Redrow shares climbed 1.2% to 481.9p in early morning trading on Wednesday after the house builder reported a return to underlying pre-Covid profits.
The firm highlighted an underlying pre-tax profit of £410 million in FY 2022 from £314 million last year, alongside a statutory pre-tax profit of £246 million against £314 million.
Redrow mentioned a £2.1 billion revenue compared to £1.9 billion as the business strengthened on post-Covid recovery.
“I am delighted to report a year of strong growth which has resulted in our underlying profits returning to the record levels achieved in 2019 prior to Covid. Revenue increased by 10% to £2.14bn and underlying profit before tax was up 31% year on year, both ahead of our pre-Covid 2019 figures,” said Redrow non-executive chairman Richard Akers.
Meanwhile, the company hit 5,715 legal completions against 5,620 year-on-year, along with a total order book of £1.44 billion from £1.43 billion.
“Given rising inflation and higher interest rates it is not surprising the buoyant housing market has moderated recently and demand has returned to historically average levels,” said Akers.
“It is on this basis we have prepared our medium term plan and we are confident our timely investment in land, combined with strong demand for our Heritage homes, will support our continued growth.”
“In addition, our opening order book of over £1.4bn has put us in an excellent starting position for the 2023 financial year. As a result, the business is well placed to deliver another set of strong results.”
Redrow noted an underlying ROCE of 24.5% against 18.5% in the previous year.
The house building firm announced net cash at 3 July 2022 of £288 million from £160 million the year before.
“House prices have proved remarkably robust since the pandemic struck, buoyed by pent-up savings and cheap mortgages. Redrow, like other housebuilders, has gushed cash in this environment and is earning huge margins to boot,” said Wealth Club head of equities Charlie Huggins.
“Redrow’s premium quality housing is resonating strongly in the current environment, with the ‘race for space’ supporting demand for larger, family homes. But, make no mistake – the biggest reason for Redrow’s success is high house prices, and the general strength of the housing market.”
Analysts noted the slowdown in the housing market, along with the looming threat of crippling interest rates and the potential of a freezing recession as winter approaches.
“That is something over which it has no control, and the big bad wolf of recession could be about to blow away the good times,” said Huggins.
“Increasing house prices in recent years mean home buyers are having to borrow more to get on the housing ladder. Combine that with rising interest rates, which ultimately mean more expensive mortgages, and the affordability of property could fall substantially. If interest rates keep rising, it’s hard to see how the housing market would be immune.”
“This is the kind of environment where you find out which housebuilders have built their success on a base of bricks, and which are about to have their sticks and straw blown away by.”
The group confirmed an underlying EPS of 96p compared to 73.7p and a statutory EPS of 57.7p from 73.7p.
Redrow declared a final dividend per share of 22p against 18.5p over FY 2022 and also noted its £100 million share buyback launched in July 2022.