Redrow revises-up expected annual profits despite ‘Brexit’ uncertainties

The business now predicts pre-tax profit for the year to June will exceed the top end of analysts’ estimates, currently £240 million, on “record” private reservations, up 46 per cent to £1.56 billion (2015: £1.07 billion), driven by strong regional growth with with confirmation expected on 6 September.

The private order book is also up more than 50 per cent to £807 million though the sales rate was in line with the previous year at 0.68 per week.

The average selling price of private homes rose 10 per cent to £328,500 (2015: £297,300).

Redrow said the number of active outlets at the year end increased to 128 (2015: 117) in line with previous guidance, while turnover for the year rose 20 per cent to a “record” £1.38 billion on a 17 per cent increase in completions to 4,716 (2015: 4,022).

Net debt is also reported to have been cut by 10 per cent to £139 million (2015: £154 million).

Redrow states: “In the run up to the EU referendum there was no impact on house sales or visitor levels.

“Although it is too early to tell whether Brexit will have any effect on future sales, initial feedback is that sites remain busy, reservations continue to be taken and, indeed, we witnessed long queues and strong reservations at new sites launched last weekend.

“The fact remains that there is a long term underlying demand for new homes following decades of under supply.

“This chronic shortage of housing leaves market fundamentals unchanged.

“The new homes market remained strong throughout the period as the mortgage market continued to improve.”

Housebuilders have been one of the hardest hit sectors following the Brexit vote and Redrow has seen its share price drop 30 per cent since last Thursday’s market close.

However, Numis Securities has upgraded earnings estimates by over 7 per cent, although Brexit uncertainty still holds back any upward revision to 2017 numbers.

It raised profit forecasts from £230 million to £247 million, giving earnings per share of 54.2p, up from 50.5p previously.

Turnover should jump 20 per cent this year to a record £1.38 billion, with the number of completed homes climbing 17 per cent to 4,716. Higher turnover and lower costs have reduced net debt by double-digits to £138 million.

In a statement issued yesterday, Redrow said: “Although it is too early to tell whether Brexit will have any effect on future sales, initial feedback is that sites remain busy.”

Numis analyst Chris Millington said: “Whilst the outlook has clearly been made more uncertain by the UK’s decision to leave the EU, we still think that the fundamentals of the housing market are positive and forecasts of significant price falls feel exaggerated.

He added: “In our view the current sell off in the sector offers a very good buying opportunity for investors willing to take a medium term view.”