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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Redrow Plc | LSE:RDW | London | Ordinary Share | GB00BG11K365 | ORD 10.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -6.00 | -0.95% | 628.00 | 629.00 | 629.50 | 647.00 | 622.00 | 647.00 | 1,220,063 | 16:35:23 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Gen Contractor-oth Residentl | 2.13B | 298M | 0.9009 | 6.99 | 2.08B |
From Apr 2021 to Apr 2024
TIDMRDW
RNS Number : 7763L
Redrow PLC
15 September 2021
FOR IMMEDIATE RELEASE
Wednesday 15 September 2021
REDROW plc
Final results for the 52 weeks to 27 June 2021
strong recovery in 2021 and well positioned for future growth
Financial Results
Hot Features
Premium
2021 2020 Var 2019 Var
Legal Completions 5,620 4,032 +39% 6,443 -13%
---------- ---------- --------- ---------- ---------
Revenue GBP1.94bn GBP1.34bn +45% GBP2.11bn -8%
---------- ---------- --------- ---------- ---------
Profit before tax GBP314m GBP140m +124% GBP406m -23%
---------- ---------- --------- ---------- ---------
EPS 73.7p 32.9p +124% 92.3p -20%
---------- ---------- --------- ---------- ---------
Net Cash/(debt) GBP160m (GBP126m) +GBP286m GBP124m +GBP36m
---------- ---------- --------- ---------- ---------
Total order book GBP1.43bn GBP1.42bn +GBP10m GBP1.01bn +GBP420m
---------- ---------- --------- ---------- ---------
Final dividend 18.5p Nil +18.5p 20.5p -2p
---------- ---------- --------- ---------- ---------
-- Heritage Collection Homes perfectly aligned to the increased demand from customers for high quality, well designed homes in locations which are great places to live
-- Revenue increased by 45% to GBP1.94bn, only 8% below 2019 -- Legal completions increased by 39% to 5,620
-- Strong cash generation with net cash at 27 June 2021 of GBP160m (June 2020: net debt of GBP126m)
-- Significant progress in the land market with c8,300 plots added to current land and 7,749 to forward land
-- Encouraging trading since the start of the new financial year -- House price inflation more than offsetting build cost increases -- Long term supplier relationships ensuring a constant build output
-- Comprehensive new Environmental, Social and Governance strategy with industry leading commitments
2024 Guidance
Now that we have returned to a normal market, the company is able to resume medium term guidance, with that for 2024 presented below:
Revenue (GBPbn) > 2.2
Operating Margin (%) c19.5
------
EPS (p) >= 90
------
ROCE (%) > 22
------
Commenting on the results John Tutte, Chairman of Redrow, said:
"Against a background of much uncertainty at the start of the financial year, I am delighted to be able to report the Group delivered an excellent performance in the year to the end of June 2021 with better than expected results.
The Group delivered 5,620 legal completions in the year (2020: 4,032). These completions generated revenue of GBP1.94bn (2020: GBP1.34bn) and profit before tax of GBP314m (2020: GBP140m). Earnings per share increased by 124% to 73.7p (2020: 32.9p).
The Group reversed an opening net debt position of GBP126m to end the year with net cash of GBP160m after making a significant investment in new land.
As a consequence of this strong performance, the Board is proposing a final dividend of 18.5p making a total of 24.5p for the year, in line with the company's policy of three times dividend cover.
The buoyant housing market has moderated in recent months and we anticipate sales rates will return to historically average rates over the course of the current financial year. It is on this basis we have planned for the future and we are confident our timely investment in land, combined with strong demand for our Heritage homes, will support our longer-term growth aspirations. Additionally, our record order book also provides us with an excellent platform for the future with over GBP1.3bn of revenue already secured for the current financial year. As a result, the business is well-placed to deliver another set of strong results."
Enquiries: Redrow plc John Tutte, Chairman 01244 527411 Matthew Pratt, Group Chief Executive 01244 527411 Barbara Richmond, Group Finance Director 01244 527411 Instinctif Partners 0207 457 2020 Tim Linacre, Chief Executive 07949 939237 Bryn Woodward, Associate Partner 0207 457 2045
A webcast and slide presentation of our results will be available at 7.00 am on http://investors.redrowplc.co.uk/ .
Participants can also dial in to hear the presentation at 7.00 am on +44 (0)20 3936 2999 or
UK Toll Free on 0800 640 6441; participant access code 529147.
Playback will be available by phone from 8.00am for the next 7 days +44 (0)20 3936 3001 followed by
Access Code 171223.
There will also be an analyst Q&A conference call with management at 9.00 am and an audiocast of this call will be available on http://investors.redrowplc.co.uk/reports-and-presentations this afternoon.
LEI Number:
2138008WJZBBA7EYEL28
Announcement Classification:
1.1: Annual financial and audit reports
CHAIRMAN'S STATEMENT
Against a background of much uncertainty at the start of the financial year, I am delighted to be able to report the Group delivered an excellent performance in the year to the end of June 2021 with better than expected results. Turnover increased by 45% to GBP1.94bn and profit before tax more than doubled to GBP314m.
The Group entered the year in good shape and well-prepared to take advantage of any bounce-back in demand following the first lockdown. The order book was at a record level and work in progress carried forward was higher than normal, partly due to a conscious decision to increase production in anticipation of higher Help to Buy demand ahead of the original scheme drawing to a close.
A strong market emerged from the lockdown driven by the Stamp Duty holiday and, in the earlier part of the year, by keen demand from buyers that would be excluded from the Help to Buy scheme after March 2021. The potential for a hiatus in the 2021 Spring market that we highlighted last year didn't materialise as the Chancellor decided to extend the Stamp Duty holiday to September 2021 with a phased return to previous rates. Given the unquestionable success of the temporary reductions in Stamp Duty to stimulate the housing market and its obvious knock-on benefits to the wider economy, we repeat our previous requests for government to consider a permanent reform of this tax, which is a constraint on the market.
