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Redrow PLC - Half-year Report

RNS Number : 9647B
Redrow PLC
05 February 2020
 

 

FOR IMMEDIATE RELEASE

 

 

Wednesday 5 February 2020

 

 

Redrow plc

 

         Interim results for the six months to 31 December 2019

 

 

ROBUST FIRST HALF PERFORMANCE AND

STRONG START TO SECOND HALF

EXPECTATIONS FOR FULL YEAR UNCHANGED

 

 

Financial Results

 

 

H1 2020

H1 2019

% Change

Private Net Reservations

£936m

£795m

18

Total Order Book

£1.2bn

£1.2bn

-

Revenue

£870m

£970m

(10)

Legal Completions

2,554

2,970

(14)

Profit Before Tax

£157m

£185m

(15)

EPS

37.2p

41.5p

(10)

ROCE

25%

28%

(11)

Interim Dividend per share

10.5p

10p

5

 

Operational Summary

 

·      Balance of Homes Turnover weighted to second half with 40:60 split (2019: 46:54)

·      Average number of outlets expected to rise to 131 for the year (2019: 126)

·      First half Private Net Reservations up 18% to £936m

·      Second half Private Net Reservations to date up 15% at £180m (2019: £156m)

 

Financial Summary

 

·      Group revenue of £870m (2019: £970m) due to the second half weighting of Homes Turnover

·      First half pre-tax profit of £157m (2019: £185m)

·      Earnings per share (EPS) of 37.2p (2019: 41.5p)

·      Return on capital employed of 25% (2019: 28%)

·      Net cash of £14m (Dec 2018: £101m)

·      Interim dividend of 10.5p per share (2019: 10p), up 5%

 

Board Changes

 

·      John Tutte to step-down to non-executive Chairman from July 2020 and retire ahead of the AGM in 2021

·      Search for an independent non-executive Chairman to commence towards end of 2020

·      Matthew Pratt to be appointed Group Chief Executive from 1st July 2020

 

John Tutte, Executive Chairman of Redrow, said

 

"Redrow has once again delivered a robust operational and financial first-half performance consistent with our expectation that revenue will be considerably more weighted than usual to the second half.

 

The Group delivered a record value of first half reservations at £936m (2019: £795m), a pre-tax profit of £157m (2019: £185m) and ended the period with net cash of £14m (2019: £101m). Given our confidence in the full year performance we have declared an interim dividend of 10.5p, up 5% on the previous year.

 

The market in the first five weeks of the second half has been resilient with the value of reservations up 15% at £180m (2019: £156m).

 

Current market conditions, combined with our very strong order book give me confidence this will be yet another year of progress for Redrow and our expectations for the full year remain unchanged."

 

Enquiries:

 

Redrow plc

 

John Tutte, Executive Chairman                           

Barbara Richmond, Group Finance Director

 

Instinctif Partners

 

Mark Garraway

James Gray

 

 

01244 527411

01244 527411

 

0207 457 2020

 

07814 379412

07583 936031

                                               

There will be an analyst and investor meeting at 10.30 am at The London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS. Coffee will be served from 10.00 am.

 

A live audio webcast and slide presentation of this event will be available at 10.30 am on www.redrowplc.co.uk.

Participants can also dial in to hear the presentation live at 10.30 am on +44 (0) 20 3936 2999 or UK Toll Free

0800 640 6441; access code 607244.

 

A recording will be available until 4th March 2020 on +44 (0) 20 3936 3001; access code 120712.

 

Chairman's Statement

 

Redrow has once again delivered a robust operational and financial set of results for the first-half of the financial year and traded strongly despite an uncertain political and economic background.  

 

The results are consistent with our expectations highlighted in September, that returns will be considerably more weighted than usual to the second-half due to constrained outlet growth last year and the timing of apartment block completions.

 

We secured a record number of private reservations in the six months to the end of December and the value of our total forward order book was maintained at December 2018's record level and closed 15% ahead of the opening position at the beginning of July.

 

Our Financial Performance

 

Group revenue was £870m in the first half compared to £970m last year due to legal completions reducing from 2,970 to 2,554. Private completions were down by 99 and social completions were 317 lower and accounted for 19% (2019: 27%) of total completions. The private average selling price was similar to last year at £387,000 (2019: £391,000).

 

The gross margin was 23.9% (2019: 24%) as the impact of build cost inflation was largely offset by the change in tenure mix.

 

Overheads increased from £46m to £49m following the opening our new Thames Valley division in July. Operating profit reduced from £187m to £159m, mainly due to the reduced turnover, and pre-tax profit was £157m (2019: £185m). Earnings per share were 37.2p (2019: 41.5p).

