Final Results

REDROW GROUP PLC 14 September 1999 Redrow Group plc today announced its Preliminary Results for the 12 months to June 1999. * Turnover up 11% to £341.6m (1998: £307.2m). * Operating profit up 18% to £56.3m (1998: £47.8m). * Profit before tax up 15% to £55.6m (1998: £48.2m). * Earnings per share up 18% to 18.5p (1998: 15.7p). * Full year dividend of 4.5p up 11%. * Return on capital employed maintained at 28%. * Current land bank increased to 12,300 plots (1998: 11,700 plots). * Average plot cost at £18,600 represents 17.8% of average selling price (1998: 18.5%). * Forward land bank further increased to 27,000 plots (1998: 22,900). * Value of forward sales at June 1999 up 20% at £132.6m (1998: £110.5m). Steve Morgan, Chairman commented:- 'Redrow has had yet another record year in 1999, the 25th anniversary of the Group's founding. Over the years, we have consistently delivered strong earnings and profits growth to our shareholders. I am very proud to be able to announce another fine set of figures in this, our fifth year as a public company. Both operating profits and earnings grew strongly posting an 18% increase. Despite concerns about the market and continuing difficulties with the planning process, Redrow enters 2000 in a strong position. Forward sales are 20% ahead of last year, the balance sheet is ungeared and we have a high quality land bank. These factors once again mean that the Group is well-placed to maintain the momentum generated in 1999.' For further information contact: Steve Morgan, Chairman Redrow Group plc Paul Pedley, Chief Executive 0171 404 5959 (14 September) Neil Fitzsimmons, Finance Director 01244 520044 (thereafter) Stephen Breslin/Clare de Souza Brunswick Public Relations 0171 404 5959 Chairman's Statement 1999 marks the 25th anniversary of Redrow's incorporation and the 5th anniversary of Redrow as a public company. Given these two landmarks, it gives me great pleasure to announce another set of record results for the Group. Turnover for the year to June 1999 was £341.6m (1998: £307.2m), an increase of 11.2% which produced a 17.8% increase in operating profits to £56.3m (1998: £47.8m). Profit before tax increased by 15.4% to £55.6m (1998: £48.2m). The tax charge of 25.6% continues to reflect the utilisation of tax losses within Redrow Homes (South East) Limited. Earnings per share increased by 17.8% to 18.5p (1998: 15.7p). The Group ended the year ungeared with a cash surplus of £7.5m. Return on capital employed at 28% remains one of the highest in the industry. It is also pleasing to note that we have achieved a 21% compound growth rate in pre-tax profits in the five years as a public company. The board is pleased to recommend an 11% increase in the final dividend to 3p which together with the 1.5p interim dividend makes a total for the year of 4.5p. This is covered 4.1 times by earnings. Last year was highly successful for the Group with progress being maintained on virtually all fronts. Redrow Homes completed a total of 3,135 units during the year, an increase of 4.2% over the previous year. The average selling price increased from £98,400 to £106,800 due to some relatively modest house price inflation, the continuing growth of our southern housing companies and a small increase in average dwelling size. The UK companies entered the current year with a forward sales value of £133m, an increase of 20% over the previous year. There has been far too much hype in the press recently about housing booms and a return to 1988 conditions. The main area of the country to experience significant price inflation to date is London and the immediate Home Counties, much of which is caused by lack of land supply to which I will refer later. Most of the UK has seen only a modest growth in house prices and indeed many parts of the country have seen no increase whatsoever. The Redrow Homes companies which trade predominantly under the Heritage Range, completed 2,572 units with an average selling price of £112,900. For the first time in the Group's history the southern companies accounted for the largest proportion of completions at 51.4%. The split of the South East business has been successfully executed and both operations are looking forward to further growth in the coming year. The Park Heights development in Jersey produced a further 28 completions with an average selling price of £371,000. Output at Harwood Homes increased significantly from 407 to 535 units largely on the back of a maiden contribution of 120 completions from Harwood Homes (Midlands). The policy adopted by Harwood Homes (North-West) of developing sites jointly with either Redrow Homes (Northern) or (Lancashire) continues to be successful particularly as the Harwood and Heritage brands are so complementary. The new Midlands region has had an encouraging first full year's trading and although further progress is anticipated during the current year the company's main aim is to secure further land holdings with which to sustain further growth. The care and attention which we give to quality, product design and customer care has once again produced a considerable number of commendations for the Group. Indeed, Redrow has virtually swept the board of industry accolades during 1999 including winning all 3 major Housebuilder of the Year Awards. As mentioned earlier, London and the immediate Home Counties have seen significant house price inflation as a result of demand exceeding supply. It amazes