Redrow's award winning Heritage product has proved popular with buyers ever since it was launched over ten years ago. The range of primarily detached house types has evolved over the years and its industry-leading design remains appealing to buyers looking for an attractive home with well-planned space in a great place to live. This has never been more so than during the past year as homebuyers re-evaluated their lifestyle and working needs during the pandemic.
The Heritage Collection's popularity and appeal to a broad market was key to dispelling any concerns over the impact on our business of the changes to the Help to Buy scheme that excluded second-time buyers and introduced regional price caps. In the second-half of the year, Help to Buy accounted for just 13% of private reservations compared to 50% in the same period last year.
The high demand for our homes resulted in us closing the year with another record order book of GBP1.43bn (2020: GBP1.42bn) despite delivering significant growth in legal completions and revenue.
Financial results
The Group delivered 5,620 legal completions in the year (2020: 4,032). These completions generated revenue of GBP1.94bn (2020: GBP1.34bn) and profit before tax of GBP314m (2020: GBP140m). Earnings per share increased by 124% to 73.7p (2020: 32.9p).
The Group reversed an opening net debt position of GBP126m to end the year with net cash of GBP160m after making a significant investment in new land.
As a consequence of this strong performance, the Board is proposing a final dividend of 18.5p making a total of 24.5p for the year, in line with the company's policy of three times dividend cover. Subject to shareholder approval at the Annual General Meeting on 12 November 2021, this will be paid on 17 November 2021 to all shareholders on the register at close of business on 24 September 2021.
Strategy
The Group last year announced its intention to largely withdraw from the London market and focus on its regional businesses and, in particular, the Heritage Collection.
Excellent progress has been made during the year to implement this strategy. The Group successfully exited and disposed of a number of London sites that it decided not to build and took the first steps to open a new regional business in the south that is expected to make a positive contribution in financial year 2023.
Following a pause in land buying during the early months of the pandemic, combined with the decision to withdraw from the London market, growth in active outlet numbers stagnated. Capital released from London is now being reinvested to help grow the regional businesses and during the year, the Group added over 8,000 plots with planning, with a projected GDV of over GBP3bn, to its owned and contracted land holdings. As a consequence of this strong land buying performance, the Group is now back on-track with a pipeline of new outlets that will return the business to a pre-pandemic pattern of growth and an incremental recovery in profits and margins.
Board changes
As previously announced, after nearly twenty years at Redrow, I will be stepping-down as Chairman and retiring from the company on 15th September 2021. I am delighted that I will be succeeded by Richard Akers. Richard joined the Board at the beginning of June and has been intensely engaged in the business as part of a comprehensive induction programme ahead of him taking up his new role.
Matthew Pratt was appointed Group Chief Executive at the beginning of the financial year. Matthew has rewarded the board's confidence in his appointment by expertly steering the business through a difficult operating period and laying the foundations for a return to long-term growth. He has also set out his vision for an innovative business centred on developing thriving communities, building responsibly and valuing our people.
I am confident under Richard's chairmanship and Matthew's leadership the business will go from strength-to-strength.
Nick Hewson will be stepping down from the board in 2022 after serving nine years as a Non- Executive Director. Throughout most of his tenure, Nick has chaired the Audit Committee and since 2018 has been the Senior Independent Director. I would like to take this opportunity to thank Nick for his valuable contribution to the business. A process is underway to appoint Nick's replacement.
Trading and outlook
The buoyant housing market has moderated in recent months and we anticipate sales rates will return to historically average rates over the course of the current financial year. It is on this basis we have planned for the future and we are confident our timely investment in land, combined with strong demand for our Heritage homes, will support our longer-term growth aspirations. Additionally, our record order book also provides us with an excellent platform for the future with over GBP1.3bn of revenue already secured for the current financial year. As a result, the business is well-placed to deliver another set of strong results.
And finally......
Great people make great businesses and Redrow owes much of its success to a team of talented and committed people. Their performance over the past year to deliver an excellent set of results against the challenges posed by the pandemic has been outstanding and I thank them all for their hard work.
It has been a privilege to work for Redrow for nearly twenty years and to share in its ongoing success. I am immensely grateful to colleagues, past and present, for their support and dedication. I am indebted to my Board colleagues who over the years have always given wise counsel and encouragement. I wish them and the rest of the Group all the very best for the future.
John Tutte
Non-Executive Chairman
GROUP Chief Executive's Statement
Overview
The Group delivered a strong performance during the year, as long-term social trends continued to underpin demand for our premium homes and places. Customers attached additional value to our larger, mainly detached family homes designed to offer flexible and modern living. COVID-19 also highlighted the growing desire of homeowners to live within our prime locations, created with our own market-leading placemaking principles.
This high level of differentiation was key as we successfully navigated the end of the original Help to Buy scheme and the Government's temporary Stamp Duty changes. Total legal completions increased by 39% to 5,620 from 4,032 in the previous year with revenues increasing by 45% to GBP1.94bn (2020: GBP1.34bn).
We ended the financial year with another record forward order book of GBP1.43bn (2020: 1.42bn) of which 73% was exchanged. This provides the business with an excellent foundation for the future with over GBP1.3bn of our turnover secured for 2022.
We welcomed the introduction of the Government's Stamp Duty holiday, which helped homeowners and the wider market at a time when market stimulation was required. We have now been selling beyond the cut-off date for the holiday for well over six months without any negative impact on reservation levels, as demonstrated by our record order book.
