Final Results
Tuesday 10 September 2002
Redrow plc today announces its Preliminary results for the 12 months to
30 June 2002:
______________________________________________________________________
Highlights:
Restated
June 2002 June 2001
£m £m
Turnover 573.3 421.2 +36%
Operating Profit - pre 98.4 79.5 +24%
integration costs
Operating Profit 94.1 79.5 +18%
Profit before tax 85.1 72.1 +18%
Earnings per share 38.5p 28.8p +34%
Dividend per share 6.06p 5.50p +10%
______________________________________________________________________
* Earnings per share increased by 34% to 38.5p (2001: 28.8p).
* Redrow Homes operating margins at 17.7% (2001: 17.9%)
* Return on capital employed increased to 30% (2001: 28%).
* Value of forward sales up 24% to a record £218m (2001: £176m).
* Current land bank increased to 15,600 plots (June 2001: 14,300) representing
4 years supply.
* Plot cost of land with planning at 15.3% of historic average selling price
(June 2001: 17.4%).
* Draft allocations maintained at over 30% of forward land bank of 25,000
plots.
* Tay Homes successfully integrated providing accelerated growth in Scotland
and Yorkshire.
Commenting on the results, Robert Jones, Chairman of Redrow plc said:
'We are delighted to report further strong growth in earnings per share of 34%.
The strength of the business is reflected in our margins and return on capital
employed. Both are at the top of our industry's range. We are confident that
Redrow has an excellent future since high quality products, a low cost current
land bank and a focused management team are the very essence of sustainability
in our industry'.
Enquiries:
Robert Jones, Chairman Redrow plc
Paul Pedley, Chief Executive 0207-404-5959 (10 September)
Neil Fitzsimmons, Finance Director 01244-520-044 (thereafter)
Patrick Handley/Nina Richmond Brunswick Public Relations
0207-404-5959
Further information on Redrow plc can be found at www.redrow.co.uk including,
from 8.45 am, a copy of the Preliminary Results Presentation Pack.
CHAIRMAN'S STATEMENT
I am pleased to report a highly successful year for Redrow.
When the share buy-back took place in October 2000, the Board highlighted its
focus on delivering increased shareholder value. I am therefore delighted to
report further strong growth in earnings per share of 34%. Part of this
increase reflects the capital restructuring but the greater part is the
consequence of the strong financial and operational performance of the
business.
Redrow's financial strength is demonstrated by two key measures, its margins
and its return on capital employed. Both are at the top of our industry's
range. This year the operating margin within the Homes Division was 17.6%, a
considerable achievement and one which the Board regards as sustainable in the
current markets. Equally, the return on capital employed at 30% continues to
reflect the emphasis we place on the efficient use of capital. The increased
volume of the business, generated both within the existing Redrow companies and
from the acquisition of Tay Homes, has enabled us to grow operating profits
before integration costs relating to the acquisition by 24% from £79.5m to £
98.4m. I am therefore glad to report that once again the Board is able to
recommend increasing the dividend by 10%, maintaining the progressive dividend
policy since flotation.
Sustaining profitable growth is one of the key objectives of the Board and we
have therefore taken a number of important steps aimed at underpinning the
continuation of our successful performance. Firstly, Tay Homes was acquired in
January this year which established critical mass in two operating areas,
Yorkshire and Scotland, enabling us to bring them closer to maturity faster
than would otherwise have been possible. The acquisition also brought useful
new opportunities in the Midlands. The purchase was almost entirely funded out
of cash generated by selling a number of successful developments by Redrow's
commercial arm, which generated turnover of £30.2m and an operating profit of £
3.1m this year. As a result I can not only report that gearing of the Company
as a whole fell from 60% at the start of the year to 42% at the half-year end
but that there has been a further fall to 39% at the end of the second half.
The company remains strongly cash generative while gearing reflects a prudent
balance between leveraging our shareholders' funds and maintaining an
appropriately cautious approach to debt.
Secondly, building techniques throughout the industry have failed to change
sufficiently to reflect the problems the country faces as a result of shortages
of certain skilled trade workers. After careful consideration of alternative
solutions and pilot schemes using timber-frame and light steel frame methods,
as well as modular construction, Redrow has decided that the benefits from the
use of light steel frame warrant the establishment of a joint venture for their
manufacture. This joint venture with Corus brings together our expertise in
residential development with their skills in steel manufacture and application.
Both companies are investing into a stand-alone joint venture company the
equivalent of up to £3.0m. We anticipate that the utilisation of light steel
frames will benefit the Company in terms of build times and quality resulting
in improved customer satisfaction.
