, up sharply from £15.3m last time. Gearing fell to 11% from 22%, with net debt at the end of the first half standing at £65.2m.

Redrow's land bank at the end of December 2012 was 13,295 plots (June 2012: 12,356 plots).

Steve Morgan, chairman of Redrow, said: "Redrow has delivered a strong set of results with another significant improvement in profitability. The backdrop remains challenging, but the stability of the housing market, the gradual improvement in both the planning environment and the mortgage market, together with our distinct focus on our high-quality, differentiated family housing range has meant that we have continued to make good progress.

"We applaud the Government's attempts to improve the market through the NewBuy, extension of FirstBuy, and Funding for Lending schemes and if the current trend in reduction of mortgage rates continues, it will undoubtedly assist in the housing market's gradual return to more normalised conditions. The National Planning Policy Framework has also stimulated some positive changes in the planning environment, albeit this has still got a long way to go.

"We have started the second half well, with reservations up 8% on the same period last year. Additionally we are on track to increase the number of outlets from 82 to around 90 by June. Given the strong pipeline of new sites and the modest improvement in market conditions, I am cautiously optimistic that Redrow's strong recovery is set to continue. In line with this, we expect to propose a modest final dividend at the year end."

Shares in Redrow slipped 5% to 186p by 11.15am on Tuesday.