The number of homes sold with Help to Buy reduced considerably. Following the introduction of the new regional price caps, the scheme represented just 13% of private reservations in the second half and 28% across the full financial year. As the scheme draws to a close, and the market continues to adapt, we expect a negligible impact on reservations.
Redrow capitalised on some excellent land opportunities in the financial period under review. Achieving above average hurdle rates, we added c8,300 plots in the year with a GDV of over GBP3bn. Our award winning Heritage Collection accounted for 79% of private homes revenue, which enables us to satisfy demand at scale and deliver efficiencies. The desirability of our product, combined with our aesthetically pleasing designs, means planners across England & Wales are happy to see our homes incorporated within their communities.
As we continue to build in prime locations, our products and places are within reach of many families aspiring to a larger home. Our average reservation rate for the year was 0.70 (2020: 0.67) and, more importantly, the reservation value per outlet increased to GBP288K per week (2020: GBP259k), excluding private rented sector, as we delivered an industry leading reservation rate on a revenue basis.
In the year, we saw considerable house price inflation across England & Wales with the exception of London. In the regional businesses, due to a combination of house price inflation and geographical mix, reservation prices increased on average by c5% across the financial year, particularly in the final quarter, which was more than enough to offset build cost inflation of c5%.
We have continued to work largely uninterrupted across all our sites during the year. However, there have been some supply interruptions and specific shortages in steel, timber and cement-based products. In conjunction with our supply partners, we have mitigated the impact of these interruptions and we are confident that our close working relationships will allow us to continue to build unhindered. We expect that supply pressures will ease as more capacity is brought on stream to deal with high demand for materials.
As announced in June 2020 we made the strategic decision to exit the London market on all the sites where we hadn't commenced build. Our scaled-down London operation is now concentrating on our large redevelopment site at Colindale. During the year we successfully received planning for a further 1,100 homes at Colindale ensuring that we will be developing this successful site for some considerable time.
We have completed the exit of the six London sites we decided not to build out. Our owned interest in three of these were sold, albeit one was at the start of the current financial year, and the other three were not acquired. The proceeds of the London site disposals are being reinvested in our strong divisional network across England & Wales, including the new Southern division, which will be based in Crawley and is expected to make a contribution to turnover in the 2023 financial year.
People Making the Difference
Keeping our colleagues and customers safe is our first priority. During COVID-19, we have continued to adopt secure protocols for our customers and colleagues. Despite no longer being mandatory, we will continue to encourage mask wearing where appropriate, alongside a thorough cleaning regime.
This approach has been supported by comprehensive training from our in-house team. The availability of online modules has ensured new and existing colleagues have access to training on our COVID-19 secure working protocols, regardless of their location.
We have also introduced flexible working and many colleagues have been working from home during the pandemic. This has proved to be very effective and, going forward; colleagues will be able to work from where they are most efficient, whether that be at home, site or within divisional offices. Based on the feedback we have received, these steps have improved colleagues' general mental health and we have extended our wellbeing offering to colleagues, and their families, during the year.
Our people - whether they are directly or indirectly employed - are key to us maintaining a competitive advantage. Therefore, during the year, I was pleased to see us become a Real Living Wage employer and to extend this benefit to our subcontractor partners.
Furthermore we are committed to 'inspiring the next generation to build' as one of the central aims within our Valuing People strategy. In May 2021, I was delighted to attend the opening of the first NHBC brickwork Training Hub at our Amington Garden Village development in Tamworth. Officially opened by Chris Pincher, the Minister of State for Housing and MP for Tamworth, it is a great example of partnership working and will enable applicants from other home builders, as well as Redrow, to complete a bricklaying apprenticeship within an accelerated 18 month period, making it attractive to those looking to move into construction from another sector.
Investing in Places
As I stated in my 2020 Chief Executive review, at the onset of COVID-19 we temporarily postponed the purchase of new land as part of measures to protect cash flow and also renegotiated favourable deferment terms on our existing obligations. Post the initial lockdown we returned to the market, taking a sensible and balanced view with regard to land acquisition.
This resulted in some constraints on our active outlet numbers and, together with the strength of the market, has seen the number of outlets reduce over the last 12 months. We closed the year working from 120 outlets and expect to remain at a reduced level for the forthcoming year until new land acquisitions come on-stream.
As stated above, we capitalised on strong land opportunities in the financial period under review. Achieving above average hurdle rates, we added 8,290 current land plots in the year with a total GDV of over GBP3bn. Therefore, our owned and contracted land holdings with planning totalled 29,460 plots (2020: 27,000). Pull through from Forward Land accounted for 3,539 of the plots added.
Housing Secretary Robert Jenrick officially launched the Building Beautiful Places plan in July 2021. Whilst we support the broad intentions of the new code and framework, we believe that opportunities have been missed. The report's recommendations have failed to take into account underlying lifestyle changes, which have been accelerated as a result of the pandemic.
In a survey we commissioned of c.2,000 consumers, an overwhelming majority (77%) said they aspired to live in a two storey detached home. Only 3% and 4% of respondents stated they would choose to live in a terraced home or townhouse respectively. This is contrary to the central ethos of the National Model Design Code (NMDC), which supports higher density development.
A positive outcome of the NMDC launch is the focus on community consultation. This is essential to delivering places where people want to live. For a number of years we have been extending our reach via social media and digital methods to ensure all members of the community have an opportunity to input their views into developments. Given that c80% of our product is standard and adopted by planning authorities across England & Wales, we are confident we are meeting the needs of both customers and planning authorities.
Innovation across Redrow
Since my appointment as Chief Executive, I have set a clear direction of evolving, rather than revolutionising, our successful strategy. Alongside this approach, I have launched Redrow 2025. It is an ambitious vision, which is focused on accelerating innovation across the business.
