Interim Results
Redrow PLC
08 March 2005
8 March 2005
Redrow plc today announces interim results for the six months ended 31 December
2004:
Highlights:
Dec 2004 Dec 2003
£m £m
Turnover 373.8 310.8 +20%
Operating Profit 73.6 60.6 +21%
Profit before tax 69.1 56.7 +22%
Return on capital employed 27% 28%
Earnings per share - basic (pence) 30.5p 25.1p +22%
Dividend per share (pence) 3.6p 3.0p +20%
Record interim results with:
• Profit before tax 22% higher at £69.1m (H1 2003/04: £56.7m).
• Interim dividend per share increased by 20% to 3.6p (H1 2003/04: 3.0p)
in line with existing commitment.
• Launch of 'Debut by Redrow', a new product range designed to deliver
high quality, affordable homes with selling prices starting at
£49,995.
Commenting on the results, Robert Jones, Chairman of Redrow plc said:
'I am delighted to report a period of strong growth for Redrow with record
interim profits. This performance, together with our positioning of Redrow for
more normal market conditions, underpins our commitment to the Board's
previously stated dividend policy to increase the dividend by 20% in this and
the next financial year.
Redrow's responsiveness to both customer demand and market conditions has once
again been demonstrated by the launch of 'Debut by Redrow'. This high quality
more sustainable range, encompassing modern methods of construction, will
provide homes for people looking to take their first step onto the property
ladder but who are currently precluded from doing so because of affordability.'
Enquiries:
Redrow plc
Paul Pedley, Chief Executive 0207-404-5959 (8 March)
David Arnold, Group Finance Director 01244-520044 (thereafter)
Patrick Handley/Nina Coad Brunswick Public Relations
0207-404-5959
Further information on Redrow plc can be found at www.redrow.co.uk
CHAIRMAN'S STATEMENT
Introduction
I am delighted to report a period of strong growth for Redrow with profit before
tax of £69.1m (H1 2003/04: £56.7m) and earnings per share of 30.5 pence (H1 2003
/04: 25.1 pence), both 22% higher than the previous year. This performance,
together with our positioning of Redrow for more normal market conditions,
underpins our commitment to the Board's previously stated dividend policy to
increase the dividend save for unforeseen circumstances by 20% in this and the
next financial year. Consequently, the interim dividend has been increased by
0.6 pence to 3.6 pence per share (H1 2003/04: 3.0 pence).
Financial Performance
Legal completions in the Homes business increased by 6% to 2,111 units (H1 2003/
04: 1,996 units) at an average selling price of £176,700, 16% higher than the
corresponding period last year (H1 2003/04: £152,700) and partly reflecting
geographic and product mix. The average selling price achieved in the first six
months of the financial year is likely to be marginally higher than that for the
year as a whole.
As a result of the increase in legal completions and higher average selling
price, turnover in the Homes business rose by 22% to £373.1m (H1 2003/04:
£304.8m). The operating margin of 19.8% achieved in the first six months was in
line with that of the previous financial year and 0.3% higher than the
corresponding period last year (H1 2003/04: 19.5%). The Board remains of the
view that as the market reverts to more normal levels of activity and house
price inflation returns to its historic relationship with earnings, operating
margins will, over time, reduce to more sustainable levels. Overall, the first
half operating profit in Homes increased by 24% to a record £73.8m (H1 2003/04:
£59.6m).
In the first six months, the Group's commercial activities achieved legal
completions at St David's Park and at Odyssey in London Docklands. These
disposals, together with subsequent transactions at Buckshaw Village, Chorley
and at Western Approach, Bristol provide a sound base for the year.
