Final Rslts/Tender Offer,etc

Redrow Group PLC 12 September 2000 PRESS RELEASE Redrow Group plc today announced its Preliminary Results for the 12 months to June 2000, and a tender offer to return surplus capital to shareholders. * Profit before tax up 21% to £67.2m (1999: £55.6m). * Earnings per share up 22% to 22.5p (1999: 18.5p). * Full year dividend of 4.95p up 10%. * Return on capital employed maintained at 28%. * Current land bank increased to 13,500 plots (1999: 12,300 plots). * Tender offer to return surplus capital to shareholders. Steve Morgan, Chairman commented:- 'I am delighted to be reporting another year of record performance for the Group. Pre-tax profits have increased by 21% in the twelve months to June 2000, maintaining the Group's record of 21% compound growth rate during our six years as a public company and providing a strong platform from which to deliver consistent value to our shareholders. As a further enhancement to shareholder value, we are announcing a tender offer for 30% of the shares. The Board considers this to be the best mechanism of returning surplus capital to shareholders. Redrow has never been in better shape. The company enjoys a superb reputation for quality, an outstanding product, a four year low cost current landbank and a record that compares with the best in the industry. Looking forward, I foresee a steady housing market which, combined with the return of capital announced today, should deliver enhanced earnings growth for shareholders. After founding Redrow twenty-six years ago the time is right in my professional life for a change. I feel it is the appropriate moment to hand over the Chairmanship to Robert Jones who has been a Non-Executive Director for the last three years. I am extremely confident that the management team will continue to achieve outstanding results.' For further information contact: Steve Morgan, Chairman Redrow Group plc Paul Pedley, Chief Executive 0207 404 5959 (12 September) Neil Fitzsimmons, Finance Director 01244 520044 (thereafter) Nick Wiles/George Brenan Cazenove & Co. 0207 588 2828 Alan Parker/Gavin Partington Brunswick Public Relations Claire de Sousa 0207 404 5959 Chairman's Statement My statement this year contains two important elements. Firstly I am delighted once again to report yet another record performance by the Group. Secondly, the announcement by the Board to return surplus capital to Shareholders by means of a Tender Offer which accompanies my decision to step down from the Board. Results ------- Turnover for the year to June 2000 increased by 19% to £405m (1999, £341.6m) producing a 20% increase in operating profit to £67.7m (1999, £56.3m). Profit before tax increased by 21% to £67.2m (1999, £55.6m) maintaining the Group's record of achieving a 21% compound growth rate in pre-tax profits in the six years as a public company. Earnings per share increased by 22% to 22.5p (1999, 18.5p). Borrowings at the year end were £11.6m, a gearing ratio of just 4.5% with return on capital employed at 28%, consistently one of the highest in the industry. The Board is pleased to recommend a 10% increase in the final dividend to 3.3p which, together with the 1.65p interim dividend makes a total for the year of 4.95p. The dividend is covered 4.5 times by earnings. The Group produced yet another excellent performance during the year. Housing completions rose 7% to 3,338 whilst the average selling price rose by 11% from £106,800 to £118,800. The increase in average selling price reflects not only a strong market, particularly in the first half of the year, but also an increasingly southern emphasis of the Groups activities. The housing market has tempered in recent months which is a development I very much welcome. Demand for new homes remains strong however and we entered the current year with a forward sales position broadly in line with last years record levels. Planning Policy Guidance (PPG3) which was announced by the Government earlier this year is having a significant impact on the industry. There is an increasing emphasis towards building on brownfield land particularly in urban areas which is a policy Redrow strongly supports. Indeed, in excess of 58% of our completions this year were on brown field sites, broadly in line with Government targets. The Group's long term land policy produced clear dividends during the period and contributed significantly to raising the current landbank to 13,500 plots, more than 4 years' supply. The growth of the southern companies is reflected in the increased plot cost from £18,600 to £20,800. However, this represents a further reduction from 17.8% to 17.6% of the current average selling price underpinning Redrow's excellent margins for the future. Redrow's forward landbank remains one of the strongest in the industry with 27,000 plots, broadly the same as last year, including 6,000 plots (1999, 5,000 plots) allocated in draft local plans. Redrow Commercial ----------------- Steady progress has been made in the division. The 26,000 sq ft office in Victoria, developed jointly with Grosvenor Developments was sold during the year and significant progress has been made at the 138,500 sq ft office complex at Windsor. This scheme which is being developed jointly with Norwich Union has been fully let to Centrica Plc. A further 32,000 sq ft office and warehouse scheme in Altrincham has been pre let to ICI. Tender Offer ------------ Introduction ------------ The Board is announcing today as part of its proposals to maximise value for Redrow Shareholders, its intention to return surplus capital to Shareholders through the purchase of existing issued shares by way of a Tender Offer to all Shareholders. As the founder of Redrow and after twenty six years building the Group into what I believe is the leading housebuilder in the UK, I am announcing my intention to leave with effect from the AGM on 13 October 2000. Since I formed Redrow in 1974 the company has achieved a phenomenal growth rate which has continued during our time as a public company. The results announced today are further evidence of that performance and testimony to the hard work of all members of the Redrow team. After twenty-six years I feel the time is right in my professional life for a change, the Group is in great shape and I feel justifiably proud of our achievements. I believe that the Group's performance has been based on a number of key strengths: * An excellent management team, with a style and culture unique to Redrow. * Strong land buying skills, resulting in a substantial low cost landbank. * Outstanding product led by our Heritage Range of homes. * Strong Group disciplines in the areas of land appraisal, house design, and financial reporting. The continued earnings momentum of the Group is further evidenced by the results announced today. It is against this background that I feel able to hand responsibility for the next stage of the Group's development to the strong and well established management team. I would like to outline the terms of the Tender Offer and to explain why the Board, advised by Cazenove & Co., recommends Shareholders to vote in favour of the ordinary resolution required to effect the Tender Offer. In particular I wish to outline for Shareholders the proposed Board structure and the business plan that will be implemented by the team going forward to deliver value for Shareholders. Full details of the Tender Offer can be found in the Tender Offer circular which is expected to be posted to all Shareholders today. The Resolution will be proposed at an Extraordinary General Meeting of Redrow that has been convened for 29 September 2000. Proposed Board Structure ------------------------ Following my departure from the Board at the AGM on 13 October 2000, Robert Jones, who has been a Non Executive Director for the past three years, will be appointed Non Executive Chairman of the Group. The Board structure will be: Non Executive Chairman Robert Jones Chief Executive Paul Pedley Finance Director Neil Fitzsimmons Chairman - Southern Region Greg Locke Chairman - Northern Region Barry Harvey Non Executive Director Jim Martin Non Executive Director Bob Williams Background to and reasons for the Tender Offer ---------------------------------------------- The management has delivered an outstanding profit record during its six years as a public company, achieving a compound growth in pre tax profits of 21%. This record has been achieved without recourse to equity funding and with a balance sheet which, in the view of the Board, has been consistently under-geared. Growth in sales volumes and a continued investment in the Group's current and strategic landbank has been funded from internally generated sources. Over the last three years the Group's return on capital employed has been maintained at 28%, one of the highest in the industry. As a result the Board believes the Group has the financial capacity to assume a higher level of debt whilst continuing to deliver earnings growth. The core strengths of the Group which have served Shareholders well will continue to form the basis for our future strategy with a greater