The process began with the biggest team consultation in Redrow's history, with over 2,000 colleagues inputting their thoughts via a combination of virtual conferences, surveys, focus groups and one to one meetings. All the ideas have been collated within our three strategic themes: Thriving Communities, Building Responsibly and Valuing People.
This approach is ensuring new projects are efficiently implemented throughout the business and embraced by all teams. Initiatives include a completely new approach to flexible working with colleagues actively involved in developing collaborative workspaces; a Green Academy to ensure colleagues have the right skills to meet the climate challenge; volunteering and delivering digital programmes to create efficiencies for customers and Redrow.
This culture of constant innovation extends across all our day-to-day business operations. During the financial year, we reviewed and refreshed the Redrow brand, in tandem with our sales centre visitor experience.
New sales outlets have been re-named as 'Customer Experience Suites' reflecting their new role supporting customers throughout their whole journey, whether they are visiting Show Homes or meeting with customer service and site colleagues to undertake Hard Hat and Home Preview visits.
We are the first major house builder in the market to remove paper from our sales outlets. We have been able to take this important step by connecting great people with integrated digital technology. Key features of the new suites include digital screens throughout - all of which can be updated remotely to ensure consistent messaging across all outlets. There are also interactive site plans and iPads, where customers can view choices and upgrades, and even complete their reservation online.
Our new, refreshed brand focuses on our 'better way to live' purpose, highlighting in equal measure our product, placemaking and service credentials. These steps are part of our constant innovation of the customer journey to create an excellent online and offline experience.
Customers & Quality
Innovation is about constantly raising standards, and we have continued to make progress across all aspects relating to customers & quality.
We have once again secured a Home Builders Federation Five Star award following thousands of positive customer reviews. At the time of writing, Redrow is also the only volume house builder to be rated as 'excellent' on Trustpilot. Any feedback is carefully analysed and fed into our root cause process, which aims to iron out any recurring issues.
We were delighted that 24 of our site managers received a Pride in the Job Quality Award this year.
The accolade, established by the National House Building Council, celebrates the exceptional contribution-winning site managers make in creating homes of outstanding quality. Pride in the Job first launched over forty years ago and is the most highly regarded competition in the house-building industry.
In the period under review, we launched our Homeowner Support Portal. Part of My Redrow, it contains over 50 self-help videos along with the ability for customers to submit their warranty issues online.
Our core systems have been created in-house, enabling warranty items to be seamlessly integrated into our back-end systems. This creates efficiencies for customers and the business as we reduce the administrative burden, freeing up more time to proactively develop customer relationships.
This technology will play an important role as we prepare for a seamless transition into a New Homes Ombudsman (NHO) regime. At Redrow, we see the NHO's introduction as an opportunity. It will provide another way of demonstrating our differentiation and set us apart from competitors.
Redrow is predominantly a housebuilder, however, we have historically built a small number of high-rise buildings mostly on a design & build basis by main contractors. Ten schemes have now been identified as potentially not conforming to the current government regulations. Each development is unique and was designed in accordance with the building regulations and accepted practices at the time.
We are very aware of the stress and burden on residents of high-rise apartments across the country that have remedial issues based on the new standards and guidance set by government. We are encouraging management companies, where appropriate, to apply directly to the Building Safety Fund and we will continue to engage with government, contractors, leaseholders and all other parties to help identify solutions to this complex industry issue.
Meeting the Climate Challenge
The success of Redrow and the overall contribution we make to wider-society is dependent on how we manage the environmental and social factors that influence our business model. Our approach connects social, environmental and economic value across the business and is underpinned by good governance, which leads to better long-term decisions.
In the spring, we undertook a comprehensive review of our Environmental, Social and Governance (ESG) performance. We have prioritised those issues that are most material to our business and we have, for the first time, published our comprehensive ESG scorecard to reflect this review.
Climate change, together with biodiversity loss, is the most urgent environmental issue we face. The UK government has set a target to achieve Net Zero Carbon by 2050. We believe that whilst this presents significant challenges, there is also great opportunity to learn from the science; to innovate and to future-proof the homes and communities we build.
In the last year, we have reduced overall emissions by 6%. In particular, we have made great progress in improving the energy-efficiency of our building fabric specification, along with improving the integrity of our data and collaborating with our supply-partners to drive innovation.
We were excited to see the trial of a pioneering low-carbon heating solution get underway at our site in Scissett, Yorkshire. The solution offers a smart home and energy management system that seeks to deliver net zero electricity use in the home. We are also collaborating with several major manufacturers to assess the practical and design implications of air-source-heat-pumps. These trials form part of our wider product development and specification strategy to meet the forthcoming Future Homes Standard and the phasing out of gas boilers from 2025, and as we look beyond to deliver genuine net zero carbon homes that are both comfortable and affordable.
In recognition of our progress on mitigating climate change, we were delighted to secure a position as one of the Financial Times Europe's Climate Leaders in the year.
Looking forward we have committed to sign-up to the Science Based Targets initiative (SBTi) and partner's Business Ambition for 1.5degC campaign. In making this commitment, we are demonstrating the highest level of ambition as set by the SBTi in the short and longer term. We have also committed to reach science-based net zero emissions no later than 2050. We will set interim science-based targets across scopes 1, 2 and 3, in-line with the criteria and recommendations of the SBTi. In doing this we also join the UNFCCC Race to Zero. Furthermore, we will advocate for ambitious government policies that align to 1.5degC to support the transformational change that the UK's net zero target requires.
