Final Results

RNS Number : 5818M

Redrow PLC

19 September 2012

 



Redrow plc

Final results for the year ended 30 June 2012

ANOTHER YEAR OF SIGNIFICANT IMPROVEMENT IN PROFITABILITY

Financial Results

	2012	2011
Revenue	£478.9m	£452.7m
Operating Profit	£48.0m	£31.2m
Profit before tax	£43.0m	£25.3m
EPS (adjusted)	10.8p	6.0p
Legal Completions (homes)	2,458	2,626
Private Average Selling Price	£204,100	£174,100
Net Debt	£14m	£75.4m
Gearing	2%	16%
NAV per share (adjusted)	£1.52	£1.45
ROCE	8.7%	6.1%

Financial highlights

·        Group revenue increased 5.8% to £479m, driven by 15% increase in average selling prices, with private ASP up by 17% to £204,100

·        Operating margin rose from 7.5% (excluding Scotland) to 10% as a result of increased sales from sites purchased since the downturn, improved product mix and the benefit of high profit on land sales and freehold reversion sales (margin was 9% excluding these one off items)

·        Pre-tax profit up 70% to £43m and adjusted earnings per share up 80% to 10.8p

·        Private net reservations up 4% from £416m to £434m (excluding London) due to a change in mix to larger homes and private order book up 33% to £152m

·        Return on capital employed up from 6.1% to 8.7%

·        NAV per share up 5% to £1.52 adjusted for the £78m share issue

·        Net debt down £61.4m to £14.0m, gearing down to 2% (2011: 16%)

Operational highlights

·        New Heritage Collection now firmly established as primary brand and represented 67% of private turnover during the year (2011: 35%) 

·        Opening of new outlets remains a priority; 82 outlets at year end (2011: 74) should increase to over 90 outlets by the end of the current financial year

·        London Division commenced construction on our first two major flatted schemes, One Commercial Street in Aldgate and Kingston Riverside in Kingston upon Thames

·        Landbank of 12,350 plots at the end of June 2012 (June 2011: 11,190 plots)

·        Reservations in the current year are 16% ahead of the same period last year

·        5 Star Award in HBF 2012 Customer Satisfaction Survey

Steve Morgan, Chairman of Redrow, said:

"Redrow has once again delivered a strong set of results with a significant improvement in profitability against the backdrop of a challenging marketplace. Our strategy of focusing on high quality differentiated family housing product is clearly paying off with The New Heritage Collection firmly established as our primary brand accounting for 67% of our private turnover during the year.  The average selling price of a New Heritage home is now £215,100, which is a 7% increase on the previous year.  

We have started the new year with reservations per outlet at a similar level to last year.  Total private reservations in the first 11 weeks of the financial year are up 16% as a result of a year on year increase on outlets from 73 to 84.  We are encouraged by the recent Government Housing and Growth announcement, however the outlook for the industry remains challenging.  Supply of mortgages, although slightly improved on last year, remains a significant constraint, as does public confidence due to the country's fragile economic state.  Nevertheless, we have an excellent product range and a strong pipeline of new sites, which gives the Board every confidence that Redrow will continue along its path of improving performance."

Enquiries:

Redrow plc

Steve Morgan, Chairman                                              01244 527411

Barbara Richmond, Group Finance Director                  01244 527411

Tulchan Communications

Susanna Voyle/Lucy Legh                                             020 7353 4200

There will be an analyst and investor meeting at 9.00 am at CPC Venues, 4 Chiswell Street, London, EC1Y 4UP.  Coffee will be served from 8.30 am.

A live audio webcast and slide presentation of this event will be available at 9.00am on www.redrow.co.uk.  Participants can also dial in to hear the presentation live at 9.00 am on [phone] or UK Toll Free 0800 368 1950 Participant Code: 212947#.

Playback will be available by phone until 26 September on the following dial-in numbers:

UK & International [phone]

UK Toll Free 0800 368 1890

Conference Reference: 386851#

CHAIRMAN'S STATEMENT

Introduction

I am pleased to report that the Group has delivered its third consecutive year of significant growth in profitability despite the challenging market conditions.  During the year we have further strengthened the balance sheet through a £78m share placing and open offer, which was concluded in May 2012.

