8th Mar 2005 07:00
Redrow PLC08 March 2005 8 March 2005 Redrow plc today announces interim results for the six months ended 31 December2004: Highlights: Dec 2004 Dec 2003 £m £m Turnover 373.8 310.8 +20% Operating Profit 73.6 60.6 +21% Profit before tax 69.1 56.7 +22% Return on capital employed 27% 28% Earnings per share - basic (pence) 30.5p 25.1p +22% Dividend per share (pence) 3.6p 3.0p +20% Record interim results with: • Profit before tax 22% higher at £69.1m (H1 2003/04: £56.7m).• Interim dividend per share increased by 20% to 3.6p (H1 2003/04: 3.0p) in line with existing commitment.• Launch of 'Debut by Redrow', a new product range designed to deliver high quality, affordable homes with selling prices starting at £49,995. Commenting on the results, Robert Jones, Chairman of Redrow plc said: "I am delighted to report a period of strong growth for Redrow with recordinterim profits. This performance, together with our positioning of Redrow formore normal market conditions, underpins our commitment to the Board'spreviously stated dividend policy to increase the dividend by 20% in this andthe next financial year. Redrow's responsiveness to both customer demand and market conditions has onceagain been demonstrated by the launch of 'Debut by Redrow'. This high qualitymore sustainable range, encompassing modern methods of construction, willprovide homes for people looking to take their first step onto the propertyladder but who are currently precluded from doing so because of affordability." Enquiries: Redrow plcPaul Pedley, Chief Executive 0207-404-5959 (8 March)David Arnold, Group Finance Director 01244-520044 (thereafter) Patrick Handley/Nina Coad Brunswick Public Relations 0207-404-5959 Further information on Redrow plc can be found at www.redrow.co.uk CHAIRMAN'S STATEMENT Introduction I am delighted to report a period of strong growth for Redrow with profit beforetax of £69.1m (H1 2003/04: £56.7m) and earnings per share of 30.5 pence (H1 2003/04: 25.1 pence), both 22% higher than the previous year. This performance,together with our positioning of Redrow for more normal market conditions,underpins our commitment to the Board's previously stated dividend policy toincrease the dividend save for unforeseen circumstances by 20% in this and thenext financial year. Consequently, the interim dividend has been increased by0.6 pence to 3.6 pence per share (H1 2003/04: 3.0 pence). Financial Performance Legal completions in the Homes business increased by 6% to 2,111 units (H1 2003/04: 1,996 units) at an average selling price of £176,700, 16% higher than thecorresponding period last year (H1 2003/04: £152,700) and partly reflectinggeographic and product mix. The average selling price achieved in the first sixmonths of the financial year is likely to be marginally higher than that for theyear as a whole. As a result of the increase in legal completions and higher average sellingprice, turnover in the Homes business rose by 22% to £373.1m (H1 2003/04:£304.8m). The operating margin of 19.8% achieved in the first six months was inline with that of the previous financial year and 0.3% higher than thecorresponding period last year (H1 2003/04: 19.5%). The Board remains of theview that as the market reverts to more normal levels of activity and houseprice inflation returns to its historic relationship with earnings, operatingmargins will, over time, reduce to more sustainable levels. Overall, the firsthalf operating profit in Homes increased by 24% to a record £73.8m (H1 2003/04:£59.6m). In the first six months, the Group's commercial activities achieved legalcompletions at St David's Park and at Odyssey in London Docklands. Thesedisposals, together with subsequent transactions at Buckshaw Village, Chorleyand at Western Approach, Bristol provide a sound base for the year. Interest cover increased to 16.4 times and with net debt as at 31 December 2004of £152.8m (Dec 2003: £123.1m), gearing at 36% was unchanged from the same timelast year. The interest charge of £4.5m was £0.6m higher than in the previousyear (H1 2003/04: £3.9m), principally as a result of a higher average debt leveldue to investment in land and work in progress. The further investment made bythe Group into work in progress reflects the continuing strong forward salesposition whilst maintaining an appropriate level of work in progress to meet theSpring 2005 market. Return on capital employed for the six months ended December2004 was 27% (H1 2003/04: 28%). In November, the Group renegotiated its bankingfacilities and signed a new five year £300m syndicated loan facility. Land The Group has continued to be cautiously active in the land market to supportfuture growth. Owned plots with planning as at 31 December 2004 increased to15,200 plots (Dec 2003: 14,000 plots) with an average plot cost of £28,600 (Dec2003: £25,000). This plot cost represents 16.2% of the average selling priceachieved in the first six months of the financial year, maintaining the Group'svery competitive plot cost to sales price ratio. In addition the Groupcontrolled 2,300 plots under contract awaiting the grant of a planning consent(Dec 2003: 2,100 plots). As a result the current land bank was 17,500 plots atthe end of December 2004 (Dec 2003: 16,100 plots). The forward