 

Net cash at the end of December 2019 was £14m (2019: £101m) despite paying out £149m in dividends and tax in the first-half (2019: £105m).

 

Return on Capital Employed reduced to 25% (2019: 28%) in the first-half due to the lower profits.

 

Given the Group's ongoing strong earnings and cash position, the Board has declared an interim dividend of 10.5p (2019: 10p), a 5% increase on the prior year. The interim dividend will be paid on 9 April 2020 to holders of ordinary shares on the register at the close of business on 6 March 2020.

 

Operating Highlights

 

The wider housing market continued to be affected by political uncertainty around Brexit and during the run-up to the general election. This had an impact on the time taken to close new homes' sales, particularly where extended chains were involved. Notwithstanding this, the Group achieved a record number of private reservations in the six months to the end of December with the value of reservations up 18% at £936m (2019: £795m). Excluding the Colindale PRS deal we announced in September, the value of reservations was 3% ahead.

 

At the end of December 2019, we had a total order book of £1.2bn, in line with last year's record level.

 

Outlets averaged the same as last year at 129 and the weekly sales rate was 0.73 (2019: 0.61) and 0.62 excluding the Colindale PRS sale.

 

The market was fairly consistent across all of our operating areas with London showing some early signs of improvement. Pricing was stable throughout the period and 36% (2019: 39%) of private buyers utilised Help to Buy.

 

Our new Thames Valley division made a positive contribution to Group profits in the first-half.

 

Our long-standing supplier and sub-contractor relationships and cost saving initiatives are helping to ease cost pressures. We anticipate underlying build cost inflation will reduce in calendar year 2020 to around 3% and will be largely offset by modest house price gains.

 

During 2019 we rolled-out our bespoke tablet-based quality management system. We are now able to better track and measure standards and deal more efficiently with workmanship issues during the build process. Our industry-leading online reservation system is now operating across nearly all of our developments and is proving very popular with our customers. Our customer recommendation score is currently running at 91.8%.

 

We continue to invest in creating great places to live that respond to our customers' growing awareness of the environment and the need to address climate change and the threat to biodiversity. As part of this commitment, today we have published our social impact review: Creating Communities - Giving Our Customers a Better Way to Live. The review, which is available on our website, sets out how our business makes a meaningful social impact and strives to leave a positive environmental legacy.

 

Land and Planning

 

We remained active but cautious in the land market in the first-half. The Group acquired 1,946 plots with planning and the owned and contracted land holdings with planning closed at 28,125 plots (June 2019: 28,566 plots). The Group is processing a sizeable pipeline of sites with terms agreed and we therefore expect acquisitions to accelerate in the second-half.

 

Although our cautious approach to land acquisition during a prolonged period of political and economic uncertainty impacted the rate of outlet growth, our strategy to acquire larger sites has reduced the rate at which outlets are now closing. As a result, we are expecting outlet growth to be strong in the second-half despite ongoing delays in the planning system.

 

Board Changes

 

My appointment as Executive Chairman and Matthew Pratt's promotion to Chief Operating Officer earlier last year were integral to a smooth transition to a more conventional board structure following Steve Morgan's retirement. The transition has gone well, and it is therefore my intention to step back to a non-executive Chairman role from 1st July 2020 and to retire from the board ahead of the AGM in 2021. Matthew Pratt will take up the position of Group Chief Executive with effect from 1st July 2020 and the search for an independent non-executive Chairman to replace me will start towards the end of this calendar year.

 

I am confident that under Matthew's leadership, supported by Barbara Richmond and the wider executive team, Redrow will continue to go from strength to strength. Barbara recently celebrated ten exceptional years as Group Finance Director.

 

During the first half we further strengthened the board with the appointment of Nicky Dulieu as a non-executive Director: Nicky's extensive knowledge of retailing and customer service complements the existing Board's wealth of experience.

 

Current Trading and Outlook

 

The market in the first five weeks of the second-half has been resilient. Private reservations in terms of value are 15% ahead at £180m (2019: £156m). We are currently operating from 134 outlets (2019: 128) and continue to expect to operate from an average of 131 outlets for the full year (2019: 126).

 

Planned changes to Help to Buy next year will limit the scheme to first-time buyers and introduce regional price caps. Whilst we expect this will see demand increase in the short-term from buyers that will not qualify for the scheme in 2021, we continue to urge government to review the caps that, as they stand, will disadvantage buyers in the North and Midlands.