me therefore that this simple economic fact has not registered with either the Government or indeed many Local Authorities who continue to frustrate the supply side of our industry by the planning process. The delays in the planning system apply equally to brownfield or greenfield sites and these delays are in danger of affecting the UK economy. Although I do not foresee a repeat of the late 80's boom conditions, the warning signs are clearly there. Indeed, it is somewhat perverse that at a time when the economy is in a healthy condition and demand for housing is increasing the industry is unable to meet the demand because of the shortage of available land. Thanks to contributions from our strong forward land bank the current land bank increased slightly during the year to 12,300 plots (1998: 11,700). However, of this total 3,300 plots are caught in the planning process awaiting detailed permission. It is interesting to note that the number of plots delayed in the system has doubled from 1,150 in 1997 to 3,300 this year aptly demonstrating my previous comments. The average cost per plot has increased slightly to £18,600 (1998: £17,900). However, this represents a reduction to 17.8% (1998: 18.5%) of last year's average selling price. Our continued practice of purchasing land either off market or through our forward land policy is reflected in one of the most competitive land banks in the industry. It has been another excellent year for our forward land teams. The amount of land contained within the forward land bank, with realistic prospects of obtaining planning permission, increased from 22,900 to 27,000 plots, of which approximately 5,000 are allocated in draft local plans. The investment in forward land is long term and costly as Redrow adopts the most conservative of policies, writing off all costs relating to forward land as they are incurred. I am confident, however, that this policy will pay dividends during the next 2-3 years as our forward land bank increasingly contributes to our current land holdings. Redrow Commercial made operating profits of £1.7m during the year and has taken significant steps to secure its future development programme. The major contributor during the year was the office development in Maidenhead. A further office development in Victoria, London is nearing completion and should contribute during the current period. A number of major development opportunities have been secured, the most notable of which are the 2.3m sq.ft. distribution park at Severnside, Bristol and the 140,000 sq.ft. office development in Windsor. On the back of these schemes and a number of others currently in the pipeline, I anticipate significant growth in activity in Redrow Commercial during the coming years. Paul Pedley has managed the day to day operations of the Group for a considerable number of years. Recognition of his success and commitment is long overdue and as such I have pleasure in announcing his appointment as Chief Executive. I look forward to continuing our close working relationship. Over the 25 years since I formed Redrow in 1974 the company has achieved a phenomenal growth rate which has continued during our time as a public company. This growth is entirely due to the hard work of all members of the Redrow team, many of whom have served the company for a long period of time. I would like to take this opportunity of thanking them all for their past efforts and look forward to their support in continuing the success story of Redrow. The main obstacle for the future of our industry remains the one of land supply. Until the Government addresses this issue by speeding up the planning process, the problem threatens to spill over into the UK economy as a whole by way of house price inflation. Despite the above, Redrow has never been in better shape. Thanks to our long term planning strategy we have an excellent land bank, top quality product and strong management team, which will underpin the Group's continued growth strategy into the new Millennium. Steve Morgan, Chairman Redrow Group plc Consolidated Profit and Loss Account 12 months to 30 June 1999 Note 1999 1998 £m £m Turnover - continuing operations 2 341.6 307.2 Cost of sales (264.8) (240.8) ------- ------- Gross profit 76.8 66.4 Administrative expenses (20.5) (18.6) ------- ------- Operating profit - continuing operations 2 56.3 47.8 Net interest payable (0.7) 0.4 ------- ------- Profit on ordinary activities before taxation 2 55.6 48.2 Tax on profit on ordinary activities 3 (14.2) (13.0) ------- ------- Profit on ordinary activities after taxation 41.4 35.2 Dividends (10.1) (9.1) ------- ------- Retained Profit 31.3 26.1 ------- ------- Earnings per ordinary share- basic 4 18.5p 15.7p ------- ------- Earnings per ordinary share - diluted 4 18.4p 15.6p ------- ------- Dividends per ordinary share 6 4.5p 4.05p ------- ------- There are no recognised gains or losses other than as shown above. Redrow Group plc Consolidated Balance Sheet as at 30 June 1999 Note 1999 1998 £m £m Fixed assets Tangible assets 11.0 10.9 Investments 0.1 0.1 ------- ------- 11.1 11.0 ------- ------- Current assets Stocks and work-in-progress 7 306.0 274.7 Debtors 4.3 7.6 Bank and cash deposits 8 7.5 - ------- ------- 317.8 282.3 ------- ------- Creditors due within one year Borrowings - (2.7) Creditors 9 (105.4) (90.3) ------- ------- (105.4) (93.0) ------- ------- Net current assets 212.4 189.3 ------- ------- Total assets less current 