Financial Results

Group revenue increased 5.8% to £479m for the financial year, predominantly due to a 15% increase in our average selling price from £164,800 to £189,900.  The average selling price of private homes increased by 17% to £204,100.  Legal completions for the year were marginally up to 2,458.  In the year to 2011 we completed 2,424 homes, excluding the Scottish operation which was sold during that year.

Gross margins rose from 14.2% to 17.3% due to an increasing proportion of our sales being generated from sites purchased since the downturn, on which more normal margins are being generated, together with improved product mix and stable build costs.  We also benefited from £12.2m of land and freehold reversion sales at very good margins.

As a result of the increasing gross margins and land sale contribution, operating profit rose 54% to £48m, representing a 10% margin (2011: 6.9%).  This was achieved despite the ongoing overhead investment in our new London Division.

The higher operating profit, combined with the lower interest expense, resulted in a pre-tax profit up 70% to £43m and an adjusted earnings per share up 80% to 10.8p (2011: 6.0p).

As reported in the placing and open offer document issued in April 2012, the Board is not proposing a dividend for the 2012 financial year but, subject to economic circumstances, the Board intends to resume the payment of dividends in the current financial year.

Market

The housing market has been stable throughout the last financial year.  Sales rate per outlet per week increased from 0.54 in 2011 to 0.58 in 2012.  Excluding London, the value of private reservations rose by 4% from £416m to £434m, due a change in mix towards larger family homes. 

The New Heritage Collection is now firmly established as our primary brand and accounted for 67% of our private turnover during the year (2011: 35%).  The average selling price of a New Heritage home is now £215,100, an increase of 7% on the previous year.

The opening of new outlets remains a priority and we ended the year with 82 outlets, up from 74 last year.  We are planning a further increase to over 90 outlets by the end of the current financial year.

We completed the first two houses in our London Division at Ealing and commenced construction on our first two major flatted schemes, One Commercial Street in Aldgate and Kingston Riverside in Kingston upon Thames.  The sales launch of the two schemes were successfully received both in the UK as well as overseas and I am pleased to report that at the end of June we had over 70 reservations across the two sites with a total value of £34m. 

Balance Sheet

In May 2012 we further strengthened our balance sheet with the successful placing and open offer, which raised a net £78m.  This had the effect of reducing our gearing to just 2% by the year end.  Gearing has risen substantially during the current financial year as we continue to invest in the business by increasing the work in progress in London and taking advantage of appropriate land opportunities.

Land and Planning

We enjoyed a number of land successes during the year and have secured a total of 4,100 plots, largely on the back of a significant 2,000 plot contribution from forward land.  The land bank at the end of June 2012 equates to 12,350 plots (June 2011: 11,190 plots).  The average plot cost is £50,000, including central London and £44,000, excluding central London.  The increase in average plot cost over the last few years reflects Redrow's continuing movement to re-establish ourselves as a premium mid-market home builder of larger than average, high specification, homes.

Despite the increasing land bank the Group still retains several sites where it is not economic to develop.  We strongly welcome, therefore, the Government's housing initiative announced two weeks ago which relaxes the requirement for affordable housing on those sites where viability is in question.  This, together with other initiatives, particularly the extension of FirstBuy, will, I believe, have a positive effect on the delivery of new homes.

Planning remains a major obstacle to development despite the Government's best efforts with the publication of the National Planning Policy Framework.  The Government is determined that planning ceases to be a major obstacle to growth and we strongly welcome the recent initiatives.

As stated above, the Group's forward land bank contributed 2,000 plots to current land.  Several new opportunities have been secured and the forward land bank now stands at 22,800 plots, an increase of 650 plots over last year.  Of this total, 8,700 plots have been allocated in adopted or emerging Local Plans.

Mortgages

Unfortunately mortgage availability, or should I say, lack of it, remains the main drag to housing market recovery.  The spring saw the introduction of the Government sponsored NewBuy scheme, a Mortgage Indemnity Guarantee (MIG) which provides purchasers of new homes with the ability to secure a 95% mortgage.  The initiative has been strongly welcomed by the industry; unfortunately, however, the rates being offered by lenders still do not reflect the lower risk profile of the scheme and as such NewBuy has not yet enjoyed the success it deserves.

In more normal times new home sales have fluctuated between 11-15% of total housing transactions; ironically, during the last four years, that percentage has increased.  The new homes market needs a buoyant second hand market in order to obtain a meaningful growth and deliver the increasing numbers that the Government, and indeed the country, desperately needs.  In order for the housing market to make a full recovery there would need to be a MIG similar to NewBuy available to the second hand market. 

