Redrow returns to profit

Steve Morgan, chairman of housebuilder Redrow, claims his firm’s return to profitability is down to a new management team and a better product.

The firm made a loss of £44.2m in 2009, but returned a modest £700,000 in its latest set of results, released this morning. Its revenue was up from £302m in 2009 to £397m, while operating profit was up from a £22.4m loss in 2009 to a £12.7m profit.

Chairman Steve Morgan said: “The past year has been one of considerable change for Redrow - change that has resulted in a return to profitability. We have introduced a great new product which is proving popular with consumers, doubled our build output in response to an improved sales market and embarked on an ambitious land-buying programme.

“At the same time we have strengthened and restructured our management team, re-opened three regional offices and integrated Harrow Estates into the Group.  Our regional teams have coped enthusiastically with the changes and we are now well placed to respond to the demands of growing the business in a challenging environment.”

The new product is the firm’s Heritage Collection, for which the average selling price was £180,000, 15% higher than previous houses. Overall the firm’s average selling price was £149,300 for the year, compared with £137,400 in 2009. It also saw a sharp rise in the number of completions, from 2,113 in 2009 to 2,587 in 2010.

Redrow’s net debt reduced from £214.6m in 2009 to £47.1m in 2010, while net assets rose from £293.5m to £435.9m. The shift made a huge impact on gearing, reducing it from 73% in 2009 to 11% this year.

Morgan said his big concern now is the return of first-time buyers. “I am particularly concerned with the plight of first time buyers, who, unless assisted by their parents, are forced into saving upwards of 20% of the value of their first home by way of deposit, which compares to an historic first time buyer deposit of around 6%.  Until this issue is resolved it will remain the major constraint to the full recovery of the UK housing market with overall transactions set to continue at the current historically low levels,” he said.

“Young people need help to get onto the housing ladder one way or another and it is a sad reflection of our society that the average age of an unassisted first time buyer is now 37 years old, with the latest report from the National Housing Federation suggesting that this will increase to 43 for today’s 21 year olds.”