10th Jan 2008 07:00
Redrow PLC10 January 2008 10 January 2008 TRADING UPDATE Redrow plc is issuing the following trading update in advance of the publicationof its half yearly results for the six months ended 31 December 2007 on Thursday28 February 2008. Over the last six months, conditions in the UK housing market have becomesignificantly more challenging, reflecting both the influence of higher interestrates and the impact of the credit squeeze on the availability of mortgagefinance. The Group legally completed 2,111 new homes in the period (H1 06/07: 2,214)which was in line with our expectations in our November Interim ManagementStatement ("IMS"). This included 151 legal completions in Redrow Regeneration(H1 06/07: nil). Sales during the period were affected by the market conditionsand Group forward sales at December 2007 represented 1,694 homes (Dec 2007:1,871). As regards the Homes' operations, the average selling price of the 1,960 legalcompletions was slightly higher than in the same period last year atapproximately £163,000 (H1 2006/07: £162,400). We continued to exercise close control over our cost base with overhead recoveryin Redrow Homes remaining consistent with the same period last year. However,margins did come under pressure due to the prevailing market conditions. Inresponse to the softening land market, we became more selective in our landdisposal activities. We now expect to report land sale profits circa £5m lowerthan the same period last year. These factors will contribute to a greaterweakening in the Homes' operating margin than had been anticipated at the timeof our IMS. Our Mixed Use and Regeneration activities performed slightly ahead of ourexpectations and are anticipated to deliver results broadly in line with thecorresponding period in the last financial year. We exercised increased selectivity in our acquisitions in the short term landmarket and as a consequence our current land bank stood at approximately 19,900plots as at December 2007 (Dec 2006: 21,200 plots). Borrowing ran slightlybelow anticipated levels and net debt at December 2007 was just under £240m (Dec2006: £189.2m). We had previously indicated our intention to exit our joint venture, FramingSolutions and on 3 January 2008 we completed the disposal of our interest inthis business. As a consequence, our full year results will include a post taxloss associated with this discontinued operation of approximately £2.0m. Consumer confidence and the availability of mortgage finance will be the keyfactors in determining the strength of the critical Spring housing market. Thenext two months will provide a clearer view of prospects for the financial yearbut the expectation of continuing challenging market conditions appears to havebeen taken into consideration by the most recent analysts' forecasts. Our short term focus remains on implementing sales strategies appropriate toeach site and close control of cost and working capital. Whilst 2008 mayrepresent a more difficult market than the industry has experienced for sometime, the fundamental need in the UK to increase the supply of new homes offerssignificant opportunities for Redrow into the future. We will therefore continueto take a long term approach to land acquisition with an ongoing emphasis onforward land and the addition of value to the development process through highquality design which we believe will benefit shareholders in the medium term. Enquiries: Neil Fitzsimmons, Chief Executive Redrow David Arnold, Group Finance Director 01244 520044 Jayne Rosefield Brunswick 020 7404 5959 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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