 

Due to constrained outlet growth last year and the timing of apartment block completions, we budgeted to deliver significantly more completions than usual in the second-half. We are on-track to do so and our expectations for the full year remain unchanged.

 

With our very strong order book, a promising start to the second-half and a more stable political outlook, prospects are encouraging and I am confident this will be another year of progress for Redrow.

John Tutte
Executive Chairman

 

Consolidated Income Statement

 

 

 

Unaudited

Audited

 

 

6 months ended

31 December

12 months ended

30 June

 

 

2019

2018

2019

 

Note

£m 

£m 

£m 

Revenue

 

870

970

2,112

Cost of sales

 

(662)

 (737)

 (1,608)

Gross profit

 

208

233

504

 

 

 

 

 

Administrative expenses

 

(49)

 (46)

 (93)

Operating profit

 

159

187

411

 

 

 

 

 

Financial income

 

1

1

3

Financial costs

 

(3)

 (3)

 (8)

Net financing costs

 

(2)

 (2)

 (5)

Profit before tax

 

157

185

406

 

 

 

 

 

Income tax expense

2

(29)

 (35)

 (77)

Profit for the period

 

128

150

329

Earnings per share - basic

4

37.2p

41.5p

92.3p

                               - diluted

4

37.1p

41.4p

92.0p

 

 

Consolidated Statement of Comprehensive Income

 

 

 

Unaudited

Audited

 

 

6 months ended

31 December

12 months ended

30 June

 

 

2019

2018

2019

 

Note

£m 

£m 

£m

Profit for the period

 

128

150

329

 

 

 

 

 

Other comprehensive (expense):

 

 

 

 

Items that will not be reclassified to profit or loss

 

 

 

 

Remeasurements of post-employment benefit obligations

5

(3)

 (5)

(7)

Deferred tax on remeasurements taken directly to equity

 

1

1

1

Other comprehensive (expense) for the period net of tax

 

(2)

 (4)

(6)

Total comprehensive income for the period

 

126

146

323

 

Consolidated Balance Sheet

 

 

Unaudited

Audited

 

 

As at

31 December

As at

30 June

 

 

2019

2018

2019

 

Note

£m 

£m 

£m

Assets

 

 

 

 

Intangible assets

 

2

2

2

Property, plant and equipment

 

17

15

16

Lease right of use assets

 

8

-

-

Investments

 

8

6

6

Deferred tax assets

 

4

4

4

Retirement benefit surplus

5

17

16

18

Trade and other receivables

 

7

7

9

Total non-current assets

 

63

50

55

 

 

 

 

Inventories

6

2,350

2,258

2,297

Trade and other receivables

 

37

43

48

Current corporation tax receivables

 

14

-

-

Cash and cash equivalents

8

89

102

204

Total current assets

 

2,490

2,403

2,549

 

 

 

 

 

Total assets

 

2,553

2,453

2,604

 

 

 

 

 

Equity

 

 

 

 

Retained earnings at 1 July 2019

 

1,481

1,379

1,379

Profit for the period

 

128

150

329

Other comprehensive (expense) for the period

 

(2)

 (4)

(6)

Dividends paid

 

(72)

 (70)

(218)

Movement in LTIP/SAYE

 

3

1

(3)

Retained earnings

 

1,456

1,481

Share capital

10

37

37

37

Share premium account

 

59

59

59

Other reserves

 

8

8

8

Total equity

 

1,642

1,560

1,585

 

 

 

 

Liabilities

 

 

 

 

Bank loans

8

75

1

80

Trade and other payables

7

125

143

167

Deferred tax liabilities

 

4

4

4

Long-term provisions

 

8

9

8

Total non-current liabilities

 

212

157

259

 

 

 

 

 

Bank overdrafts and loans

8

-

-

-

Trade and other payables

7

699

702

726

Current income tax liabilities

 

-

34

34

Total current liabilities

 

699

736

760

 

 

 

 

 

Total liabilities

 

911

893

1,019

 

 

 

 

 

Total equity and liabilities

 

2,553

2,453

2,604

 

 

 

 

 

 

Redrow plc Registered no. 2877315

 

 

 

 

                 

 

 

Consolidated Statement of Changes in Equity

 

 

 

Share

 

 

 

 

Share

premium

Other

Retained

 

 

capital

account

reserves

earnings

Total

 

£m

£m

£m

£m

£m

 

 

 

 

 

 

At 1 July 2018

37

59

8

1,379 

1,483 

 

 

 

 

 

 