Interest cover increased to 16.4 times and with net debt as at 31 December 2004
of £152.8m (Dec 2003: £123.1m), gearing at 36% was unchanged from the same time
last year. The interest charge of £4.5m was £0.6m higher than in the previous
year (H1 2003/04: £3.9m), principally as a result of a higher average debt level
due to investment in land and work in progress. The further investment made by
the Group into work in progress reflects the continuing strong forward sales
position whilst maintaining an appropriate level of work in progress to meet the
Spring 2005 market. Return on capital employed for the six months ended December
2004 was 27% (H1 2003/04: 28%). In November, the Group renegotiated its banking
facilities and signed a new five year £300m syndicated loan facility.
Land
The Group has continued to be cautiously active in the land market to support
future growth. Owned plots with planning as at 31 December 2004 increased to
15,200 plots (Dec 2003: 14,000 plots) with an average plot cost of £28,600 (Dec
2003: £25,000). This plot cost represents 16.2% of the average selling price
achieved in the first six months of the financial year, maintaining the Group's
very competitive plot cost to sales price ratio. In addition the Group
controlled 2,300 plots under contract awaiting the grant of a planning consent
(Dec 2003: 2,100 plots). As a result the current land bank was 17,500 plots at
the end of December 2004 (Dec 2003: 16,100 plots).
The forward land bank continues to be an important contributor to the current
land bank, with approximately 27% of the plots acquired in the first six months
of the financial year coming from this source. At the end of December and after
having taken over 600 plots into the current land bank, the quality of Redrow's
forward land bank was maintained with 1,500 plots holding a planning consent and
6,500 plots allocated within local plans out of the total forward land bank of
21,750 plots (Dec 2003: 23,250 plots).
Sales
As a result of having positioned the Group with a record forward sales position
at the start of the financial year, Redrow's focus has been upon maximising
selling prices and hence protecting margins, rather than chasing volume during
this expected period of adjustment between the strong markets of recent years
and a return to more normal levels of activity.
As anticipated, this high level of forward sales started to unwind during the
first half of the new financial year, with forward sales at the end of December
2004, 6% lower than the previous year. These forward sales total £317m (Dec
2003: £330m) at an average selling price of £162,700 (Dec 2003: £159,300). The
level of forward sales at the end of December remained ahead of Redrow's
historic norm of between 3 and 4 months.
Since the start of the new calendar year, the Group continues to see good levels
of interest from potential customers although the time taken to convert sales
has, as experienced in the six months to December 2004, lengthened as buyers
take longer to decide, or encounter longer sales chains themselves. Whilst this
is likely to result in a further reduction of forward sales at the end of the
financial year, Redrow expects to have at least 10% more sales outlets in the
six months to June 2005 than for the same period last year.
Debut by Redrow
It is widely recognised that there is a significant need to provide affordable
homes for people to buy. Redrow has given considerable focus to develop a new
product range to satisfy this need. 'Debut by Redrow' embraces innovative
design, delivering a high quality home that meets the aspirations of customers
and Government alike whilst maintaining the appropriate financial returns and
creating value for our shareholders. 'Debut' is built using lightweight steel
frame, demonstrating Redrow's continued commitment to modern methods of
construction, and has been designed to be capable of achieving Eco excellent
ratings. The first planning consent has now been secured at Rugby, within the
target thirteen-week period, with prices starting from £49,995.
International Financial Reporting Standards
The Group continues preparations to implement International Financial Reporting
Standards. These will impact for the first time on the Group's results for the
six months ended December 2005. Based on work undertaken to date, the principal
areas of change for Redrow are in respect of the accounting for pension costs
and share based payments, financial instruments (which will include the
requirement to discount land creditors), direct selling costs and, lastly, the
recognition of the timing of dividends.
Summary
A company cannot be or remain successful without the dedication and hard work of
its employees. The strength of Redrow's team is both broad-based and deep and
the Board is grateful to all its employees for their commitment and loyalty.