Two other areas are critical to the sustainability of the business; land and
people. Redrow has consistently anticipated changes in the planning system. By
placing emphasis on the Government's aims of sustainability and increased
densities, our land acquisition programme has brought substantial financial
benefits. I am therefore pleased to report a further increase in our current
land bank from 14,300 plots to 15,600 plots. This means that the vast majority
of land we will develop in the next three years is already owned or controlled
by the Company. Much of this is brownfield land which currently represents 69%
of our land bank. Beyond that, there are approximately 25,000 plots within our
forward land bank which have a realistic prospect of securing planning
permission in the future.
Our workforce at every level is highly skilled and dedicated to the success of
the Company. However, such skills require continuous honing and updating and we
continue to dedicate considerable resources to training. Redrow aims to build
its strength in people not only through internal promotions but also from
external sources and I am particularly pleased to welcome those members of
Tay's staff who have joined Redrow and whose contribution is proving highly
beneficial. Two new members of the Main Board have joined us this year. John
Tutte joined the Company as a regional chairman in the South in January and
brings with him a wealth of experience of our industry. In July he was
appointed to the Board reflecting his significant contribution during his short
tenure with the Company. Brian Duckworth joins us as a non-executive director
and will bring his significant experience of business in general to the Board.
It is always gratifying that so many people comment favourably on the quality
and range of our developments, varying as they do from stylish inner city
apartments to refurbished buildings and from traditional family properties to
attractive new design schemes. There is indeed a home for every type of
customer within our range. As in recent years, Redrow has secured a significant
number of awards but what is particularly pleasing is that in addition to this
public recognition of the quality of our homes, many of our customers recommend
us to their friends and relatives or move from one Redrow home to another.
For the future, our industry is not being permitted to build more than
three-quarters of the minimum number of homes estimated to be necessary as a
result of demographic change and the deterioration of older housing stock.
Inevitably therefore, whilst there is house-price inflation, affordability
remains good as a result of low interest rates. On the basis of our belief that
the housing market remains sound, we can be confident that Redrow has an
excellent future since our high quality products, low cost current land bank
and focused management team are the very essence of sustainability in our
industry.
Robert Jones
Chairman
CHIEF EXECUTIVE'S REVIEW
Our corporate philosophy is to deliver long term sustainable growth and by so
doing deliver value to our Shareholders. The results for the last twelve months
represent our continuing commitment to that philosophy. Earnings per share have
increased to 38.5p representing compound growth over the last five years of 30%
p.a. This has been achieved through a combination of growth in operating
profits which, over that period, have increased from £35.4m to £94.1m and the
successful share buy back effected in October 2000.
Our focus on high quality financial returns is equally reflected within these
results. Return on capital employed, having averaged 28% for the last five
years, has increased in the current year to 30% whilst operating margins within
the Homes Division pre-integration costs are at 17.6%. The combination of these
financial returns represents one of the strongest performances within our
sector.
Although the trading fundamentals for the U.K. housing market remain sound, the
number of new homes constructed by our industry is at its lowest level since
1924. This is principally due to restrictive planning policies which have
constrained the new homes industry for a number of years. The recent
announcements by the Government to tackle the growing housing shortage are to
be welcomed. However these `announcements' must be turned into `actions'. For
the new homes industry to respond and at the same time address the issues
arising from skilled labour trade shortages, it is important to embrace `new'
construction practices to facilitate increased output whilst improving build
quality and speed. After undertaking extensive research and trials we announced
in July 2002 the formation with Corus plc of a joint venture company, Framing
Solutions plc. Framing Solutions has been funded by an equity investment from
both parties of up to £3.0m each and will harness Corus' manufacturing skills
with Redrow's development expertise to provide light steel frames, a viable and
sustainable solution primarily targeted at the U.K. residential market.
Initially, light steel frames will be introduced on selected `Harwood' and
`Design Scheme' developments across the country.
The last twelve months have been a period of significant achievement, with
Redrow continuing to recognise its responsibilities to its shareholders, its
customers and the broader community.
REDROW HOMES
Over the last 20 years, Redrow Homes has been firmly established as a major
developer of new homes. Our growth and success have been founded on three core
strengths, namely:-
* An excellent management team with a style and culture unique to Redrow
* A long term land policy which has delivered a substantial low cost land
bank
* An outstanding product portfolio combined with a clear focus on customer
care
These strengths have historically served the Division well and will continue to
form the basis for continued organic growth.
To expand our opportunities for growth, the decision was taken during the year
to divide the existing operation in the South East into two separate trading
companies, Redrow Homes (Eastern) and Redrow Homes (South East). The former
will trade from the existing office at Waltham Cross and focus on the area
north of the Thames, whilst the latter has been established at a new office at
Maidstone with a focus south of the Thames.
The acquisition of Tay Homes in January 2002 provided an opportunity to enhance
our organic growth. Through the acquisition, our land bank was increased by
approximately 1,400 plots thereby facilitating an expansion of the Group's
operations in both Yorkshire and Scotland whilst providing additional trading
outlets within the Midlands. The rebranding of developments, together with the
replanning of sites where appropriate, has been smoothly achieved whilst the
retained Tay Homes staff have been welcomed into their respective Redrow teams.
