Redrow offers bumper dividend after 124% profit increase, but builder for average home buyer highlights cooling housing market
- Redrow’s profits triple to £314 million in the year to June 27, 2021
- After cutting payouts in 2020, it announced a final dividend of 18.5 pence per share
- Now reintroduced forecasts predict £2.2bn turnover by 2024
- Housebuilder expects sales to return to normal by the end of 2021
Homebuilder Redrow saw a 124 percent increase in pre-tax profits of £314 million in the year to June 27.
The developer, which specializes in medium-sized homes and targets the average buyer, reported that turnover had grown from £1.34 billion to £1.94 billion in the past year.
That narrowed the gap with his pre-Covid income to just 8 percent.
But Redrow also warned that the rising housing market in the UK has cooled in recent months and now expects home sales to return to a more normal trend by the end of 2021.
Redrow marked a very profitable fiscal year by announcing a final dividend of 18.5p
As Redrow failed to pay a shareholder dividend in 2020, as a large number of UK companies were forced to suspend payouts, Redrow announced a final dividend of 18.5 pence per share.
Redrow said it was supported by “encouraging trade since the start of the new fiscal year,” while rising construction costs across the industry were “more than offset” by house price inflation.
The normalization of trade has enabled the company to resume its medium-term revenue forecast, with Redrow estimating a turnover of £2.2 billion in 2024.
Notably, Redrow has also reversed an opening debt position of £126m to end the year with a net cash of £160m, following a significant investment in new land, enabling its bumper dividend.
Redrow’s encouraging forecasts led Peel Hunt analysts to raise their target price from 830p to 900p, noting that the Redrow’s share price, which was flat today at 696.8p, offers “one of the best upsides in the industry.”
The UK property sector has been supported by temporary Covid-19 tax breaks for home buyers, but has shown signs of moderation since the phasing out of the benefit began in June.
“The vibrant housing market has moderated in recent months and we expect sales to return to historical average rates over the course of the current fiscal year,” Redrow chairman John Tutte said in the company’s financial statements.
“On this basis, we have made plans for the future and we are confident that our timely investment in land, coupled with strong demand for our Heritage properties, will support our longer term growth ambitions.
In addition, our record order book also provides us with an excellent platform for the future with over £1.3 billion in revenue already secured for the current fiscal year. As a result, the company is well positioned to deliver another set of strong results.”
Redrow’s share price has risen since the low of the pandemic, but remains below its all-time high