The publication of our Nature for People strategy in partnership with the Wildlife Trusts has given Redrow the solid foundation blocks to ensuring that we leave a positive environmental legacy. The next phase of our plan will see the implementation of our 15 commitments, establishing the right assurance processes, and the measurement and reporting of our impact on both wildlife and people.
In preparation for the forthcoming requirement to achieve a Biodiversity Net Gain (BNG), we undertook eight pilot projects to understand what changes we need to make to our design approach. The results are positive with on-site net gains achievable on 63% of the test projects. During the year, we held BNG training workshops with all of our delivery teams and further work is underway to establish a blueprint for achieving gains for nature on all new developments.
This year we have seen some great examples of how we are delivering Nature for People in-practice and enhancing habitats in line with the mitigation hierarchy. At our new development in Haverhill, we have retained and improved existing hedgerows to achieve a forecast 18% net gain in these important habitats, as well as creating cycle routes and footpaths through extensive green corridors and wildflower meadows.
This year saw the conclusion of our 'Reduce the Rubble' research project - a pioneering initiative that captured both the quantity and the root-cause for every element of construction waste generated during the build of our most popular house type. The study identified more than thirty opportunities for eliminating and reducing waste, several of which have now been implemented.
Overall, we are making important strides forward in ESG and I am looking forward to seeing that progress continue.
Board Changes
I'd like to place on record my thanks and appreciation to John Tutte who will be retiring and leaving the Group in September after nearly 20 years of outstanding service. During John's time at Redrow, he has held the position of CEO and latterly as Chairman. On behalf of the whole Redrow team, we wish John a long and happy retirement.
Following John's retirement, and as planned, Richard Akers now becomes Non-Executive Chairman. I am very much looking forward to working with Richard and continuing Redrow's progress in the future.
Market Outlook
The fundamentals of the market remain strong, with record low interest rates; good mortgage availability and healthy employment data.
In addition, government recognises that housebuilding creates a positive multiplier effect across the domestic economy and has a key role to play in its 'levelling up' agenda. It has an ambitious target to achieve a much-needed 300,000 new homes per year by the mid 2020's. We are proud to play our part in addressing this chronic shortage of quality family homes across England & Wales.
The sales rate (0.84) in the first 11 weeks of the financial year under review reflected unprecedented levels of demand as the country emerged from lockdown, supplemented with the launch of the Government's temporary Stamp Duty Holiday in July 2020.
Our sales rate in the first 11 weeks of the new financial year was 0.66 (2020: 0.84). This reduction was due to our record forward order book and therefore limited availability of homes for sale that can be delivered within the next six months. This strong order book, however, provides certainty going forward as our teams continue to increase production levels and look to bring more sites on stream to satisfy ongoing high demand.
Overall, we have an excellent platform to continue delivering and evolving Redrow's successful strategy in the future. Our high level of product differentiation is compounded by social trends towards customers desiring larger, quality family homes in great places.
I would like to thank Redrow's colleagues and partners for their continued hard work and commitment. Our great people will continue to play a key role as we meet the long-term demand for our products and places across England & Wales.
Matthew Pratt
Group Chief Executive
FINANCIAL REVIEW
Profitability
This year the Group has delivered a strong set of results, above expectations, representing a significant improvement on the prior year, which was severely impacted by the COVID-19 pandemic.
Total Group revenue was GBP1.9bn (2020: GBP1.3bn), an increase of 45%. Homes revenue was GBP1.9bn (2020: GBP1.3bn) from the completion of 5,620 new homes (2020: 4,032) and other revenue from land sales was GBP37m (2020: GBP7m) which included the disposal of two London sites the Group decided not to build out.
Average selling price increased by 2% to GBP338,500 (2020: GBP330,400) due to an increase in both private and affordable housing selling prices compared to the previous year. The private average selling price at GBP391,900 was 1% higher than last year (2020: GBP386,700) with our Heritage Collection private average selling price increasing to GBP393,900 (2020: GBP388,700). Homes revenue increased across all geographical regions with the largest increase in the South.
As a result of the increase in legal completions and the fixed nature of certain elements of cost of sales, gross margin increased to 21.4% compared to 18.1% in the prior year. This resulted in a gross profit of GBP414m, up 71% on last year (2020: GBP242m).
Administrative expenses reduced slightly in absolute terms to GBP93m in the year (2020: GBP94m) and, again due to their relatively fixed nature, reduced more significantly as a percentage of revenue to 4.8% (2020: 7.0%).
The Group therefore delivered an operating profit of GBP321m (2020: GBP148m) in the year at an operating margin of 16.6% (2020: 11.1%).
Net financing costs at GBP7m were GBP1m lower than the prior year with bank interest reducing due to the improved net cash position. We had an average monthly net cash balance of GBP142m for the year compared to GBP2m the previous year.
As a result, the Group delivered a profit before tax of GBP314m (2020: GBP140m) for the year with basic earnings per share up 124% at 73.7p (2020: 32.9p).
Tax
The corporation tax charge for the year was GBP60m (2020: GBP27m). The Group's tax rate for 2021 was 19% in line with 2020. The normalised rate of corporation tax for the year ending 30 June 2022 is also projected to be 19% based on rates which are substantively enacted currently. HM Treasury has undertaken a consultation on a Residential Property Developers Tax, the outcome of which is awaited. We would expect to be within the scope of this new tax, which is currently expected to commence in April 2022 per the consultation.
The Group paid GBP54m of corporation tax in the year (2020: GBP64m), in four instalments. In the previous financial year, the new legislation for corporation tax payments by very large companies took effect. This resulted in Redrow paying six instalments in the financial year ended June 2020.