Total comprehensive income for the period

-

-

-

146 

146 

Dividends paid

-

-

-

(70)

(70)

Movement in LTIP/SAYE

-

-

-

At 31 December 2018 (Unaudited)

37

59

8

1,456

1,560

 

 

 

 

 

 

At 1 July 2018

37

59

8

1,379 

1,483 

 

 

 

 

 

 

Total comprehensive income for the period

-

-

-

323 

323 

Dividends paid

-

-

-

(218)

(218)

Movement in LTIP/SAYE

-

-

-

(3)

(3)

At 30 June 2019 (Audited)

37

59

8

1,481 

1,585 

 

 

 

 

 

 

At 1 July 2019

37

59

8

1,481 

1,585 

 

 

 

 

 

 

Total comprehensive income for the period

-

-

-

126 

126 

Dividends paid

-

-

-

(72)

(72)

Movement in LTIP/SAYE

-

-

-

At 31 December 2019 (Unaudited)

37

59

8

1,538 

1,642 

 

Consolidated Statement of Cash Flows

 

 

 

 

 

Unaudited

Audited

 

 

6 months ended

31 December

12 months ended

30 June

 

 

2019

2018

2019

 

Note

£m 

£m 

£m

Cash flows from operating activities

 

 

 

 

Operating profit

 

159

187

411

Depreciation and amortisation

 

3

1

3

Adjustment for non-cash items

 

(3)

 (1)

(7)

Decrease/(increase) in trade and other receivables

 

13

1

(6)

Increase in inventories

 

(53)

 (40)

(79)

(Decrease)/increase in trade and other payables

 

(74)

 (3)

50

(Decrease)/increase in provisions

 

-

-

(1)

Cash inflow generated from operations

 

145

371

 

 

 

 

 

Interest paid

 

(1)

 (1)

(2)

Tax paid

 

(77)

 (35)

(77)

Net cash (outflow)/inflow from operating activities

 

(33)

109

292

 

 

 

 

Cash flows from investing activities

 

 

 

 

Acquisition of software, property, plant and equipment

 

(3)

 (1)

(4)

Interest received

-

-

1

Net payments to joint ventures

(2)

-

 -

Net cash (outflow) from investing activities

 

(5)

 (1)

(3)

 

 

 

 

Cash flows from financing activities

 

 

 

 

Issue of bank borrowings

 

75

1

80

Repayment of bank borrowings

 

(80)

 (5)

(5)

Purchase of own shares

 

-

-

(10)

Dividends paid

3

(72)

 (70)

(218)

Net cash outflow from financing activities

 

(77)

 (74)

(153)

 

 

 

 

(Decrease)/increase in net cash and cash equivalents

 

(115)

34

136

Net cash and cash equivalents at the beginning of the period

 

204

68

68

Net cash and cash equivalents at the end of the period

8

89

102

204

               

 

NOTES (Unaudited)

 

1.    Accounting policies

 

Basis of preparation

 

The condensed consolidated half-yearly financial information for the half-year ended 31 December 2019 has been prepared on a going concern basis in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The half-yearly condensed consolidated report should be read in conjunction with the annual consolidated financial statements for the year ended 30 June 2019, which have been prepared in accordance with IFRSs as adopted by the European Union.

 

These half-yearly financial results do not comprise statutory accounts within the meaning of section 435 of the Companies Act 2006. This condensed half-yearly financial information has been reviewed, not audited. The comparative figures for the financial year ended 30 June 2019 are not the Group's statutory accounts for that financial year. Audited statutory accounts for the year ended 30 June 2019 were approved by the Board of Directors on 4 September 2019 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph, and did not contain any statement under section 498 (2) of (3) of the Companies Act 2006.

 

The principal accounting policies adopted in the preparation of this consolidated half-yearly report are included in the annual consolidated financial statements for the year ended 30 June 2019. The accounting policies are consistent with those followed in the preparation of the financial statements to the year ended 30 June 2019 with the exception of one main new accounting standard which has been adopted by the Group from 1 July 2019.

 

IFRS 16, 'leases' is the standard that has replaced the guidance in IAS 17. Under IAS 17, the Group did not have any finance leases only operating leases which were off balance sheet. IFRS 16 requires lessees to recognise a lease liability reflecting future lease payments and a lease right of use asset for virtually all lease contracts. Under IFRS 16, a contract is, or contains a lease, if the contract conveys the right to control the use of the identified asset in exchange for consideration. This standard is effective for the Group for the year ending 30 June 2020.

 

The Group has a number of leases in relation to cars, photocopiers and some office properties which have been brought onto the balance sheet as a result of the adoption of IFRS 16. The Group has used the modified retrospective method to implement IFRS 16. Under this approach, comparative information is not restated. Rather at 1 July 2019, the Group recognised the accumulative effect of the initial application as an adjustment to the opening balance sheet, increasing both fixed assets and liabilities by £8m. Discount rates are used in the calculation of the lease liability. For photocopier leases, the discount rates implicit in the lease have been used. For cars, the discount rate has been estimated across the asset type based on a sample of implicit rates provided by the lessor. For the office property leases an estimate has been used based on adjusted borrowing rates.

 

As at 31 December 2019, lease right of use assets on the balance sheet were £8m.

 

There were no other key judgements or estimates made in assessing the impact of IFRS 16 on the Group.

 

The preparation of condensed half-yearly financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may subsequently differ from these estimates. In preparing these condensed half-yearly financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the annual consolidated financial statements for the year ended 30 June 2019.

 

After making due enquiries and in accordance with the FRC's 'Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009', the Directors have a reasonable expectation that the Group has adequate resources to continue trading for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the condensed consolidated half-yearly financial statements.

 

The main operation of the Group is focused on housebuilding. As it operates entirely within the United Kingdom, the Group has only one reportable business and geographic segment. After considering the requirements of IFRS 15 to present disaggregated revenue, the Group does not believe there is any disaggregation criteria applicable to its one reportable business and geographic segment. There is no material difference between any assets or liabilities held at cost and their fair value.

 

Principal risks and uncertainties

 

As with any business, Redrow plc faces a number of risks and uncertainties in the course of its day to day operations.

 

The principal risks and uncertainties facing the Group are outlined within our half-yearly report 2020. We have reviewed the risks pertinent to our business in the six months to 31 December 2019 and which we believe to be relevant for the remaining six months to 30 June 2020. The only material change to those outlined in our Annual Report 2019 is that economic uncertainty around Brexit which has decreased following the recent election.

 

2.       Income Tax expense

 

Income tax charge is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year (18.5% (2019: 19.0%)). Deferred taxation balances have been valued at 17% being the corporation tax rate from 1 April 2020 substantively enacted on 6 September 2016.

 

3.       Dividends

 

A dividend of £72m was paid in the six months to 31 December 2019 (six months to 31 December 2018: £70m).

 

4.       Earnings per share

 

The basic earnings per share calculation for the six months ended 31 December 2019 is based on the weighted number of shares in issue during the period of 344m (31 December 2018: 362m) excluding those held in trust under the Redrow Long Term Incentive Plan, 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.

 

6 months ended 31 December 2019 (Unaudited)

 

 

            Earnings

            £m

No. of shares

millions

Per share

            Pence

Basic earnings per share

128

344

37.2  

Effect of share options and SAYE

-

1

(0.1)

Diluted earnings per share

128

345

37.2  

 

 

6 months ended 31 December 2018 (Unaudited)

 

            Earnings

            £m

No. of shares

millions

Per share

            Pence

Basic earnings per share

150

362

41.5  

Effect of share options and SAYE

-

1

(0.1)

Diluted earnings per share

150

363

41.4  

 

 

12 months ended 30 June 2019 (Audited)

 

            Earnings

            £m

No. of shares

millions

Per share

            Pence

Basic earnings per share

329

356

92.3  

Effect of share options and SAYE

-

2

(0.3)

Diluted earnings per share

329

358

92.0  

 

5.       Pensions

 

The amounts recognised in respect of the defined benefit section of the Group's Pension Scheme are as follows:

 

 

Unaudited

6 months ended

31 December

Audited

12 months ended 30 June

 

2019

£m

2018

£m

2019

£m

Amounts included within the consolidated income statement

 

 

 

period operating costs

 

 

 

Scheme administration expenses

-

1

(1)

Net interest on defined benefit liability

-

-

1

 

-

1

-

 

 

 

 

Amounts recognised in the consolidated income statement of comprehensive income

 

 

 

Return on scheme assets excluding interest income

1

(5)

13

Actuarial gains arising from change in financial assumptions

(3)

-

(20)

Actuarial gains arising from change in demographic assumptions

(1)

-

-

Actuarial gains arising from experience adjustments

-

-

-

 

(3)

(5)

(7)

 

 

 

 

Amounts recognised in the consolidated balance sheet

 

 

 

Present value of the defined benefit obligation

(134)

(112)

(130)

Fair value of the Scheme's assets

151

1

148

Surplus in the consolidated balance sheet

17

1

18

 