People

Since my return to the business just over three years ago we have initiated the reintroduction of apprentices of all types, a graduate training programme and numerous management trainee programmes.  This represents a large investment in our people and just over 11% of our total workforce are now trainees.  I am delighted that Redrow is once again at the forefront of our industry for training its people.

Redrow has continued to make excellent progress during the last year, primarily due to the ongoing efforts of our people.  I would like to thank them for their hard work during the year and their continued support in the successful delivery of our strategic goals.

Current Trading and Outlook

Reservations per outlet in the current year are running fractionally ahead of last year at 0.55 sales per outlet (2011: 0.54).  In the year to date we have been selling on an average of 84 outlets (2011: 73) and as a result we have secured 507 private reservations in the first 11 weeks, some 16% ahead of last year. 

Despite the encouraging start to the year and the recent Government Housing and Growth announcement, the outlook for the industry remains challenging.  Supply of mortgages, although slightly improved on last year, remains a significant constraint, as does public confidence due to the country's fragile economic state.  Nevertheless, we have an excellent product range and a strong pipeline of new sites, which gives me every confidence that Redrow will continue along its path of improving performance.

Steve Morgan

Chairman

OPERATING REVIEW

Introduction

The strong financial performance in 2012 is a measure of the success of the strategic changes implemented across the business in 2010 and 2011, particularly the introduction of the New Heritage Collection which has been central to the Group's growth in turnover, average selling price and profit. The average selling price, including social housing, has increased from £137,400 in 2009 to £189,900 in 2012 with private housing rising to £204,100 as a result of building larger and higher specified homes in better locations. The average selling price is set to increase further, albeit at a slower pace, as we continue to open new outlets in higher priced areas and completions come through in the London division.

Build costs remained relatively stable throughout the year with price pressures on certain materials being offset by economies elsewhere. Operating expenses increased largely due to investment in overheads in the London division and to a lesser extent, elsewhere to meet the growth in outlets.

Sales and Marketing

The first-half of the year was challenging for two reasons, there was a slower than expected upturn in the autumn sales market and bringing new outlets on-stream proved to be frustrating. The volume of reservations was fairly flat compared to the previous year and the number of outlets remained stubbornly static: in the first-half we opened five new outlets and closed six. In spite of this, the value of reservations was comfortably ahead due to the increase in average selling price.

The second-half saw a change in fortunes. The market recovered at the start of the calendar year and we had considerably more success opening new outlets: in the second-half we opened 24 and closed 15.

In the first-half we secured £180m of reservations and averaged 0.50 reservations per outlet per week, by comparison in the second-half we took £292.0m of reservations and averaged 0.66 per outlet per week. We closed the year with a private order book of £152m including £34m of reservations on outlets in the London division: like-for-like, the value of the order book closed 4% ahead.

There was relatively strong revenue growth across all regions. The North performed particularly well and grew to represent 30% of the Group's turnover, slightly ahead of the Central region: the South remained the largest region representing 42% of turnover. 

The use of Part Exchange continues to increase as we shift more of the business towards the trade-up market; in 2012 it accounted for 16% of private sales. We maintain tight management controls over Part Exchange and held £9.7m of stock at the year-end (2011: £7.2m).  We also continued to use 'shared equity' in 2012 particularly through the Government sponsored HomeBuy and FirstBuy schemes and where we have partnership arrangements with local authorities. We also introduced NewBuy, the Government-backed mortgage indemnity scheme, immediately following its launch in March. The take-up so far has been disappointing with just 63 customers choosing to use the scheme with many more discouraged by the high interest rates charged by most of the participating lenders.

Published national house price indices reported prices falling slightly over the year with some regions fairing worse than others. Our experience was that prices were generally stable across much of our operating area. The cancellation rate was 18% and in-line with the previous year.

Digital marketing is now the dominant source of enquiries and leads into the business. We launched an upgraded website in the second-half which helped to increase enquiries and leads to our developments. The new website is more interactive, easier to navigate and contains significantly more video content with links to our own internet TV channel, RedrowTV.

Product and Design

Apartments accounted for less than 10% of private sales turnover in 2012 (2011: 19.7%) as the revenue from houses increased by 23% to represent over 90% of sales. This trend will reverse over time as more apartment schemes come on-stream, particularly in and around London.