223.5 200.3 liabilities Creditors due after more than one year 9 (2.9) (11.2) Provisions for liabilities and charges (1.3) (1.1) ------- ------- Net assets 219.3 188.0 ------- ------- Capital and reserves Called up ordinary share capital 22.4 22.4 Share premium account 49.7 49.7 Revaluation reserve 0.3 0.3 Capital redemption reserve 0.2 0.2 Consolidation reserve 0.9 0.9 Profit and loss account 145.8 114.5 ------- ------- Equity shareholders' funds 219.3 188.0 ------- ------- The balance sheet at 30 June 1998 has been restated to comply with FRS 12, 'Provisions, contingent liabilities and contingent assets'. Redrow Group plc Consolidated Cash Flow Statement 12 months to 30 June 1999 Note 1999 1998 £m £m Net cash inflow from operating 10 31.2 6.2 activities ------- ------- Returns on investments and servicing of finance Interest received 0.3 0.6 Interest paid (1.0) (0.3) Net cash (outflow)/inflow from returns ------- ------- on investments and servicing finance (0.7) 0.3 ------- ------- Taxation Corporation tax paid (10.2) (10.7) ------- ------- Capital expenditure Purchase of tangible fixed assets (0.9) (4.4) Sale of tangible fixed assets 0.1 0.0 ------- ------- Net cash outflow for capital expenditure (0.8) (4.4) ------- ------- Dividends paid (9.4) (8.4) ------- ------- Cash inflow/(outflow)before financing 10.1 (17.0) Financing Issue of ordinary share capital 0.1 0.1 ------- ------- Net cash inflow from financing 0.1 0.1 ------- ------- Increase/(decrease)in cash in period 10.2 (16.9) Net (debt)/cash at 1 July (2.7) 14.2 ------- ------- Net cash/(debt) at 30 June 7.5 (2.7) ------- ------- Redrow Group plc Notes to the preliminary announcement 12 months to 30 June 1999 1. Basis of preparation The above results and the accompanying notes do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. They are taken from the full accounts which have received an unqualified report by the auditors and will be filed with the Registrar of Companies. 2. Segmental information 1999 1998 £m £m Turnover Homes 334.9 296.1 Commercial 6.7 11.1 ------- ------- 341.6 307.2 ------- ------- Operating profit Homes 54.6 45.5 Commercial 1.7 2.3 ------- ------- 56.3 47.8 ------- ------- Profit on ordinary activities before taxation Homes 53.9 45.9 Commercial 1.7 2.3 ------- ------- 55.6 48.2 ------- ------- Net assets Group 81.1 81.3 Homes 133.8 103.2 Commercial 4.4 3.5 ------- ------- 219.3 188.0 ------- ------- 3. Taxation The effective rate of tax for the year is 25.6% (1998: 26.9%) and takes account of the utilisation of tax losses within Redrow Homes (South East) Limited which were acquired within Costain Homes Limited in 1993 as well as the lower rate of corporation tax prevailing in Jersey. At 30 June 1999, tax losses in excess of £23m remained within Redrow Homes (South East) Limited. 4. Earnings per share The calculation of the basic earnings per share of 18.5p (1998: 15.7p) is based on Group profit on ordinary activities after taxation of £41.4m (1998: £35.2m) and on the weighted average number of 10p ordinary shares in issue of 223.9m (1998: 224.3m). The average reflects an adjustment in respect of surplus shares held in trust under the Redrow Long Term Share Incentive Plan. Diluted earnings per share has been calculated in accordance with FRS14 based on the weighted average number of 10p ordinary shares in issue of 225.1m (1998: 225.5m). 5. Half year comparison 6 months to 6 months to 30 June 31 December 1999 1998 Unit Sales 1,562 1,573 ------- ------- £m £m Turnover 180.5 161.1 ------- ------- Operating profit 30.2 26.1 Interest payable (0.7) - ------- ------- 29.5 26.1 ------- ------- Earnings per ordinary share - basic 9.9p 8.6p 6. Dividends The final dividend of 3.0p will be recommended to shareholders for approval at the Annual General Meeting on 8 November 1999. This dividend will be paid on 26 November 1999 to shareholders whose names are on the Register of Members at the close of business on 24 September 1999. The shares will become ex-dividend on 20 September 1999. This dividend when added to the interim makes a total dividend for the year of 4.5p (1998: 4.05p). 7. Stocks and work-in-progress 1999 1998 £m £m Land held for development 186.3 171.6 Work in progress 111.5 94.7 Stock of showhomes 14.1 12.6 ------- ------- 311.9 278.9 Cash on account (5.9) (4.2) ------- ------- 306.0 274.7 ------- ------- Work-in-progress includes £2.2m (1998: £3.0m) in respect of part exchange properties. 8. Bank and cash deposits Bank and cash deposits includes £3.9m held in stakeholder accounts by solicitors relating to land acquisitions. 9. Amounts due in respect of development land 1999 1998 £m £m Due within one year 27.7 19.4 Due after more than one year 2.9 11.2 ------- ------- 30.6 30.6 ------- ------- 10. Analysis of cash flow from operating activities 1999 1998 £m £m Operating profit 56.3 47.8 Depreciation, including profits and losses on disposals of fixed assets 0.7 0.6 Increase in stock and work-in-progress (31.3) (45.6) Decrease/(increase) in debtors 3.3 (2.8) Increase in creditors and provisions 2.2 6.2 ------- ------- Cash inflow from operating activities 31.2 6.2 ------- ------- 11. Annual General Meeting The Annual General Meeting of Redrow Group plc will be held at St. David's Park Hotel, St. David's Park, Flintshire, on 8 November 1999, commencing at 12.00 noon. A copy of this statement is available for inspection at the registered office.

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