6.       Inventories

 

 

Unaudited

Audited

 

 

As at

31 December

As at

30 June

 

 

2019

2018

2019

 

 

£m 

£m 

£m

Land for development

 

1,464

1,460

1,515

Work in progress

 

814

723

715

Stock of showhomes

 

72

75

67

 

 

2,350

2,258

2,297

 

7.       Land Creditors 

          (included in trade and other payables)

 

 

Unaudited

Audited

 

 

As at

31 December

As at

30 June

 

 

2019

2018

2019

 

 

£m 

£m 

£m

Due within one year

 

229

244

271

Due in more than one year

 

125

143

167

 

 

354

387

438

 

8.       Analysis of Net Cash/(Debt)

 

 

Unaudited

Audited

 

 

As at

31 December

As at

30 June

 

 

2019

2018

2019

 

 

£m 

£m 

£m

Cash and cash equivalents

 

89

102

204

Bank overdrafts

 

-

-

-

Net cash and cash equivalents

 

89

102

204

Bank loans

 

(75)

 (1)

(80)

 

 

14

101

124

 

Net cash excludes land creditors and lease liabilities arising under IFRS 16.

 

9.       Bank facilities

 

At 31 December 2019, the Group had total unsecured bank borrowing facilities of £253m, representing £250m committed facilities and £3m uncommitted facilities.

 

The Group's syndicated loan facility matures in December 2022.

 

 

10.        Issued Share capital

 

Allotted, called up and fully paid.

 

£m

At 31 December 2018 - 369,799,938 ordinary shares of 10p each (unaudited)

37

At 31 June 2019 - 352,190,420 ordinary shares of 10.5p each (audited)

37

At 31 December 2019 - 352,190,420 ordinary shares of 10.5p each (unaudited)

37

 

 

 

 

 

Number of ordinary

 

 

shares of 10.5p each

 

 

 

 

As at 1 July 2019 and 31 December 2019

 

352,190,420

 

11.     Contingent Liabilities

 

Performance bonds, financial guarantees in respect of certain deferred land creditors and other building or performance guarantees have been entered into in the normal course of business.

 

12.     Related parties

 

Key management personnel, as defined under IAS 24 'Related Party Disclosures', are identified as the Executive Management Team and the Non-Executive Directors. Summary key management remuneration is as follows:

 

 

 

Unaudited

Audited

 

 

6 months ended

31 December

12 months ended

30 June

 

 

2019

2018

2019

 

 

£m 

£m 

£m

Short-term employee benefits

 

3

3

5

Share-based payment charges

 

1

1

2

 

 

4

4

7

 

The Group did not undertake any material transactions with Menta Redrow Limited or Menta Redrow (II) Limited.  The Group's loans to its joint ventures are summarised below:

 

 

Unaudited

Audited

 

 

As at

31 December

As at

30 June

 

 

2019

2018

2019

 

 

£m 

£m 

£m

Loans to joint ventures

 

7

4

4

 

13.     Alternative performance measures

 

Redrow uses return on capital employed (ROCE) as one of its financial measures. The Directors consider this to be an important indicator of whether the Group is achieving appropriate returns on its invested capital. As this is not defined or specified by IFRSs, a definition and calculation is provided below:

 

Capital employed is defined as total equity plus net debt or minus net cash.

 

ROCE - at half year end, this is calculated as operating profit for the 12 months to December before exceptional items as a percentage of the average of current year December and prior year December capital employed.

 

 

December

2019

£m

 

December

2018

£m

Operating Profit

 

 

 

6 months to December 2019

159

6 months to December 2018

187

12 months to June 2019

411

12 months to June 2018

382

6 months to December 2018

(187)

6 months to December 2017

(175)

12 months to December 2019

383

12 months to December 2018

394

 

 

 

 

Capital Employed

 

 

 

Total equity December 2019

1,642

Total equity December 2018

1,560

Net cash December 2019

(14)

Net cash December 2018

(101)

Capital employed December 2019

1,628

Capital employed December 2018

1,459

 

 

 

 

Total equity December 2018

1,560

Total equity December 2017

1,343

Net cash December 2018

(101)

Net debt December 2017

35

Capital employed December 2018

1,459

Capital employed December 2017

1,378

 

 

 

 

Average capital employed

1,544

Average capital employed

1,419

 

 

 

 

ROCE %

25%

ROCE %

28%

 

14.     General information

 

Redrow plc is a public limited company incorporated and domiciled in the UK and has its primary listing on the London Stock Exchange.