Social housing accounted for 13.5% of unit sales and just 7% of revenue, similar to the previous year: we expect to see levels of social housing gradually increase as new sites come on-stream. The average selling price of social housing completions was £98,700 (2011: £100,000).

The New Heritage Collection accounted for 67% of private revenue in 2012 compared to 35% in the previous year, a proportion that is expected to rise further. The average selling price of the New Heritage Collection increased by 7% to £215,100 in 2012.

We continue to fine-tune the New Heritage Collection in response to customer feedback and opportunities to make build cost savings without compromising the appeal and quality of the product.  We have also expanded the Collection to ensure we are able to offer a wider choice of types across all price ranges.

Our new Regent Collection is an attractive higher density product designed to be plotted more formally, particularly in urban areas. The Regent Collection has traditional Regency styled elevations complemented by interiors designed for modern-day living.  We expect to have our first schemes underway in 2013.

Quality with Responsibility

At the heart of our operation is a determination to safely and responsibly build homes of the highest standard for our customers. We closely monitor and measure quality, Health and Safety, our impact on the environment and levels of customer satisfaction.

Our key quality measure in addition to our own inspection regime, is the number of NHBC 'Reportable Items' per inspection: in 2012 this was 0.19 (2011: 0.25). The number of our Site Managers winning NHBC Pride in the Job Awards rose to a record 14.

By all measures we improved our Health and Safety performance in what was a busy year for the build teams. Reportable and First Aid accidents decreased by over 20% of which only eight were classified as 'major', a 27% decrease. The Group Accident Incident Rate (AIR) also fell by 27% and is below the construction industry average. The Group was awarded its third Gold Medal by RoSPA for achieving seven consecutive Gold Awards. The Gold Medal is widely recognised as the most prestigious Health and Safety award.

We take seriously our responsibility to minimise the impact of our business on the environment.  We regularly monitor our carbon footprint and look at ways to ensure any increase in emissions is at a slower pace than the overall growth in output of the business. We responsibly procure materials and last year we maintained our excellent performance in buying our timber from well managed sources: 99.3% of timber products used on our sites were classified 'Licensed Source - Credibly Certified' by WWF.

We continued to maintain high levels of customer satisfaction throughout the year. Our own independent telephone surveys that managed to obtain feedback from over 70% of our customers,  recorded 94% (2011: 93%) were very satisfied or satisfied with their new home and 97% (2011: 96%) would recommend us to a friend. Our leading customer satisfaction position was further endorsed by once again receiving a five star award in the most recent HBF National New Home Customer Satisfaction Survey. Amongst many other awards received in the year, we were voted 'Best Large Housebuilder' by What House?

Land and Planning

We added 3,642 plots to the owned land bank in the year which after deducting legal completions, increased the owned land bank to 10,704 (2011: 9,520). At the end of the year we held 1,652 plots under contract, a similar level to the previous year (2011: 1,670). The Current land bank remains weighted to the south representing 43% of plots owned or held under contract.

We had a very successful year in pulling-through plots from the Forward into the Current land bank. We transferred 1,991 plots (2011: 207) to the Current land bank across nine sites. We also added over 2,600 plots through options or freehold purchases after taking into account a strategic review that identified a number of sites where the prospects for delivery had deteriorated. At the end of the year we held c.22,800 plots in the Forward land bank that are either allocated or have a realistic prospect of coming forward. Although pulling through Forward land remains a lengthy and unpredictable process, we expect to have another successful year in 2013.

The National Planning Policy Framework (NPPF) was introduced earlier in the year and sets out to deliver a more efficient locally based planning system. Central to its success will be the extent to which local authorities embrace the policy and timely produce Local Development Frameworks that recognise the underlying level of demand for housing in their areas. We are optimistic the NPPF will lead to a better planning system; meanwhile, there are grey areas over interpretation that will only be resolved through the appeals process. We have already had appeals successfully upheld and have a number of decisions pending.

London

The London division achieved its first completions in 2012 at Ealing and commenced construction at One Commercial Street, Aldgate and at Kingston Riverside. It also gained planning permission to convert Connaught Place, W2 into a development of luxury apartments.

One Commercial Street is a mixed-use high rise scheme consisting of retail and office space and residential apartments. The residential element was successfully launched overseas in the Far East earlier in the year and was 40% sold at the year-end. Completions are expected to come through in 2014.