However, future success is dependent upon both the current positioning of the
Group and the development of sound foundations, particularly as regards land,
the product range and construction techniques. Although in the short term there
may be a period of uncertainty resulting from the anticipated General Election
and the renewed debate regarding the future direction of interest rates, in the
medium term the Board expects macro economic factors generally to remain
supportive of the housing market. On this basis, I am sure that Redrow will
continue to produce value for our shareholders whose support we greatly
appreciate.
Robert Jones
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Audited
6 months 12 months
ended ended
31 December 30 June
2004 2003 2004
Note £m £m £m
Turnover 2 373.8 310.8 669.9
Total operating profit 2 73.6 60.6 132.7
Interest payable (4.5) (3.9) (8.6)
Profit before taxation 69.1 56.7 124.1
Taxation 3 (20.7) (17.0) (37.2)
Profit after taxation 48.4 39.7 86.9
Dividends 4 (5.7) (4.8) (14.3)
Profit retained 42.7 34.9 72.6
Earnings per share - basic 5 30.5p 25.1p 54.8p
- diluted 5 30.4p 25.0p 54.6p
Dividends per share 4 3.6p 3.0p 9.0p
There are no material recognised gains or losses other than as shown above.
There is no material difference between the profit on ordinary activities before
taxation and the retained profit for the period stated above and their historic
cost equivalents.
CONSOLIDATED BALANCE SHEET
Unaudited Audited
As at As at
31 December 30 June
Restated
2004 2003 2004
Note £m £m £m
Fixed assets
Tangible assets 22.9 21.5 22.5
Investments 1.9 1.7 1.8
24.8 23.2 24.3
Current assets
Land for development 445.3 359.4 419.0
Work in progress 295.8 272.9 287.4
Stock of showhomes 8.1 9.5 7.0
Debtors 16.9 15.2 11.6
Bank and cash deposits 0.4 1.0 1.2
766.5 658.0 726.2
Creditors
Bank borrowings (153.2) (124.1) (131.9)
Land creditors 6 (67.9) (72.6) (85.8)
Other creditors and provisions (150.9) (146.4) (156.2)
(372.0) (343.1) (373.9)
Equity shareholders' funds 419.3 338.1 376.6
Reconciliation of movement in Equity
shareholders' funds
Opening shareholders' funds 376.6 302.0 302.0
Retained profit for the period 42.7 34.9 72.6
Shares issued 0.2 0.2 0.9
Movement in respect of LTSIP (0.2) 1.0 1.6
Contribution to QUEST - - (0.5)
Closing shareholders' funds 419.3 338.1 376.6
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Audited
6 months 12 months
ended ended
31 December 30 June
2004 2003 2004
Note £m £m £m
Cash inflow from operating activities 7 12.6 2.4 24.5
Returns on investments and servicing of finance
Net interest paid (4.2) (3.2) (8.0)
Issue costs of new bank borrowings (0.8) - -
Net cash (outflow) from returns on investments (5.0) (3.2) (8.0)
and servicing of finance
Corporation tax paid (18.2) (15.6) (34.1)
Capital expenditure and financial investment
Net purchase of tangible fixed assets (1.2) (5.7) (7.1)
Loan to Joint Venture (0.5) - (0.5)
Net cash (outflow) from capital expenditure (1.7) (5.7) (7.6)
and financial investment
Dividends paid (9.5) (7.9) (12.7)
Net cash (outflow) before financing (21.8) (30.0) (37.9)
Financing and liquid resources
Issue of ordinary share capital 0.2 0.2 0.5
Cash deposits - restricted use (0.8) - (0.6)
Purchase of own shares (0.2) - -
Issue of bank borrowings 53.0 55.0 80.0
Repayment of bank borrowings (48.5) (30.0) (70.0)
Net cash inflow from financing 3.7 25.2 9.9
(Decrease) in cash in period (18.1) (4.8) (28.0)
Cash deposits - restricted use 0.8 - 0.6
Net movement in bank borrowings (4.5) (25.0) (10.0)
Other non-cash movements (0.3) (0.1) (0.1)
Change in net (debt) (22.1) (29.9) (37.5)
Net (debt) at start of period (130.7) (93.2) (93.2)
Net (debt) at end of period (152.8) (123.1) (130.7)
NOTES
1. The interim report does not represent statutory accounts within the
meaning of section 240 Companies Act 1985. The comparative figures for the year
ended 30 June 2004 are however an abridged version of the Group's statutory
accounts which received an unqualified audit report and have been delivered to
the Registrar of Companies. The restatement reflects changes required by UITF
Abstract 38 'Accounting for ESOP Trusts' and the amended UITF Abstract 17 '
Employee Share Schemes' which were adopted in the financial statements for the
year ended 30 June 2004.