Redrow Homes has again reported record results with turnover increasing by
21.8% to £506.9m and operating profit by 20% to £89.5m. These results were
secured from 3,573 legal completions, with an average selling price of £
141,900, an 18.1% increase on last year, reflecting in part the increased
contribution from the Southern and Western Regions and from 'In the City'
schemes.
The legal completion profile of the `Heritage', `Harwood' and `In the City'
brands was broadly in balance between the first and second halves with 1,728
and 1,845 legal completions respectively. In addition the Tay Homes'
developments delivered a further 335 legal completions in the second half with
an average selling price of £108,100.
During the year Redrow Homes has continued to expand its market share. Sales
reservations have increased by 9.1% in volume and by 22.0% in value. As a
result, having allowed for the forward sales within Tay Homes at the time of
acquisition, the Division ended the year with a record forward sales position
of 1,526 units, having a sales value of £218.0m, 23.9% ahead of the record
levels of last year.
Cost pressures within the industry have increased over the last twelve months.
Whilst material price increases have been controlled in line with inflation,
ongoing trade shortages have resulted in more significant cost increases of
between 5% and 10% for some labour trades. In addition, the ever-increasing
burden of building regulations and the various tax increases imposed by central
Government have together increased the cost base within our industry.
Operating margins within Redrow Homes were 17.7% as compared with 17.9% last
year. This reduction was due to the reduced contribution from the `Heritage'
brand, which derives the greatest benefit from the enhanced margins emanating
from land acquired through the forward land bank.
Tay Homes delivered an operating margin of 16.0% largely reflecting the
profitability of the developments at the time of acquisition. Subsequently, the
adoption of the Redrow product portfolio combined with identified cost savings
will bring the operating margin more in line with Redrow Homes.
I referred last year to `the Redrow philosophy of 'in-house expertise' with the
formation of a centralised Health and Safety Function'. The development of this
corporate responsibility has been, and will continue to be, an integral part of
our management culture with all health and safety issues considered and
controlled on a more cohesive basis. During the year, this philosophy has been
extended to the creation of a centralised Research and Development team. This
team is charged with identifying and evaluating new construction techniques and
products. It has also been instrumental in the co-ordination and reassessment
of previously undertaken research and the management of further tests which
resulted in the decision to form the joint venture company, Framing Solutions.
REGIONAL PERFORMANCE
The Northern Region delivered 1,621 legal completions, as compared with 1,695
in the previous year, representing 45.4% of the Redrow Homes completions. The
average selling price increased by 14.9% to £122,900 to yield an overall
increase in turnover of 9.8%. In addition 267 legal completions were secured
from the Tay Homes' developments at an average selling price of £94,100.
The Southern Region achieved 1,050 legal completions, an increase on the
previous year of 7.4% and representing 29.4% of the total completions of Redrow
Homes. The average selling price increased by 19.7% to £171,300 to give an
overall increase in turnover of 28.5%. A further 68 legal completions were
secured from the Tay Homes' developments at an average selling price of £
163,000.
The Western Region continued to make significant progress with legal
completions increasing by 14.2% to 902 units and the average selling price by
17.8% to £141,500. As a result, turnover increased by 34.5% to £127.6m.
THE REDROW BRANDS
The last twelve months have witnessed the continuing development of the Redrow
portfolio. The decision to allow each subsidiary company full access to the
`Heritage', `Harwood', `Renaissance' and `In the City' brands has been a major
factor in the continuing development of the Homes Division and has greatly
extended the product offering within each subsidiary company. Our ability to
offer our customers a variety of choice both in terms of product and lifestyle
has been, and will continue to be, a major factor in their decision to acquire
a new Redrow home and is the cornerstone of our recently launched advertising
campaign on digital TV.
Our recognition of increasing customer expectations and changing lifestyles
resulted in the introduction of the new Sapphire and Emerald specifications for
the `Heritage Range', which last year represented 67% of our legal completions
and had an average selling price of £152,400. The importance of individual
customer lifestyles is further recognised through our highly successful Design
Schemes which create community environments whilst embracing current planning
criteria.
Over the last two years the `Harwood' brand has been extended from its origins
in the North West and the West Midlands to represent an increasingly
significant element of the Divisions' portfolio in Scotland, Yorkshire, South
West and South Wales. These stylish and contemporary homes, which had an
average selling price in the year of £81,800, now account for 20% of legal
completions. Further, as the majority of the Tay Homes' developments in
Yorkshire and Scotland were more suited to the `Harwood Range', it is
anticipated that its contribution will increase significantly in the new
financial year.