Kingston Riverside was successfully launched in the UK in the late spring and is selling steadily to the local market. Kingston Heights, a further phase that targets a different market segment is expected to be launched in 2013.

The London division remains on-track to contribute to Group profits in financial year 2014 with the first legal completions expected from Kingston in the first-half of that year.

Harrow

Harrow performed strongly in the year making good progress on planning, bringing forward sites for development and acquiring new land.

Planning permission for c.350 plots was achieved at appeal on the option it holds at Horsforth, Leeds and it has a number of other sites pending decisions. It also completed the remediation of the South Cerney site in the Cotswolds which has now been transferred to the Homes' division. Physical remediation works are complete at Hauxton near Cambridge and currently the subject of on-going monitoring. The site is held under an Option which is expected to be exercised in 2013.

The business has acquired a further four sites with capacity for c.1,000 plots. Most notable of the acquisitions is the Woodford Aerodrome near Stockport where consent is being sought to create a new Garden Village of 550 homes on the land we own together with supporting community infrastructure.

Harrow oversees the Group's modest legacy of commercial interests and managed to achieve a small number of disposals during the year.

People

We continue to create new jobs to meet the planned growth of the business. Our directly employed workforce has increased to 952 (2011: 888) including five Graduate Trainees and 69 Apprentices at June 2012 as we expand opportunities for young people to join our industry. We plan a further intake of five Graduate Trainees and 20 Apprentices in September 2012.

We are committed to having a skilled workforce and developing our future managers and leaders from within the business. We have a dedicated training team based at our purpose built facility in the Midlands and completed 2,302 days of training in the year (2011: 2,267).

John Tutte

Group Managing Director

FINANCIAL REVIEW

Profit before tax and earnings per share

The Group generated turnover of £478.9m in the year ended 30 June 2012 (2011: £452.7m).

This reflected a 15% increase in the average selling price of our homes.

Revenue (£m)	2012	2011
Residential	466.7	432.8
Land sales	10.5	18.7
Commercial	1.7	1.2
	478.9	452.7

The Group delivered an operating profit of £48.0m (2011: £31.2m), an increase of 54% on prior year levels and representing a 10% operating margin (2011: 6.9%).

It is pleasing to report that operating margin has increased over threefold between 2010 and 2012 as we continue to make significant strides forward in returning our operating margin to pre downturn levels.

Net financing costs at £5.0m were £0.9m lower than the previous year reflecting lower bank interest costs as a result of lower average gearing levels throughout the year.

The Group generated a profit before tax of £43.0m, a 70% increase on the prior year (2011: £25.3m).  Basic earnings per share were 9.7p (2011: 4.4p).  Basic earnings per share excluding the impact of rate changes on our deferred tax assets were up 80% to 10.8p (2011: 6.0p).

The Return on Capital Employed for 2012 at 8.7% is 43% higher than 2011 levels and we continue to focus on improving this key performance indicator.

Tax

As a consequence of tax losses brought forward, the Group again paid no corporation tax in the year (2011: £0.5m refund on earlier overpayment).  This situation is expected to continue in 2013.

The Group's tax rate for the year was 25.5% (2011: 27.5%) before taking into account the reduction in the corporation tax rate to 24% on deferred tax assets (£3.5m (2011: £4.8m)).

A deferred tax asset of £51.8m (2011: £63.8m) was carried at 24% at 30 June 2012, primarily in relation to brought forward tax losses, for use against future profits.  A corporation tax rate of 23% applicable from 1 April 2013 was substantively enacted on 3 July 2012.  The carrying value of the deferred tax asset based on a 23% rate would be £49.6m.  The £2.2m difference between this number and the closing balance will be charged to the Consolidated Income Statement in the first half of the 2013 financial year.

The normalised rate of tax for the year ending 30 June 2013 is projected to be 23.75% based on rates which are currently substantively enacted.

Dividends

No dividends have been proposed in respect of the financial year ended 30 June 2012 (2011: nil).  However, in line with the statement made in the prospectus for the Firm Placing and Open Offer, subject to economic circumstances, we intend to resume dividend payments in the 2013 financial year.