 

The registered office address is Redrow House, St David's Park, Flintshire, CH5 3RX.

 

Financial Calendar

 

Interim dividend record date                                                                                                6 March 2020

Interim dividend payment date                                                                                               9 April 2020

Announcement of results for the year to 30 June 2020                                                  9 September 2020

Final dividend record date                                                                                            25 September 2020

Circulation of Annual Report                                                                                       28 September 2020

Annual General Meeting                                                                                                6 November 2020

Final dividend payment date                                                                                        13 November 2020         

 

15.     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

 

Shareholder helpline: 0370 707 1257

 

16.     Risks and Risk Management

 

Risk

Risk Owners

Key Controls and Mitigating Strategies

Housing Market

The UK housing market conditions have a direct impact on our business performance.

Chief Operating Officer

Market conditions and trends are being closely monitored allowing management to identify and respond to any sudden changes or movements.

 

With underlying build costs continuing to rise and house price inflation remaining relatively subdued we maintain tight controls on costs and continue to build our relationships with key suppliers and broaden our supplier base.

 

Weekly review of sales at Group, divisional and site level.

 

Ensuring strong relationships with lenders and valuers to ensure they recognise our premium product.

 

Ongoing and regular monitoring of Government policy and lobbying as appropriate.

 

Following the recent election delivering a strong majority, there is a clearer view of the direction of Brexit.

 

Although clear guidance is a benefit to the economy

there remain considerable unknowns surrounding the

UK leaving the EU.

 

Availability of Mortgage Finance

Availability of mortgage finance and increased lending criteria requirements are key factors in the current environment.

Group Finance Director

Proactively engage with the Government, Lenders and

Insurers to support the housing market.

 

Expert New Build Mortgage Specialists provide updates on and monitoring of regulatory change.

 

The threat of early withdrawal of Help to Buy dissipated.

 

Liquidity and Funding

The Group requires appropriate facilities for its short-term liquidity and long-term funding.

Group Finance Director

Suitable committed banking facilities with covenants and headroom.

 

Regular communication with our investors and relationship banks, including visits to developments.

 

Regular review of our banking covenants and capital structure.

 

Ensuring our future cash flow is sustainable through detailed budgeting process and reviews.

 

Strong forecasting and budgeting process.

 

Customer Service

Failure of our customer service could lead to relative under performance of our business.

Group Customer and Marketing Director

My Redrow website to support our customers purchasing their new home.

 

Hard Hat Tours for customers of their new home at an appropriate stage of production.

 

Regular review of our marketing and communications policy at both Group and divisional level.

 

Land Procurement

The ability to purchase land suitable for our products and the timing of future land purchases are fundamental to the Group's future performance.

Group Development Director

Proactive monitoring of the market conditions to implement a clear defined strategy at both Group and divisional level.

 

Experienced and knowledgeable personnel in our land, planning and technical teams.

 

Effective use of our Land Bank Management system to support the land acquisition process and monitor opportunities has led to the risk decreasing overall.

 

Peer review by Legal Directors and use of third party legal resources for larger site acquisitions to reduce risk.

 

Planning and Regulatory Environment

The inability to adapt to changes within the planning and regulatory environment could adversely impact on our ability to comply with regulatory requirements.

Group Development Director

 

Group Human Resources Director

 

Group Company Secretary

Close management and monitoring of planning expiry dates and CIL.

 

Well prepared planning submissions addressing local concern and deploying good design.

 

Careful monitoring of the regulatory environment and regular communication of proposed changes across the Group through the Executive Management Team.

 

Proactive approach to the introduction of GDPR with a broad based project team defining and implementing new policies and procedures.

 

Appropriateness of Product

The failure to design and build a desirable product for our customers at the appropriate price may undermine our ability to fulfil our business objectives.

Group Design and Technical Director

Regular review and product updates in response to the demand in the market and assessment of our customer needs.

 

Design focused on high quality build and flexibility to planning changes.

 

Regular site visits and implementation of product changes to respond to demands.

 

Introduction of Internal Product Review Panel.

 

Attracting and Retaining Staff

The loss of key staff and/ or our failure to attract high quality employees will inhibit our ability to achieve our business objectives.

Group Human Resources Director

Personal Development Programmes supported by National training centres at four locations.

 

Graduate training, Undergraduate placements and

Apprentice training programmes to aid succession planning.

 

Development of a bespoke housebuilding degree course in conjunction with Liverpool John Moores University and Coleg Cambria.

 

Remuneration strategy in order to attract and retain talent within the business is reviewed regularly and benchmarked.

