Redrow Plc- Trading Statement
This content has been sourced from: https://www.investegate.co.uk/redrow-plc/rns/tradi...
Redrow plc (the 'Group') is today issuing a trading update for the year ended 28th June 2020 ahead of publication of its annual results in September.
Following the implementation of a range of strict social distancing measures, the Group commenced a phased return to construction and began re-opening it sales offices on 18th May 2020. Sales offices in Wales remained closed until 22nd June 2020 due to lockdown restrictions.
The Group is currently undertaking construction activities across 124 developments and has 113 sales offices open (2019: 129). Remote working remains in place for many office-based staff and the Group no longer has any of its workforce furloughed. Given the business's resilient cash flow, the Group has decided not to utilise the Government's Job Retention Scheme and is in the process of returning all payments received under the Scheme.
The new construction protocols that have been put in place, together with extended customer handover procedures, lengthened build times and this will continue to impact the pace of output over coming weeks.
The timing of site closures due to Covid-19 towards the end of March had a profound impact upon the Group's results in a year which was budgeted to be disproportionately weighted to the end of the second-half. Adapting to new ways of working also limited the number of homes that were completed in the last few weeks of the financial year after construction activities were able to resume.
The Group completed 4,032 homes in the year to the end of June compared to 6,443 in the previous year. Turnover is expected to be £1.34bn against £2.11bn last year.
The Group secured 4,222 private reservations in the year with a value of £1.61bn (2019: £1.67bn). In the 5 weeks since re-opening its sales offices, the Group has achieved a net sales rate per outlet per week of 0.56 (2019: 0.59) reflecting strong pent-up demand, especially from buyers using the Government's Help to Buy scheme.
As a result of the Group's strong sales performance earlier in the year, and the significant shortfall in legal completions due to the Covid-19 lockdown, the Group enters the new financial year with a record order book of £1.42bn (2019: £1.02bn) of which c70% in terms of revenue is contracted.
The Group ended the financial year with £126m of debt (2019: £124m cash). At the beginning of the pandemic the Group increased its Revolving Credit Facility to £350m and, as a precaution against the risk of an extended lockdown, obtained eligibility under the Government's CCFF. Due to a timely return to work and the effectiveness of measures taken to protect its cash flow, the Group is unlikely to draw on the CCFF.
Recent studies have highlighted that the Covid-19 pandemic has shifted home movers' priorities. In particular, there is a desire for more inside and outside space, wanting to live closer to green spaces and having better home workspace. Redrow's reputation for placemaking and its award winning Heritage product ideally position the business to meet these changing customer priorities.
Following a review of our divisional businesses, we have decided to scale-back our operations in London to focus on the Colindale Gardens development and continue to target the Group's future growth on the higher returning regional businesses and the Heritage product. The costs and related significant impairments associated with scaling-back the London business will be provided for in the June 2020 accounts. As a consequence of the impact of Covid-19 and making these provisions the profit for 2020 will be substantially below 2019.
An update on the Group's strategy will be presented in more detail at the forthcoming Results presentation in September.
The prospects for the wider economy and its impact upon the new homes market remains uncertain. Despite this, as lockdown restrictions have eased, trading has been encouraging, driven by high customer demand for Help to Buy as more buyers look for support as the mortgage market and economy recovers. To ensure the recovery is sustainable, and buyers intending to use the scheme have the opportunity to do so, we urge the Government to approve an extension to the existing scheme beyond March next year or change the scope of the new scheme to provide access to a broader range of buyers.
The Group's output will inevitably continue to be affected by the ongoing fallout from the Covid-19 pandemic. Notwithstanding this, the Group's record order book, excellent product range and dedicated team of talented people, means it is well-placed to deliver a robust performance against an uncertain outlook.
John Tutte, Executive Chairman said "This has been a challenging period for the industry and prevented the Group from delivering another set of record results. The business has however demonstrated its resilience throughout the crisis and I am immensely grateful for the dedication of my colleagues, the commitment of our wider-workforce and the continuing patience of our customers as we adjust to a new way of working.
Whilst these extraordinary times have been testing for the business, they have provided us with an opportunity to focus on our core strengths putting product, customer satisfaction and the environment at the heart of a recovery strategy to maximise shareholder returns."