2. Segmental information:-
Unaudited Audited
6 months 12 months
ended ended
31 December 30 June
Restated
2004 2003 2004
£m £m £m
Turnover
Homes 373.1 304.8 662.7
Commercial 0.7 6.0 7.2
Turnover 373.8 310.8 669.9
Framing Solutions plc - share of Joint Venture 0.5 0.2 0.4
Turnover (including share of Joint Venture) 374.3 311.0 670.3
Profit on ordinary activities before taxation
Homes 73.8 59.6 131.2
Commercial 0.4 1.6 2.7
Framing Solutions plc - Joint Venture (0.6) (0.6) (1.2)
73.6 60.6 132.7
Interest (4.5) (3.9) (8.6)
69.1 56.7 124.1
Net assets
Homes 548.6 445.3 487.1
Commercial 21.6 14.2 18.4
Framing Solutions plc - Joint Venture 1.9 1.7 1.8
572.1 461.2 507.3
Net (debt) (152.8) (123.1) (130.7)
Net assets 419.3 338.1 376.6
3. The taxation charge reflects the estimated effective rate for the
full year to 30 June 2005.
4. The Directors have declared an interim dividend of 3.6p per share
(2003: 3.0p). This gives an interim dividend of £5.7m (2003: £4.8m) which will
be paid on 6 May 2005 to shareholders whose names are on the Register of Members
at the close of business on 18 March 2005. The shares will become ex-dividend
on 16 March 2005.
5. The basic earnings per share calculation for the half year ended 31
December 2004 is based on the weighted average number of shares in issue during
the period of 158.8m (2003:158.5m) after adjusting for surplus shares held in
trust under the Redrow Long Term Share Incentive Plan. The weighted average
number of shares in issue for the year ended 30 June 2004 was 158.6m. Diluted
earnings per share has been calculated after adjusting the weighted average
number of shares in issue for shares held under unexercised options in
accordance with FRS 14.
6. Land creditors:-
Unaudited Audited
As at As at
31 December 30 June
2004 2003 2004
£m £m £m
Due within one year 38.0 34.3 56.1
Due in more than one year 29.9 38.3 29.7
67.9 72.6 85.8
7. Analysis of cash inflow from operating activities:-
Unaudited Audited
6 months 12 months
ended ended
31 December 30 June
2004 2003 2004
£m £m £m
Total operating profit 73.6 60.6 132.7
Add back share of Joint Venture operating loss 0.6 0.6 1.2
Group operating profit 74.2 61.2 133.9
Depreciation including profits and losses on
disposals of fixed assets 0.8 0.7 1.1
Increase in stocks and work in progress (35.8) (62.8) (134.4)
Movement in other current assets, creditors and
provisions (26.6) 3.3 23.9
12.6 2.4 24.5
8. The interim report has been prepared using accounting policies
consistent with those applied in the Group accounts for the year ended 30 June
2004. The interim report has not been audited or reviewed and was approved by
the Board of Directors on 7 March 2005.
9. The Registrar is Computershare Investor Services PLC. Shareholder
enquiries should be addressed to the Registrar at the following address:
Registrars Department
PO Box 82
The Pavilions
Bridgwater Road
Bristol
BS99 7NH
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