Dividends
The Board has proposed a 2021 final dividend of 18.5p per share which will be paid on 17 November 2021 to Shareholders on the register on 24 September 2021, subject to Shareholder approval at the 2021 Annual General Meeting. The full year dividend is therefore 24.5p (2020: nil p) on earnings per share of 73.7p. This is a return to a payout ratio of 33% of earnings following a pause in dividend payments last year due to the uncertainty surrounding the pandemic.
Based on a corporation tax rate of 25% in FY2024, we are targeting earnings per share of at least 90.0p and therefore a dividend per share of at least 30.0p. This represents a like for like increase on FY2021 dividend levels of 32%.
Returns
Net assets at 27 June 2021 were GBP1,872m (2020: GBP1,626m), a 15% increase. Capital employed at the same date was GBP1,712m (2020: GBP1,752m) down 2% due to the increased net cash and a return to more normal levels of work in progress. Our return on capital employed increased to 18.5% (2020: 9.2%). Return on equity also increased from 8.7% to 18.0%..
Inventories
Our gross investment in land was broadly in line with prior year levels at GBP1,526m (2020: GBP1,538m) representing owned with planning land holdings of approximately 5.2 years. Approximately 43% of our current land bank additions in 2021 came from our forward land holdings, broadly in line with the five year average contribution.
Land creditors decreased slightly to GBP294m at June 2021 (2020: GBP302m) representing 19.3% of gross land value, broadly in line with the prior year (2020: 19.6%).
Our owned plot cost has reduced by GBP2,000 per plot to GBP76,000 at June 2021 (2020: GBP78,000), representing 19% of the average selling price of private legal completions in the year (2020: 20%). This is in part due to obtaining planning permission for a further 1,100 plots on our Colindale site in London.
Our investment in work in progress has decreased by GBP60m to GBP987m (2020: GBP1,047m). This reduction from the higher than normal closing position last year was expected and is a consequence of the timing of legal completions this year compared with 2020. As a percentage of Homes turnover, it reduced to 52% from 79% last year.
Receivables
Trade receivables and contract assets increased by GBP50m at June 2021 to GBP75m (2020: GBP25m) due primarily to the timing of PRS receipts. Other receivables increased from GBP8m to GBP21m mainly due to the timing of the recovery of VAT on land payments.
Payables
Trade payables, customer deposits and accruals were GBP3m higher than 2020 levels at GBP607m (2020: GBP604m) with trade payables increasing and customer deposits decreasing reflecting levels and timing of activity.
Cash flow and Net Debt
There was a cash inflow generated from operations of GBP362m in the year (2020: cash outflow of GBP80m). This is due to the increase in legal completions and hence revenue and cash receipts. As a result, we closed the year with a net cash of GBP160m compared to a net debt balance at June 2020 of GBP126m.
Financing and Treasury Management
In March 2021, we extended our unsecured GBP350m syndicated loan facility due to mature in December 2022 to 30 September 2025. In the light of net cash projections, at the same time we cancelled GBP13m of committed, unsecured bilateral facilities, as these were no longer required.
Redrow remains a UK based housebuilder and therefore the main focus of its financial risk management surrounds the management of liquidity and interest rate risk. Financial management at Redrow is conducted centrally using policies approved by the Board.
(i) Liquidity
The Group regularly prepares and reviews its cash flow forecasts and stress tests them. These are used to manage liquidity risks in conjunction with the maintenance of appropriate committed banking facilities to ensure we maintain medium term committed banking facilities sufficient for a major market breakdown.
Facilities are kept under regular review and the Group maintains regular contact with its banks and other financial institutions; this ensures Redrow remains attuned to new developments and opportunities and that our facilities remain aligned to our strategic and operational objectives and market conditions.
Our current banking syndicate comprises six banks and in addition to our committed facilities, Redrow also has further uncommitted bank facilities which are used to assist day to day cash management.
(ii) Interest Rate Risk
The Group is exposed to interest rate risk as it borrows money at floating rates. Redrow occasionally uses simple risk management products, notably sterling denominated interest rate swaps, as appropriate to manage this risk. Such products are not used for speculative or trading purposes. Redrow regularly reviews its hedging requirements. No hedging was undertaken in the year or the previous financial year and no interest rate swaps are held currently (2020: nil).
Pensions
As at June 2021, the Group's financial statements showed a GBP40m surplus (2020: GBP22m surplus) in respect of the defined benefits section of The Redrow Staff Pension Scheme (which closed to future accrual with effect from 1 March 2012). The GBP18m increase is mainly due to experience adjustments as a result of the triennial valuation of the defined benefit element of the Scheme as at 1 July 2020 being completed in the year.
