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Redrow promotes Pratt to CEO as interim profits fall 15%

The housebuilder had already warned that results would be a lot more skewed to the second half because of a bumper delivery of London apartments the prior year

Redrow plc -

Redrow plc (LON:RDW) reported a 15% decline in half-year profits and said that operations director Matthew Pratt will become chief executive this summer and executive chairman John Tutte will step down next year.

Tutte, who stepped up from CEO when founder Steve Morgan left last year, said the transition had “gone well” and that Pratt, formerly regional boss at the FTSE 250 group’s southern businesses, will become group CEO in July, allowing him to become non-executive chairman until the 2021 annual shareholder meeting.

READ: Redrow trading “resilient” despite planning delays and Brexit caution

Redrow had already warned that results would be considerably more skewed to the second half than usual because the previous year had seen it deliver a large number of London apartments in the first half.

Tutte said the current year to end-June would see a revenue split of around 40:60, with sales coming in at £870mln for the first half, down 10% year on year.

This resulted from house completion volumes falling 14% to 2,554 and the average selling price dipped to £387,000 from £391,000.

Profit before tax dropped to £157mln from £185mln and net cash at the end of the period was £14mln, well down from £101mln a year earlier after the payment of £149mln of dividends.

The interim dividend was lifted to 10.5p from 10.0p and Tutte said trading in the first five weeks of the second half has been “resilient” with the value of reservations up 15% at £180mln.

"Unwarranted discount"

Redrow shares were down and up in early trades, before climbing 1% to 834p by mid morning on Wednesday.

Analysts at UBS said the results were "slightly above our estimates across the board" and were reassured to hear that housing market conditions are consistent across operating areas while pricing trends are stable.

At broker Peel Hunt, the number crunchers said that while first-half results were down, the decline was down to timing issues that had already been flagged and what was "more important" was that reservation levels have been good before Christmas and afterwards.

"The underlying performance of the business is arguably better shown with the 18% pick-up in private net reservations in H1. This is reinforced by the trading in the first five weeks of H2, which has reservations up 15%."

The Peel Hunt analysts said their forecasts remained unchanged following the update, "but we see upside risks to our 2021-22 estimates if market conditions remains as they are" and Redrow’s 25% discount to the sector on a price/net asset value ratio "is unwarranted".   -- Adds broker comment --

Quick facts: Redrow PLC

Price: 405 GBX

LSE:RDW
Market: LSE
Market Cap: £1.43 billion
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