emphasis on the following: * Developing a more streamlined operating and reporting structure within the Group. * Building on the complementary nature of the Group's housing activities enabling the strong Redrow brands to deliver a range of homes attractive to all the distinct groupings within our customer base. * Using the Group's commercial property expertise to focus strongly on satisfying the increasing requirements for mixed use developments. * Focussing the Group on its core activities in which the Board is confident of achieving a consistently high level of return on capital employed. The Board believes this strategy will position the Group to deliver better returns from a reduced and more efficient capital base while, at the same time, retaining the resources and the flexibility to deliver profitable growth in the future. The Board believes that, from the first year, the Tender Offer will be earnings enhancing. The Tender Offer ---------------- The Board's proposal is to return surplus capital to shareholders through the purchase of existing issued Ordinary shares, by way of a tender offer to all Shareholders. Subject to Shareholder approval Ordinary Shares will be acquired under the Tender Offer at a price of 170 pence per share. A total of 67,620,642 shares, representing 30.0 per cent of the issued share capital of Redrow will be acquired for cancellation pursuant to the Tender Offer. The total consideration paid will be £115 million. The Tender Offer will remain open from Wednesday 13th September 2000 until 3.00 pm on Friday 29th September 2000. Director's intentions in the Tender Offer ----------------------------------------- Bridgemere Investments, a company which I control has undertaken to tender 67,620,642 Shares representing 30.0 per cent of the Group's issued share capital. To the extent that these shares are not sold in the Tender Offer Bridgemere has undertaken not to sell or otherwise dispose of any of the balance of its shares before April 2002 except with the consent of the Board and Cazenove & Co. Other than the Bridgemere shares, the remaining Directors have indicated that they wish to retain their holdings and will not participate in the Tender Offer. Dividend Entitlement -------------------- Shareholders participating in the Tender Offer will still receive the proposed final dividend of 3.3 pence per Share for the year to 30th June 2000. This dividend will be paid to Shareholders on the register on 29th September 2000. The payment date will be 24th November 2000. Redrow is an outstanding company with a strong and energetic management team and it is with great sadness that I am departing the Group that I founded. The Board believes that the business plan developed by the management team and outlined above, combined with a materially reduced equity base, is the most appropriate approach to enhance Shareholder value. Against this background I feel the time is right for me to hand over the Chairmanship of the business to Robert Jones who, together with the existing management team will lead the Group through the next stage of its development. Over the years it has been my great privilege to work alongside what I believe is the most outstanding team in the industry. It is through their efforts that Redrow has achieved its most remarkable success story. May I take this opportunity to thank each and every member of the team for their dedication, hard work and support which has made my last twenty-six years such a great pleasure. Redrow has never been in better shape. The company enjoys a superb reputation for quality, an outstanding product, a four year low cost current landbank and a record that compares with the best in the industry. Looking forward, I foresee a steady housing market which combined with the return of capital announced today should deliver enhanced earnings growth for shareholders. I am extremely confident that the management team will continue to achieve outstanding results. Steve Morgan Chairman Redrow Group plc Consolidated Profit and Loss Account 12 months to 30 June 2000 Note 2000 1999 £m £m Turnover - continuing operations 2 405.7 341.6 Cost of sales 313.3) 264.8) Gross profit 92.4 76.8 Administrative expenses (24.7) (20.5) Operating profit - continuing 2 67.7 56.3 operations Net interest payable (0.5) (0.7) Profit on ordinary activities 2 67.2 55.6 before taxation Tax on profit on ordinary 3 (16.8) (14.2) activities Profit on ordinary activities 50.4 41.4 after taxation Dividends (11.2) (10.1) Retained Profit 39.2 31.3 Earnings per ordinary share - 4 22.5p 