Barbara Richmond
Group Finance Director
Consolidated Income Statement
52 weeks ended 27 June 28 June
2021 2020
Note GBPm GBPm
Revenue 1,939 1,339
Cost of sales (1,525) (1,097)
-------------------------------------- -----
Gross profit 414 242
Administrative expenses (93) (94)
-------------------------------------- -----
Operating profit 321 148
Financial income 1 2
Financial costs (8) (10)
-------------------------------------- -----
Net financing costs (7) (8)
Profit before tax 314 140
Income tax expense 2 (60) (27)
-------- --------
Profit for the year 254 113
====================================== ===== ======== ========
Earnings per share - basic 4 73.7p 32.9p
- diluted 4 73.6p 32.8p
Statement of Comprehensive Income
52 weeks ended 27 June 28 June
2021 2020
GBPm GBPm
Profit for the year 254 113
Other comprehensive income
Items that will not be reclassified to profit
or loss
Remeasurements of post-employment benefit obligations 16 1
Deferred tax on actuarial gains taken directly
to equity (9) -
Other comprehensive income for the year net of tax 7 1
-------------------------------------------------------- -------- --------
Total comprehensive income for the year 261 114
======================================================== ======== ========
Balance Sheet
As at
27 June 28 June
2021 2020
Note GBPm GBPm
Assets
Intangible assets - 2
Property, plant and equipment 19 19
Lease right of use assets 6 7
Investments - 9
Deferred tax assets 1 1
Retirement benefit surplus 40 22
Trade and other receivables - -
Total non-current assets 66 60
------------------------------------------------ ----- -------- --------
Inventories 5 2,513 2,585
Trade and other receivables 100 38
Current corporation tax 1 7
Cash and cash equivalents 8 160 44
Total current assets 2,774 2,674
------------------------------------------------ ----- -------- --------
Total assets 2,840 2,734
------------------------------------------------ ----- -------- --------
Equity
Retained earnings at 29 June 2020/1 July 2019 1,522 1,481
Profit for the year 254 113
Other comprehensive income for the year 7 1
Dividend Paid (21) (72)
Movement in LTIP/SAYE 6 (1)
------------------------------------------------ ----- -------- --------
Retained earnings at 27 June 2021/28 June 2020 1,768 1,522
Share capital 9 37 37
Share premium account 59 59
Other reserves 8 8
Total equity 1,872 1,626
------------------------------------------------ ----- -------- --------
Liabilities
Bank loans 8 - 170
Trade and other payables 6 152 120
Deferred tax liabilities 15 5
Long-term provisions 34 8
Total non-current liabilities 201 303
------------------------------------------------ ----- -------- --------
Trade and other payables 6 767 805
Total current liabilities 767 805
------------------------------------------------ ----- -------- --------
Total liabilities 968 1,108
Total equity and liabilities 2,840 2,734
------------------------------------------------ ----- -------- --------
Redrow plc Registered no. 2877315
Statement of Changes in Equity
Note Share Share Other Retained Total
capital premium reserves earnings
GBPm account GBPm GBPm GBPm
GBPm
-------------------------------- ----- --------- --------- ---------- ---------- ------
Total equity at 1 July 2019 37 59 8 1,481 1,585
-------------------------------- ----- --------- --------- ---------- ---------- ------
Profit for the year - - - 113 113
Other comprehensive income for
the year - - - 1 1
-------------------------------- ----- --------- --------- ---------- ---------- ------
Total comprehensive income relating
to the year (net) - - - 114 114
Dividend paid - distributions
to owners 3 - - - (72) (72)
Movement in LTIP/SAYE - - - (1) (1)
-------------------------------- ----- --------- --------- ---------- ---------- ------
Total equity at 28 June 2020 37 59 8 1,522 1,626
-------------------------------- ----- --------- --------- ---------- ---------- ------
Profit for the year - - - 254 254
Other comprehensive income for
the year - - - 7 7
-------------------------------- ----- --------- --------- ---------- ---------- ------
Total comprehensive income relating
to the year (net) - - - 261 261
Dividend paid - distributions
to owners 3 - - - (21) (21) Movement in LTIP/SAYE - - - 6 6 -------------------------------- ----- --------- --------- ---------- ---------- ------ Total equity at 27 June 2021 37 59 8 1,768 1,872 -------------------------------- ----- --------- --------- ---------- ---------- ------
Statement of Cash Flows
52 weeks ended 27 June 28 June
2021 2020
Cash flows from operating activities Note GBPm GBPm
Profit for the year 254 113
Depreciation and amortisation 7 7
Financial income (1) (2)
Financial costs 8 10
Income tax expense 60 27
Adjustment for non-cash items 4 1
(Increase)/decrease in trade and other receivables (62) 20
Decrease/(increase) in inventories 72 (181)
Decrease in trade and other payables (6) (75)
Increase in provisions 26 -
Cash inflow/(outflow) generated from operations 362 (80)
Interest paid (4) (5)
Tax paid (54) (64)
Net cash inflow/(outflow) from operating activities 304 (149)
------------------------------------------------------ ----- -------- --------
Cash flows from investing activities
Acquisition of software, property, plant and
equipment (2) (7)
Interest received - -
Receipts from/(payments to) joint ventures 9 (3)
Net cash inflow/(outflow) from investing activities 7 (10)
------------------------------------------------------ ----- -------- --------
Cash flows from financing activities
Issue of bank borrowings 7 - 170
Repayment of bank borrowings 7 (170) (80)
Payment of lease liabilities (3) (3)
Purchase of own shares (1) (16)
Dividend paid 3 (21) (72)
Net cash (outflow) from financing activities (195) (1)
------------------------------------------------------ ----- -------- --------
Increase/(decrease) in net cash and cash equivalents 116 (160)
Net cash and cash equivalents at the beginning
of the year 44 204
Net cash and cash equivalents at the end of
the year 8 160 44
------------------------------------------------------ ----- -------- --------
NOTES
1. Basis of preparation
The above results and the accompanying notes do not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006.
The Auditors have reported on the Group's statutory accounts for the 52 weeks ended 27 June 2021 under s495 of the Companies Act 2006, which do not contain a statement under s498 (2) or s498 (3) of the Companies Act 2006 and are unqualified. The statutory accounts for the 52 weeks ended 28 June 2020 have been delivered to the Registrar of Companies and the statutory accounts for the 52 weeks ended 27 June 2021 will be filed with the Registrar in due course.
The audited consolidated financial statements from which these results are extracted have been prepared under the historical cost convention and in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and also in accordance with International Financial Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No 160612002 as it applies in the European Union.
Going concern
The financial statements have been prepared on a going concern basis, which the Directors consider to be appropriate for the reasons outlined below.