 

Engagement Team and continued refinement of internal communications platform in addition to annual employee survey to create framework for strong, two-way communication.

 

Health and Safety/ Environment

Instances of non-compliance with Health & Safety standards and Environmental regulations could put our people and the environment at risk, ultimately damaging our reputation.

Increased levels of scrutiny of the housebuilding industry heightens the risk environment.

Group Health and Safety and Environmental Director

Dedicated in-house team operating across the Group to ensure compliance of appropriate Health and Safety standards supported by external professional expertise.

 

Separate focus on Assurance visits to site and proactive management support to develop planning and processes.

 

Monthly Divisional H, S & E Leadership meetings.

 

Tri-annual Group H, S & E Leadership meetings.

 

Internal and external training provided to all employees.

Divisional Construction (Design and Management) Regulation (CDM) inspections carried out to assess our compliance with our client duties under CDM.

 

Health and Safety discussion at both Group and divisional level board meetings.

 

CDM competency accreditation requirement as a minimum for contractor selection process.

 

Key Supplier or Subcontractor Failure

The failure of a key component of our supply chain to perform due to financial failure or production issues could disrupt our ability to deliver our homes to programme and budgeted cost.

Group Commercial Director

Use of reputable supply chain partners with relevant experience and proven track record.

 

Monitoring of subcontract supply chain to maintain appropriate number for each trade to identify potential shortage in skilled trades in the near future.

 

Subcontractor utilisation on sites monitored to align workload and capacity.

Materials forecast issued to suppliers and reviewed regularly.

 

Group Monthly Product Development meetings to identify and monitor changes in the regulatory environment.

 

Cyber Security

Failure of the Group's IT systems and the security of our internal systems, data and our websites can have significant impact to our business.

The introduction of GDPR has increased the requirements for the control of personal data.

Chief Information Officer

Communication of IT policy and procedures to all employees.

 

Regular systems back up and storage of data offsite. Internal IT security specialists.

 

Use of third party entity to test the Group's cyber security systems and other proactive approach for cyber security including Cyber Essentials Plus accreditation.

 

Compulsory GDPR and IT security online training to all employees within our business.

 

Fraud/Uninsured Loss

A significant fraud or uninsured loss could damage the financial performance of our business.

Group Finance Director

Systems, policies and procedures in place which are designed to segregate duties and minimise any opportunity for fraud.

 

Regular Business Process Reviews undertaken to ensure compliance with procedure and policies followed by formal action plans.

 

Timely management reporting.

 

Insurance strategy driven by business risks.

 

Fraud awareness training.

 

Responsibility Statement

 

We confirm that to the best of our knowledge:

 

·        the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; and

 

·        the interim management report includes a fair review of the information required by:

 

a)    DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

 

b)    DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

During the period since the approval of the Redrow plc Annual Report for the year ended 30 June 2019, Nicky Dulieu was appointed to the board on 6 November 2019 following the close of the 2019 Annual General Meeting.

 

The Directors of Redrow PLC as at the date of this statement are:

 

John Tutte

Matthew Pratt
Barbara Richmond
Nicholas Hewson
Sir Michael Lyons
Vanda Murray
Nicky Dulieu

 

By order of the Board

 

Graham Cope

Company Secretary

 

4 February 2020

 

Redrow plc

Redrow House

St David's Park

Flintshire
CH5 3RX

 

Independent Review Report to Redrow plc

 

Report on the half-yearly report

 

 

Conclusion

 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31st December 2019 which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and the related explanatory notes.

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31st December 2019 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

The impact of uncertainties due to the UK exiting the European Union on our review

 

Uncertainties related to the effects of Brexit are relevant to understanding our review of the condensed financial statements. Brexit is one of the most significant economic events for the UK, and its effects are subject to unprecedented levels of uncertainty of consequences, with the full range of possible effects unknown. An interim review cannot be expected to predict the unknowable factors or all possible future implications for a company and this is particularly the case in relation to Brexit.

 

Directors' responsibilities

 

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

The interim financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.

 

Our responsibility

 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

The purpose of our review work and to whom we owe our responsibilities

 

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

 

Nick Plumb

For and on behalf of KPMG LLP

Chartered Accountants

 

KPMG LLP

8 Princes Parade

Liverpool

L3 1QH

 

4 February 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LEI Number:

2138008WJZBBA7EYEL28

 

Announcement Classification:

1.2: Half yearly financial report and audit reports/limited reviews


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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Quick facts: Redrow PLC

Price: 443.6

Market: LSE
Market Cap: £1.56 billion
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