18.5p basic Earnings per ordinary share - 4 22.4p 18.4p diluted Dividends per ordinary share 6 4.95p 4.5p There are no recognised gains or losses other than as shown above. Redrow Group plc Consolidated Balance Sheet as at 30 June 2000 Note 2000 1999 £m £m Fixed assets Tangible assets 13.0 11.0 Investments 0.1 0.1 13.1 11.1 Current assets Stocks and work-in-progress 7 361.6 306.0 Other current assets 13.9 4.3 Bank and cash deposits 8 1.9 7.5 377.4 317.8 Creditors due within one year Borrowings (13.5) - Creditors 9 (113.0) (105.4) (126.5) (105.4) Net current assets 250.9 212.4 Total assets less current 264.0 223.5 liabilities Creditors due after more than one 9 (3.3) (2.9) year Provisions for liabilities and (1.5) (1.3) charges Net assets 259.2 219.3 Capital and reserves Called up ordinary share capital 22.5 22.4 Share premium account 50.8 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 184.5 145.8 Equity shareholders' funds 259.2 219.3 Redrow Group plc Consolidated Cash Flow Statement 12 months to 30 June 2000 Note 2000 1999 £m £m Net cash inflow from operating 10 16.8 31.2 activities Returns on investments and servicing of finance Interest received 0.6 0.3 Interest paid (1.2) (1.0) Net cash outflow from returns on investments and servicing finance (0.6) (0.7) Taxation Corporation tax paid (17.2) (10.2) Net Cash outflow from Capital expenditure and Financial (8.3) (0.8) Investment Dividends paid (10.5) (9.4) Cash (outflow)/inflow before (19.8) 10.1 financing Financing Issue of ordinary share capital 0.7 0.1 Net cash inflow from financing 0.7 0.1 (Decrease)/increase in cash in (19.1) 10.2 period Net cash/(debt) at 1 July 7.5 (2.7) Net (debt)/cash at 30 June (11.6) 7.5 Redrow Group plc Notes to the preliminary announcement 12 months to 30 June 2000 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 2000 1999 £m £m Turnover Homes 396.7 334.9 Commercial 9.0 6.7 405.7 341.6 Operating profit Homes 65.9 54.6 Commercial 1.8 1.7 67.7 56.3 Profit on ordinary activities before taxation Homes 65.4 53.9 Commercial 1.8 1.7 67.2 55.6 Net assets Homes 247.9 196.7 Commercial 22.9 15.1 270.8 211.8 Net (borrowings)/cash (11.6) 7.5 Net Assets 259.2 219.3 3 Taxation The effective rate of tax for the year is 25.0% (1999: 25.6%) 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 2000, tax losses in excess of £2m remained within Redrow Homes (South East) Limited. 4 Earnings per share The calculation of the basic earnings per share of 22.5p (1999: 18.5p) is based on Group profit on ordinary activities after taxation of £50.4m (1999: £41.4m) and on the weighted average number of 10p ordinary shares in issue of 224.3m (1999: 223.9m). 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 225.2m (1999: 225.1m). 5 Half year comparison 6 months 6 months to to 30 June 2000 31 December 1999 Unit Sales 1,691 1,647 £m £m Turnover 200.5 205.2 Operating profit 33.4 34.3 Interest payable (0.4) (0.1) 33.0 34.2 Earnings per ordinary share - 10.9p 11.5p basic 6 Dividends The final dividend of 3.3p will be recommended to shareholders for approval at the Annual General Meeting on 13 October 2000. This dividend will be paid on 24 November 2000 to shareholders whose names are on the Register of Members at the close of business on 29 September 2000. The shares will become ex-dividend on 25 September 2000. This dividend when added to the interim makes a total dividend for the year of 4.95p (1999: 4.5p). 7 Stocks and work-in-progress 2000 1999 £m £m Land held for development 236.7 186.3 Work in progress 117.0 111.5 Stock of showhomes 12.7 14.1 366.4 311.9 Cash on account (4.8) (5.9) 361.6 306.0 Work-in-progress includes £0.9m (1999: £2.2m) in respect of part exchange properties. 8 Bank and cash deposits Bank and cash deposits represent £1.9m held in stakeholder accounts by solicitors relating to land acquisitions. (1999: £3.9m). 9 Amounts due in respect of development land 2000 1999 £m £m Due within one year 27.6 27.7 Due after more than one year 3.3 2.9 30.9 30.6 10 Analysis of cash flow from operating activities 2000 1999 £m £m Operating profit 67.7 56.3 Depreciation, including profits and losses on 0.9 0.7 disposals of fixed assets Increase in stock and work-in-progress (55.6) (31.3) Decrease/(increase) in other current assets, creditors and provisions 3.8 5.5 Cash inflow from operating activities 16.8 31.2 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 13 October 2000, commencing at 12.00 noon. A copy of this statement is available for inspection at the registered office.

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