Within `Heritage' and `Harwood', `Renaissance' represents a further opportunity
for customer choice through the careful restoration of historic buildings. In
addition many refurbishment schemes provide major opportunities for new build
development. A prime example is the former Victorian hospital at Pen-y-Fal,
Abergavenny. This historic building has been refurbished to provide 63 luxury
apartments complemented by a `Heritage' development of 110 apartments and
houses within the grounds.
`In the City' developments contributed 13% of legal completions, with an
average selling price in the year of £181,100. The schemes at '51o02' in
Bristol, Rigarossa in Cardiff, Brindley Point in Birmingham and Park Wharf in
Nottingham are now complete. Odyssey in London and W3 in Manchester continue to
progress successfully and in the new financial year will be complemented by
additional developments, Jupiter in Birmingham and Velocity in Leeds.
DEVELOPING A SUSTAINABLE FUTURE
One of the fundamental strengths of Redrow remains its long term land policy
which has delivered a substantial low cost land bank.
Over the last twelve months, the current land bank has increased substantially
from 14,300 plots to 15,600 plots representing, on an historic basis, a four
year land supply. As a result of significant planning successes during the
year, 13,400 of these plots have the benefit of a planning consent, an increase
on the previous year of 2,100 plots. The balance are held under contract
awaiting, in the vast majority of cases, the grant of a satisfactory planning
consent.
During the year, the Homes Division acquired 6,000 plots for a total
consideration of £136.3m, representing an average plot cost of £22,700. This
included the 1,400 plots secured on the acquisition of Tay Homes. At the
financial year end, the average plot cost has increased marginally from £20,900
to £21,200, but expressed as a percentage of annual historic sales price,
continues to reflect its downward trend, reducing from 18.5% in 1998 to 15.3%
for the current year. The quality of the current land bank provides inherent
support to the Homes Division in delivering future sustainable profitability.
Despite the uncertainty within the planning process following the publication
of the Planning Green Papers in November 2001, and more recently through the
Ministerial reshuffle, forward land has contributed 1,150 plots to the current
land bank during the year. At the year end the forward land bank stood at
approximately 25,000 plots but of particular significance is the number of
plots allocated in either draft or adopted local plans. Despite the
contribution to the current land bank during the year, these allocations have
been maintained at over 8,000 plots, representing in excess of 30% of the
forward land bank. These allocations include 750 plots at Bracknell where we
have recently secured planning consent subject to the completion of a planning
gain agreement. This major development in a strategically important location
will provide a backbone for Redrow Homes (Southern) for a considerable number
of years.
REDROW COMMERCIAL
The results for Redrow Commercial reflect a turnover of £30.2m and an operating
profit of £3.1m. These results were secured from the investment sale of the
138,500 sq. ft. office development at Windsor Office Park, fully let to
Centrica plc, the investment sale of the 26,000 sq. ft. office and 6,000 sq.
ft. trade warehouse at Altrincham, Manchester, fully let to ICI plc, and the
freehold sale of the 8,000 sq. ft. office development at Wakefield to ICM
Computer Group plc. These sales secured the appropriate level of profitability
within Redrow Commercial and provided the finance to enable the Group to
acquire Tay Homes plc without any significant increase in gearing.
In last year's review, I detailed the changes within the management team
enabling the structure within Redrow Commercial to mirror that of the Homes
Division. These changes have given the Group the ability to focus successfully
on mixed use developments. In addition, the extensive project management skills
within Redrow Commercial have been harnessed to provide the appropriate
controls on all `In the City' schemes undertaken throughout the Group.
Buckshaw Village in Chorley, Lancashire, exemplifies the success of the Group's
mixed use philosophy. During the year the extensive remediation works to the
initial phase have been completed, and detailed planning consent secured for
the major infrastructure works together with the first phase of the commercial
development. In March 2002 development of this 400 acre mixed use scheme
commenced on site and has already generated significant commercial interest.
Our mixed use philosophy has also proved successful at W3 in Manchester. The
ground floor retail space within this highly successful 224 residential
apartment scheme has been pre-let to Sainsburys Supermarkets Ltd and, subject
to market conditions at the time, the resulting investment will be marketed for
sale during the new financial year.
I reported last year the land sale at Western Approach, Severnside to Next plc
for a 100,000 sq. ft. distribution facility. This facility is now construction
complete and the activity on site has resulted in an increase in enquiries and
in particular a pre-let to MacFarlane Group U.K. Ltd for a 51,000 sq. ft.
distribution warehouse. In addition, a funding agreement has been completed for
the sale of this investment upon practical completion. To complement this
development, a further 51,000 sq. ft. distribution warehouse will be
constructed on a speculative basis.
At St. David's Park, the 27,000 sq. ft. speculative office development,
`Optima', is nearing completion and enquiry levels are encouraging.
THE REDROW TEAM
One of the core strengths of the Group remains the `Redrow Team'. The
importance of that team can never be overstated. