Performance remains “comfortable” and the outlook “very encouraging” the housebuilder said as it showed increased revenue, profit and margins, buoyed by running down the remaining land acquired at higher prices before the downturn.
Redrow reported turnover of £1.38bn in the 12 months to the end of June 2016 and £250m pre-tax profit, with a return on capital employed of 24.2%.
Chairman Steve Morgan said the gross margin of 24% was fueled by a drop in the use of provisioned land from before the downturn in new projects from 12% to 6%. The remainder of this higher priced land is expected to be used up before the end of 2016.
Land creditors increased by £112m to £378m at June 2016 representing 31% of land inventory (2015: 26%). “This reflects favourable land market conditions prevailing during the year,” the company said.
Net debt reduced Net debt reduced to £139m from £154m in 2015, a low borrowing rate, or gearing, of 14% of portfolio value.
Sales completions were up 17% to 4,716 (2015: 4,022) spurred by Help to Buy. The average house price rose 7% to £288,600. The number of developments increased 9% to 128. The staff headcount rose 19% to 1,962. The land bank at the end of June 2016 was up 43% at 26,000 plots (2015: 18,216 plots).
Morgan said: “I am delighted to report that for the third consecutive year Redrow has delivered a record set of results. Pre-tax profits were £250m, achieved by completing over 4,700 much needed new homes, a 17% increase over last year. Redrow entered the new financial year with a record private order book of £807m, up 54% year on year. Sales in the first 10 weeks are very encouraging and up 8% on a strong comparator last year. Our strategy of continued growth for the business is on track and I am confident this will be another year of significant progress for Redrow.”
Morgan said he had still seen no seen of a slowdown since the EU referendum result.
Gross margin improved by 40 basis points to 24.2% helped by 94% of completions coming from sites “purchased post downturn with normal margins”.
A final dividend of 6p/share (2015: 4p) making 10p in total for the year, is proposed, an increase of 67% on 2015.
Shares in Redrow, based in Deeside, were up 30p to 414p.