Redrow reports on 23% rise in FY pre-tax profits and no adverse Brexit-impact

Welsh housebuilder Redrow plc (LON: RDW) reported record full year earnings on Tuesday, with chairman Steve Morgan also mentioning that the recent Brexit vote seems to have no adverse effect on the company’s profitability.

However, Shore Capital analyst Robin Hardy suggests troubles may still be to come.

Redrow plc reports a 23% increase in pre-tax profits for their 2016 fiscal year

The company’s pre-tax profits rose from £204 million in 2015 to £250 million by the 30th June 2016, up 23% in its third consecutive year of record earnings growth.

Revenues grew by 20% to £1.38 billion over the one-year period.

Improved earnings were driven both by an increase in house sales and rising house prices. Redrow reported 694 more house sales than the previous year, bringing the total number of legally completed sales to 4,716. House prices were on average 7% higher, with the average house selling at a price of £288,600.

The board increased the last dividend payment to six pence per share to reflect the higher earnings. This will bring the total pay-out for the year to ten pence, up four pence from the previous year’s pay-out.

Chairman states Brexit has not impacted the company negatively
Steve Morgan, Chairman of Redrow said:

“Redrow entered the new financial year with a record private order book of GBP807 million, up 54% year on year…Our strategy of continued growth for the business is on track and I am confident this will be another year of significant progress for Redrow…We have seen very little impact as a result of the Brexit vote.”

In the first ten weeks of the new fiscal year, sales are already up 8% from the same period the previous year.

Share price rises on higher earnings and favourable statement on post-Brexit performance

The FTSE-250 listed company saw share prices rise to 410 pence by 1.54pm on Tuesday, up 6.69% from previous market close.

Has the UK housing market successfully avoided adverse impacts from Brexit?

While the positive earnings report lead to an increase in share prices, the positive outlook on the post-Brexit environment, provided by Morgan, will have also helped push prices upwards.

His statement added to last weeks published figure of a 5.6% increase in nationwide housing prices in August, ringing positive for the development of the UK housing market.

However, not everyone is quite so confident that the UK housing industry has completely avoided adverse effects from the UK’s recent decision to leave the European Union.

Shore Capital analyst Robin Hardy stated:

“While the market could return to its previous path, we still not believe that [its] rating can return to previous levels. The risk profile has changed as Brexit could still alter wider economic prospects or the narrower housing market in a way that was not present before the vote.”

“Policy stimulus measures and pricing pressures added to the mix will further complicate the market”, he added.

Katharina Fleiner 06/09/2016
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