Balance Sheet

Net assets at June 2012 were £561.5m (2011: £458.6m), a 22% increase as follows:

	£m
Net assets at 1 July 2011	458.6
Net proceeds of Firm Placing and Open Offer	78.0
Profit for the period	30.2
IAS19 actuarial losses net of tax	(6.0)
Movement in share based payment	0.7
	561.5

In May, the Group successfully completed a Firm Placing and Open Offer for 14,902,867 and 46,289,592 new shares respectively at 130 pence per new share.  This generated £78.0m of funds net of £1.6m expenses of which £6.1m has been credited to Share capital and £71.9m to Retained earnings.

The net asset value per share at the end of June 2012 was £1.52, an increase of 5% on the prior year (2011: £1.45) adjusting for the recent share issue.

Our investment in land increased by £138.1m in the year to £515.9m reflecting a 12% increase in plots owned with residential planning permission and targeted investment in strategic land.

Our investment in work in progress continues to be carefully managed with the number of equivalent units in work in progress excluding London reducing for the third consecutive year to 1,048 units (a 15% reduction on June 2011 levels).

Trade and other receivables decreased by £16.4m during the year to £53.2m.  The decrease related primarily to the receipt of £12.3m of deferred consideration from the disposal of our Scotland business which took place in June 2011.

Capital employed increased by £41.5m to £575.5m mainly due to increases in land holdings.

Our net realisable value (NRV) provision reduced by £46.8m to £111.5m in the year due to legal completions and land sales.

Land creditors increased by £63.5m to £108.3m in the year as a result of c.60% of land purchases in the year including some element of deferred purchase consideration.

Pensions

Redrow closed both the defined benefit and defined contribution sections of The Redrow Staff Pension Scheme (The Scheme) to future accrual with effect from 1 March 2012.  New pension benefits from this date are being provided via the Redrow Group Personal Pension Plan (GPP) which is a type of defined contribution plan.

As at 30 June 2012, the Group's financial statements showed a £2.6m deficit (2011: £5.0m surplus) in respect of the defined benefits section of The Scheme, as calculated in accordance with IAS19.  The £7.6m movement from last year is due to an increase in defined benefit obligations resulting from changes in bond yields.

Cash flow and Net Debt

Net debt decreased by £61.4m to £14.0m during the year, with gearing at 2% at the year-end (2011: 16%).  This reflects the timing of the receipt of proceeds from the Firm Placing and Open Offer in May.  Gearing has increased since June 2012 and is expected to rise going forward due to investment in new land to grow the business.

Financing and Treasury Management

Redrow is a UK based housebuilder and therefore the main focus of its financial risk management surrounds the management of liquidity and interest rate risk.

(i)         Liquidity

            The Group regularly prepares and reviews its cash flow forecasts which are used to manage liquidity risks in conjunction with the maintenance of appropriate committed banking facilities to ensure adequate headroom.

            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 four 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 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.  During the year the Board decided, taking into account current predicted LIBOR rates and the pricing of interest rate swaps, to take out £20m of two year sterling interest rate swaps.  They have a neutral value at 30 June 2012.

            Financial management at Redrow is conducted centrally using policies approved by the Board.

Barbara Richmond

Group Finance Director

Consolidated Income Statement

12 months ended 30 June		2012	2011
	Note	£m	£m
Revenue		478.9	452.7
Cost of sales		(396.1)	(388.4)
Gross profit		82.8	64.3
Administrative expenses		(34.8)	(33.1)
Operating profit before financing costs		48.0	31.2
Financial income		2.4	2.7
Financial expenses		(7.4)	(8.6)
Net financing costs		(5.0)	(5.9)
Profit before tax		43.0	25.3
Income tax (expense)	2	(12.8)	(11.8)
Profit for the period		30.2	13.5
Earnings per share           -     basic	4	9.7p	4.4p
-     diluted	4	9.7p	4.4p

Consolidated Statement of Comprehensive Income

12 months ended 30 June		2012	2011
		£m	£m
Profit for the period		30.2	13.5
Other comprehensive income/(expense)
Effective portion of changes in fair value of interest rate cash flow hedges		-	1.1
Deferred tax on change in fair value of interest rate cash flow hedges		-	(0.3)
Actuarial (losses)/gains on defined benefit pension scheme		(7.9)	9.7
Deferred tax on actuarial (losses)/gains taken directly to equity		1.9	(2.5)
Other comprehensive (expense)/income for the period		(6.0)	8.0
net of tax
Total comprehensive income for the period		24.2	21.5

