Redrow PLC (LON:RDW) saw its shares fall on Wednesday after the group revealed that its boss Steve Morgan, who founded the housebuilding company in 1974, will retire from its board at the end of March 2019, virtually 10 years to the day since he returned to the business, which is seeing something of a sales stagnation at present.
The FTSE 250-listed company said Morgan, who re-joined the group in March 2009, will be succeeded as executive chairman by John Tutte, Redrow's current group chief executive.
The firm added that Matthew Pratt, currently regional CEO of Redrow's Southern businesses, will be appointed its chief operating officer and will join the board at the end of March 2019.
The announcement came on the day the housebuilder holds its AGM, and in a separate statement to be delivered at that meeting, Morgan said: "For the first 18 weeks of the current financial year, Redrow has traded in line with expectations.
“We continue to see good demand in our regional businesses with most sites sold well in advance. However, the London sales market has remained subdued affected by excessively high Stamp Duty tax and Brexit uncertainty.”
Regional price caps review urged
The Redrow boss also said the company broadly welcomed the extension, announced in the Budget, of the highly successful Help to Buy scheme which has enabled to date the purchase of almost 170,000 properties, over 80% of which were first-time buyers.
Morgan added, however, that the group would “urge the government to review the regional price caps that markedly disadvantage the North and Midlands in favour of the South of England.”
The executive chairman said the value of net private reservations in the 18 weeks to 3 November was in line with last year at £588mln versus £586mln in 2017.
Sales rate slows, average prices up
He added that the sales rate per outlet per week over the period was 0.64 compared with 0.67 last year, with a slight reduction entirely due to the London market.
Redrow’s average selling price for private reservations in the 18 week period was 4.6% higher at £388,000, up from £371,000 a year earlier, and its total order book remains very healthy at £1.2bn, an 11% increase on this time last year, Morgan said.
The housebuilder’s boss also said the group’s operational cash flow was strong with net cash currently standing at £132mln, against net debt of £25mln in 2017.
Loss of figurehead
In a note to clients, analysts at Shore Capital pointed out that Tutte “is also an old-school house builder which is a positive.”
“However,” they added, “the loss of a figurehead is often taken badly by the market, especially in this case. The new CEO will be an internal appointment of a long-standing internal staffer.”
The analysts pointed out: “The shares have rebounded strongly since the Budget and while they had begun to appear cheap, they are now only 7% below fair value and we will remain at HOLD although we would still prefer the larger midcaps focused on growth to the more turgid large caps and a switch still makes sense to us.”
In late morning trading, Redrow shares had extended opening falls, down 3.5% to 545p.
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