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Redrow and Cairn Homes under the cosh as founders reduce stakes in the housebuilders

Redrow's chairman and Bridgemere Securities have sold a 7% interest while three founders of Cairn Homes will offload a 2.1% stake
House
The housing market has slowed following last year's Brexit vote

Redrow plc (LON:RDW) and Cairn Homes PLC (LON:CRN) shares dropped after saying their founders were selling stakes in the housebuilders.

Redrow said its chairman Steve Morgan, who founded Redrow in 1974, has sold a 7% interest in the housebuilder through his charitable trust, The Steve Morgan Foundation, and Bridgemere Securities. 

Morgan disposed of 25.9 million existing ordinary shares at a 590p per share via an accelerated bookbuild.

Barclays Bank PLC acted through its investment bank as sole global co-ordinator and co-bookrunner with Peel Hunt.

Morgan and his vehicles will remain the company's largest shareholder with a 33% stake.

Shares fell 8.38% to 579.50p in afternoon trading. 

READ: Redrow says demand for homes remains strong despite Brexit as it reports record 2017 results

In September Morgan announced he plans to ease back from a full-time executive to a non-executive role but would continue to lead the business strategy and be involved in key projects.

"We believe this announcement could raise the question on whether Mr. Morgan will ultimately sell his entire stake in the company, and whether Redrow will be able to continue to grow successfully without Mr. Morgan's leadership," said analysts at UBS

"However, we highlight the market is now supported by (1) low interest rates; (2) structural undersupply; (3) supportive land market with limited competition allowing for attractive returns; (4) government support in the form of Help-to-Buy and planning reform."

Redrow cautious on outlook

The news comes a week after Redrow achieved record 2017 results and said it was confident of another strong performance in the next financial year despite the challenges facing the housing market, sending its share price higher.

In the year to 30 June 2017, pre-tax profit rose 26% to £315mln compared to the previous year and revenue increased 20% to £1.66bn, driven by a 15% gain in legal completions to 5,416 and 7% growth in the average selling price to £309,800.

However, the group highlighted key issues that “need to be addressed by government to support future growth”, including the status of European Union workers after Brexit, plans for the Help to Buy scheme and the need to revitalise stalled planning reforms.

Cairn Homes founders reduce stake

Irish housebuilder Cairn Homes said three of its founders will sell a 2.1% stake, or 15.64 million shares, in the company.

Chief executive Michael Stanley, his brother chief commercial officer Kevin Stanley and executive director Alan McIntosh will reduce their holdings.

Following the placing, Michael Stanley’s voting rights will reduce to 2.1% from 2.9%, Kevin Stanley’s will fall to 0.9% from 1.2% and McIntosh’s entities will drop to 4.7% from 5.8%.

Goodbody has been appointed as sole bookrunner of the placing, which will be launched today through an accelerated bookbuild.

Shares declined 3.96% to 1.730p.

Last week, Cairn Homes reported first half gross profits jumped to €7.7 mln from €5.1mln last year as revenue rose to €42.2mln from €16.0mln last year with 94 sales completions and forward sales of 474 units. 

The housing market has slowed since the UK voted to leave the European Union. Cairn Homes said while uncertainty remains for the broader Irish economy, it expects to benefit from the relocation of financial services jobs to Dublin from London. 

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Article
February 08 2017

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