The Group renewed its available banking facilities in March 2021. As a result, the Group has a 350m Revolving Credit Facility (RCF) (2020: 350m) provided by an established syndicate of six banks being Barclays Bank PLC, Lloyds Bank Plc, The Royal Bank of Scotland Group Plc, Santander, HSBC and Svenska. This expires in September 2025 (2020: December 2022) and is a committed unsecured facility. No change to the RCF covenants was made as a result of the renewal. As at 14 September 2021, GBP350m of this facility was undrawn. It is likely that the RCF will be renewed prior to its expiry in September 2025.
In addition, the Group is in a net cash position at 27 June 2021 and 14 September and also has GBP 3m of unsecured, uncommitted facilities.
The Directors have prepared forecasts including cashflow forecasts for a period of at least 12 months from the date of signing of these financial statements (the going concern assessment period). These forecasts indicate that the Group will have sufficient funds to meet its liabilities as they fall due, taking into account the following severe but plausible downside assumptions:
-- A 10% price reduction on all unexchanged private and social legal completions for the going concern assessment period compared to the base case Board approved budgeted prices;
-- 15% volume reduction for the going concern assessment period compared to the base case Board approved budgeted volumes; and
-- A 4% build cost increase on budgeted costs in Q1 of FY2023.
These downside assumptions reflect the further potential impact of COVID 19 being increased economic uncertainty, further Government lockdown restrictions and legislation and increasing rates of unemployment and the impact on consumer confidence levels.
Allowing for the above downside scenario, the model shows the Group has adequate levels of liquidity from its committed facilities and complies with all its banking covenants throughout the forecast period. The Directors therefore consider that the Group has adequate resources in place for the going concern assessment period and have therefore adopted the going concern basis of accounting in preparing these financial statements.
The principal accounting policies have been applied consistently.
2. Income Tax expense
2021 2020
GBPm GBPm
Current year
UK Corporation Tax 59 23
------ ------
Deferred tax
Origination and reversal of temporary differences 1 4
------ ------
Total income tax charge in income statement 60 27
====== ======
An increase in the UK corporation tax rate from 19% to 25% (effective
1 April 2023) was substantively enacted on 24 May 2021. This will increase
the Company's future current tax charge accordingly. The deferred tax
asset at 27 June 2021 has been calculated based on these rates (2020:
19%) with the exception of the deferred tax liability on employee benefits
which has been calculated at 35% (2020: 19%). This reflects the results
of the latest triennial valuation of the defined benefit section of The
Redrow Staff Pension Scheme which now suggests the return of the IAS
19 surplus is highly likely to take the form of a lump sum cash refund
rather than a reduction in future deficit contributions.
Reconciliation of tax charge for the year
Profit before tax 314 140
------ ------
Tax calculated at UK Corporation Tax Rate at 19.0%
(2020: 19.0%) 60 27
------ ------
Tax charge for the year 60 27
====== ======
3. Dividends
The following dividends were paid by the Group:
2021 2020
GBPm GBPm
Prior year final dividend per share of nil
(2020: 20.5p);
current year interim dividend per share of
6.0p(2020: nil) 21 72
21 72
===== =====
4. Earnings per ordinary share
The basic earnings per share calculation for the 52 weeks ended 27 June 2021 is based on the weighted average number of shares in issue during the period of 344m (2020: 343m) excluding those held in trust under the Redrow Long Term Incentive Plan (8m shares (2020: 9m shares)), which are treated as cancelled.
Diluted earnings per share has been calculated after adjusting the weighted average number of shares in issue for all potentially dilutive shares held under unexercised options.
For the 52 weeks ended 27 June 2021
Earnings No. of shares Per share
GBPm millions pence
Basic earnings per share 254 344 73.7
Effect of share options and SAYE - 1 (0.1)
--------- -------------- ----------
Diluted earnings per share 254 345 73.6
========= ============== ==========
For the 52 weeks ended 28 June 2020
Earnings No. of shares Per share
GBPm Millions pence
Basic earnings per share 113 343 32.9
Effect of share options and SAYE - 2 (0.1)
--------- -------------- -----------
Diluted earnings per share 113 345 32.8
========= ============== ===========
5. Inventories
2021 2020
GBPm GBPm
Land for development 1,526 1,538
Work in progress 910 972
Stock of showhomes 77 75
------ ------
2,513 2,585
====== ======
Inventories of GBP1,465m were expensed in the year (2020: GBP1,027m). Work in progress includes GBP1m (2020: GBP1m) in respect of part exchange properties.
6. Land Creditors
(included in trade and other payables)
2021 2020
GBPm GBPm
Due within one year 144 186
Due in more than one year 150 116
----- -----
294 302
===== =====
7. Borrowings and loans
2021 2020
GBPm GBPm
Opening net book amount 170 80
Issue of bank borrowings - 170
Repayment of bank borrowings (170) (80)
------ ------
Closing net book amount - 170
====== ======
At 27 June 2021 the Group had total unsecured bank borrowing facilities of GBP353m representing GBP350m committed facilities and GBP3m uncommitted facilities.
8. Analysis of net (debt)/cash
2021 2020
GBPm GBPm
Cash and cash equivalents 160 44
Bank loans - (170)
----- -------
160 (126)
===== =======
9. Share capital
2021 2020
GBPm GBPm
Issued and fully paid 37 37
===== =====
Number of ordinary
shares
As at 28 June 2020 and 27 June 2021 (ordinary shares
of 10.5p each) 352,190,420
10. Shareholder Enquiries
The Registrar is Computershare Investor Services PLC.
Shareholder enquiries should be addressed to the Registrar at the following address:
Registrars Department
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
11. Annual General Meeting
The Annual General Meeting of Redrow plc will be held on 12 November 2021 and the Notice of Meeting, together with explanatory notes, will be sent to shareholders in due course.
A copy of this statement is available for inspection at the registered office.
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