land bank continues to be an important contributor to the currentland bank, with approximately 27% of the plots acquired in the first six monthsof the financial year coming from this source. At the end of December and afterhaving taken over 600 plots into the current land bank, the quality of Redrow'sforward land bank was maintained with 1,500 plots holding a planning consent and6,500 plots allocated within local plans out of the total forward land bank of21,750 plots (Dec 2003: 23,250 plots). Sales As a result of having positioned the Group with a record forward sales positionat the start of the financial year, Redrow's focus has been upon maximisingselling prices and hence protecting margins, rather than chasing volume duringthis expected period of adjustment between the strong markets of recent yearsand a return to more normal levels of activity. As anticipated, this high level of forward sales started to unwind during thefirst half of the new financial year, with forward sales at the end of December2004, 6% lower than the previous year. These forward sales total £317m (Dec2003: £330m) at an average selling price of £162,700 (Dec 2003: £159,300). Thelevel of forward sales at the end of December remained ahead of Redrow'shistoric norm of between 3 and 4 months. Since the start of the new calendar year, the Group continues to see good levelsof interest from potential customers although the time taken to convert saleshas, as experienced in the six months to December 2004, lengthened as buyerstake longer to decide, or encounter longer sales chains themselves. Whilst thisis likely to result in a further reduction of forward sales at the end of thefinancial year, Redrow expects to have at least 10% more sales outlets in thesix months to June 2005 than for the same period last year. Debut by Redrow It is widely recognised that there is a significant need to provide affordablehomes for people to buy. Redrow has given considerable focus to develop a newproduct range to satisfy this need. "Debut by Redrow" embraces innovativedesign, delivering a high quality home that meets the aspirations of customersand Government alike whilst maintaining the appropriate financial returns andcreating value for our shareholders. "Debut" is built using lightweight steelframe, demonstrating Redrow's continued commitment to modern methods ofconstruction, and has been designed to be capable of achieving Eco excellentratings. The first planning consent has now been secured at Rugby, within thetarget thirteen-week period, with prices starting from £49,995. International Financial Reporting Standards The Group continues preparations to implement International Financial ReportingStandards. These will impact for the first time on the Group's results for thesix months ended December 2005. Based on work undertaken to date, the principalareas of change for Redrow are in respect of the accounting for pension costsand share based payments, financial instruments (which will include therequirement to discount land creditors), direct selling costs and, lastly, therecognition of the timing of dividends. Summary A company cannot be or remain successful without the dedication and hard work ofits employees. The strength of Redrow's team is both broad-based and deep andthe Board is grateful to all its employees for their commitment and loyalty. However, future success is dependent upon both the current positioning of theGroup and the development of sound foundations, particularly as regards land,the product range and construction techniques. Although in the short term theremay be a period of uncertainty resulting from the anticipated General Electionand the renewed debate regarding the future direction of interest rates, in themedium term the Board expects macro economic factors generally to remainsupportive of the housing market. On this basis, I am sure that Redrow willcontinue to produce value for our shareholders whose support we greatlyappreciate. Robert JonesChairman CONSOLIDATED PROFIT AND LOSS ACCOUNT Unaudited Audited 6 months 12 months ended ended 31 December 30 June 2004 2003 2004 Note £m £m £m Turnover 2 373.8 310.8 669.9 Total operating profit 2 73.6 60.6 132.7 Interest payable (4.5) (3.9) (8.6) Profit before taxation 69.1 56.7 124.1 Taxation 3 (20.7) (17.0) (37.2) Profit after taxation 48.4 39.7 86.9 Dividends 4 (5.7) (4.8) (14.3) Profit retained 42.7 34.9 72.6 Earnings per share - basic 5 30.5p 25.1p 54.8p - diluted 5 30.4p 25.0p 54.6p Dividends per share 4 3.6p 3.0p 9.0p There are no material recognised gains or losses other than as shown above. There is no material difference between the profit on ordinary activities beforetaxation and the retained profit for the period stated above and their historiccost equivalents. CONSOLIDATED BALANCE SHEET Unaudited Audited As at As at 31 December 30 June Restated 2004 2003 2004 Note £m £m £m Fixed assetsTangible assets 22.9 21.5 22.5Investments 1.9 1.7 1.8 24.8 23.2 24.3Current assetsLand for development 445.3 359.4 419.0Work in progress 295.8 272.9 287.4Stock of showhomes 8.1 9.5 7.0Debtors 16.9 15.2 11.6Bank and cash deposits 0.4 1.0 1.2 766.5 658.0 726.2CreditorsBank borrowings (153.2) (124.1) (131.9)Land creditors 6 (67.9) (72.6) (85.8)Other creditors and provisions (150.9) (146.4) (156.2) (372.0) (343.1) (373.9) Equity shareholders' funds 419.3 338.1 376.6 Reconciliation of movement in Equityshareholders' fundsOpening shareholders' funds 376.6 302.0 302.0Retained profit for the period 42.7 34.9 72.6Shares issued 0.2 0.2 0.9Movement in respect of LTSIP (0.2) 1.0 1.6Contribution to QUEST - - (0.5)Closing shareholders' funds 419.3 338.1 376.6 CONSOLIDATED CASH FLOW STATEMENT Unaudited Audited 6 months 12 months ended ended 31 December 30 June 2004 2003 2004 Note £m £m £m Cash inflow from operating activities 7 12.6 2.4 24.5Returns on investments and servicing of financeNet interest paid (4.2) (3.2) (8.0)Issue costs of new bank borrowings (0.8) - -Net cash (outflow) from returns on investments (5.0) (3.2) (8.0)and servicing of financeCorporation tax paid (18.2) (15.6) (34.1) Capital expenditure and financial investmentNet purchase of tangible fixed assets (1.2) (5.7) (7.1)Loan to Joint Venture (0.5) - (0.5)Net cash (outflow) from capital expenditure (1.7) (5.7) (7.6)and financial investmentDividends paid (9.5) (7.9) (12.7)Net cash (outflow) before financing (21.8) (30.0) (37.9)Financing and liquid resourcesIssue of ordinary share capital 0.2 0.2 0.5Cash deposits - restricted use (0.8) - (0.6)Purchase of own shares (0.2) - -Issue of bank borrowings 53.0 55.0 80.0Repayment of bank borrowings (48.5) (30.0) (70.0)Net cash inflow from financing 3.7 25.2 9.9(Decrease) in cash in period (18.1) (4.8) (28.0)Cash deposits - restricted use 0.8 - 0.6Net movement in bank borrowings (4.5) (25.0) (10.0)Other non-cash movements (0.3) (0.1) (0.1)Change in net (debt) (22.1) (29.9) (37.5)Net (debt) at start of period (130.7) (93.2) (93.2)Net (debt) at end of period (152.8) (123.1) (130.7) NOTES 1. The interim report does not represent statutory accounts within themeaning of section 240 Companies Act 1985. The comparative figures for the yearended 30 June 2004 are however an abridged version of the Group's statutoryaccounts which received an unqualified audit report and have been delivered tothe Registrar of Companies. The restatement reflects changes required by UITFAbstract 38 'Accounting for ESOP Trusts' and the amended UITF Abstract 17 'Employee Share Schemes' which were adopted in the financial statements for theyear ended 30 June 2004. 2. Segmental information:- Unaudited Audited 6 months 12 months ended ended 31 December 30 June Restated 2004 2003 2004 £m £m £m Turnover Homes 373.1 304.8 662.7 Commercial 0.7 6.0 7.2 Turnover 373.8 310.8 669.9 Framing Solutions plc - share of Joint Venture 0.5 0.2 0.4 Turnover (including share of Joint Venture) 374.3 311.0 670.3 Profit on ordinary activities before taxation Homes 73.8 59.6 131.2 Commercial 0.4 1.6 2.7 Framing Solutions plc - Joint Venture (0.6) (0.6) (1.2) 73.6 60.6 132.7 Interest (4.5) (3.9) (8.6) 69.1 56.7 124.1 Net assets Homes 548.6 445.3 487.1 Commercial 21.6 14.2 18.4 Framing Solutions plc - Joint Venture 1.9 1.7 1.8 572.1 461.2 507.3 Net (debt) (152.8) (123.1) (130.7) Net assets 419.3 338.1 376.6 3. The taxation charge reflects the estimated effective rate for thefull year to 30 June 2005. 4. The Directors have declared an interim dividend of 3.6p per share(2003: 3.0p). This gives an interim dividend of £5.7m (2003: £4.8m) which willbe paid on 6 May 2005 to shareholders whose names are on the Register of Membersat the close of business on 18 March 2005. The shares will become ex-dividendon 16 March 2005. 5. The basic earnings per share calculation for the half year ended 31December 2004 is based on the weighted average number of shares in issue duringthe period of 158.8m (2003:158.5m) after adjusting for surplus shares held intrust under the Redrow Long Term Share Incentive Plan. The weighted averagenumber of shares in issue for the year ended 30 June 2004 was 158.6m. Dilutedearnings per share has been calculated after adjusting the weighted averagenumber of shares in issue for shares held under unexercised options inaccordance with FRS 14. 6. Land creditors:- Unaudited Audited As at As at 31 December 30 June 2004 2003 2004 £m £m £m Due within one year 38.0 34.3 56.1 Due in more than one year 29.9 38.3 29.7 67.9 72.6 85.8 7. Analysis of cash inflow from operating activities:- Unaudited Audited 6 months 12 months ended ended 31 December 30 June 2004 2003 2004 £m £m £m Total operating profit 73.6 60.6 132.7 Add back share of Joint Venture operating loss 0.6 0.6 1.2 Group operating profit 74.2 61.2 133.9 Depreciation including profits and losses on disposals of fixed assets 0.8 0.7 1.1 Increase in stocks and work in progress (35.8) (62.8) (134.4) Movement in other current assets, creditors and provisions (26.6) 3.3 23.9 12.6 2.4 24.5 8. The interim report has been prepared using accounting policiesconsistent with those applied in the Group accounts for the year ended 30 June2004. The interim report has not been audited or reviewed and was approved bythe Board of Directors on 7 March 2005. 9. The Registrar is Computershare Investor Services PLC. Shareholderenquiries should be addressed to the Registrar at the following address: Registrars Department PO Box 82 The Pavilions Bridgwater Road Bristol BS99 7NH This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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