Balance Sheet

			As at 30 June
			2012	2011
		Note	£m	£m
Assets
Intangible assets			1.8	1.7
Property, plant and equipment			12.1	12.9
Investments			9.3	2.6
Deferred tax assets			51.8	63.8
Retirement benefit surplus			-	5.0
Trade and other receivables			26.0	31.4
Total non-current assets			101.0	117.4
Non-current assets held for sale			1.4	1.4
Inventories		5	708.2	562.7
Trade and other receivables			27.2	38.2
Cash and cash equivalents		8	37.4	32.0
Total current assets			774.2	634.3
Total assets			875.2	751.7
Equity
Share capital		9	37.0	30.9
Share premium account			58.7	58.7
Hedge reserve			-	-
Other reserves			7.9	7.9
Retained earnings			457.9	361.1
Total equity			561.5	458.6
Liabilities
Bank loans		8	30.0	85.0
Trade and other payables		6	40.6	12.4
Deferred tax liabilities			0.7	1.8
Retirement benefit obligations			2.6	-
Long-term provisions			8.2	8.0
Total non-current liabilities			82.1	107.2
Bank overdrafts and loans		8	21.4	22.4
Trade and other payables		6	210.2	163.5
Total current liabilities			231.6	185.9
Total liabilities			313.7	293.1
Total equity and liabilities			875.2	751.7

Statement of Changes in Equity

			The Group
			2012 £m	2011 £m
Total comprehensive income relating to the period (net)			24.2	21.5
Shares issued			78.0	-
Share-based payment			0.3	0.3
Movement in LTSIP/SAYE			0.4	0.9
Net increase in equity			102.9	22.7
Opening equity			458.6	435.9
Closing equity			561.5	458.6

The Statement of Cash Flows

			12 months        ended 30 June
			2012	2011
		Note	£m	£m
Cash flow from operating activities
Operating profit before financing costs			48.0	31.2
Depreciation and amortisation			1.3	1.3
Adjustment for non-cash items			(3.1)	(2.8)
Operating profit before changes in working capital and			46.2	29.7
provisions
Decrease/(increase) in trade and other receivables			6.3	(10.2)
(Increase) in inventories			(145.5)	(71.1)
Increase in trade and other payables			75.2	25.1
Increase/(decrease) in provisions			0.2	(0.4)
Cash (outflow) generated from operations			(17.6)	(26.9)
Interest paid			(3.6)	(4.9)
Tax received			-	0.5
Net cash from operating activities			(21.2)	(31.3)
Cash flows from investing activities
Sale of business			12.3	5.0
Acquisition of property, plant and equipment			(0.7)	(0.7)
Proceeds from sale of property, plant and equipment			-	0.6
Interest received			-	1.0
Payments to joint ventures - continuing operations			(6.7)	(0.4)
Net cash inflow from investing activities			4.9	5.5
Cash flows from financing activities
Issue of bank borrowings		7	30.0	85.0
Repayment of bank borrowings		7	(85.0)	(50.0)
Issue costs of bank borrowings			-	(2.5)
Purchase of own shares			(0.3)	-
Proceeds from issue of share capital			78.0	-
Net cash inflow from financing activities			22.7	32.5
Increase in net cash and cash equivalents			6.4	6.7
Net cash and cash equivalents at the beginning of the period			9.6	2.9
Net cash and cash equivalents at the end of the period		8	16.0	9.6

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 year ended 30 June 2012 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 year ended 30 June 2011 have been delivered to the Registrar of Companies and the statutory accounts for the year ended 30 June 2012 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 Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The principal accounting policies have been applied consistently in the periods presented.

2.         Income Tax expense

	12 months       ended 30 June
	2012	2011
	£m	£m
Current year
UK Corporation Tax at 25.5%  (2011: 27.5%)	-	-
(Over) provision in respect of prior year	-	-
	-	-
Deferred tax
Origination and reversal of temporary differences	9.3	7.0
Impact of change in deferred tax rate	3.5	4.8
Total income tax charge in income statement	12.8	11.8
Reconciliation of tax charge for the year
Profit for the year	43.0	25.3
Tax on total profit at 25.5% (2011: 27.5%)	11.0	7.0
Impact of change in deferred tax rate	3.5	4.8
Expenses not deductible for tax purposes net of rolled over capital gains	-	-
Short term temporary differences	(1.7)	-
Tax charge for the year	12.8	11.8

3.         Dividends

No dividend was paid in the year ended 30 June 2012 (2011: £nil).

4.         Earnings per share

The basic earnings per share calculation for the year ended 30 June 2012 is based on the weighted number of shares in issue during the period of 311.9m (2011: 304.3m) excluding those held in trust under the Redrow Long Term Incentive Plan (4.3m shares (2011: 4.3m 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.

12 months ended 30 June 2012

	Earnings	No. of shares	Per share
	£m	millions	pence
Basic earnings per share	30.2	311.9	9.7p
Effect of share options and SAYE	-	0.4	-
Diluted earnings per share	30.2	312.3	9.7p

	Earnings	No. of shares	Per share
	£m	millions	pence
Basic earnings per share	30.2	311.9	9.7p
Adjustment to deferred tax rate change	3.5	-	1.1p
Adjusted earnings per share	33.7	311.9	10.8p

Adjusted diluted earnings per share are 10.8p (2011: 6.0p)

12 months ended 30 June 2011

	Earnings	No. of shares	Per share
	£m	millions	pence
Basic earnings per share	13.5	304.3	4.4p
Effect of share options and SAYE	-	0.3	-
Diluted earnings per share	13.5	304.6	4.4p

5.         Inventories

		As at    30 June
		2012	2011
		£m	£m
Land for development		515.9	377.8
Work in progress		170.5	161.6
Stock of showhomes		21.8	23.3
		708.2	562.7

Inventories of £373.2m net of £46.7m net realisable value provision utilisation, were expensed in the year (2011: £415.4m net of £95.5m net realisable value provision).  Work in progress includes £9.7m (2011: £7.2m) in respect of part exchange properties.

Of the net realisable value provision of £111.5m (2011: £158.3m), £88.2m (2011: £135.0m) is attributed to land and £23.3m (2011: £23.3m) is attributed to work in progress.

For provisioning purposes, we classify our inventory into two categories:

Type 1: land where the construction of homes has commenced or we are proposing to develop.

Type 2: land that we have not yet concluded that we are to develop and are more likely to sell.

The net realisable value provision movement is analysed below:

	Type 1	Type 2	Total
	£m	£m	£m
As at 1 July 2011	132.1	26.2	158.3
Utilised during the year	(40.3)	(6.4)	(46.7)
Created during the year	21.3	0.8	22.1
Reclassified during the year	6.3	(6.3)	-
Released during the year	(17.7)	(4.5)	(22.2)
As at 30 June 2012	101.7	9.8	111.5

The net realisable value provisions of £22.1m and £22.2m created and released in the year are the result of our review at the balance sheet date in the context of prevailing market conditions and the

re-assessment of selling prices and costs.  They represent the creation of additional provisions against sites acquired pre June 2009 and the reduction of provisions already in place against such sites as required i.e. a reallocation of the quantum of provision amongst sites where provisions already exist.

6.         Land Creditors

(included in trade and other payables)

		As at    30 June
		2012	2011
		£m	£m
Due within one year		67.7	32.4
Due in more than one year		40.6	12.4
		108.3	44.8

7.         Borrowings and loans

		12 months           ended 30 June
		2012	2011
		£m	£m
Opening net book amount		85.0	50.0
Issue of bank borrowings		30.0	85.0
Repayment of bank borrowings		(85.0)	(50.0)
Closing net book amount		30.0	85.0

At 30 June 2012 the Group had total unsecured bank borrowing facilities of £202.5m, representing £200.0m committed facilities and £2.5m uncommitted facilities.

8.         Analysis of net debt

		As at      30 June
		2012	2011
		£m	£m
Cash and cash equivalents		37.4	32.0
Bank overdrafts		(21.4)	(22.4)
		16.0	9.6
Bank loans - current liabilities		-	-
		16.0	9.6
Bank loans - non-current liabilities		(30.0)	(85.0)
		(14.0)	(75.4)

9.         Share capital

		As at 30 June
		2012	2011
		£m	£m
Authorised
480,000,000 ordinary shares of 10p each		48.0	48.0
Allotted, called up and fully paid		37.0	30.9

		Number of ordinary
		shares of 10p each
1 July 2011			308,607,479
Shares issued re Firm Placing and Open Offer			61,192,459
At 30 June 2012			369,799,938

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 at De Vere St. David's Park Hotel, St. David's Park, Flintshire on 12 November 2012, commencing at 12.00 noon.  A copy of this statement is available for inspection at the registered office.

 

END

 

 

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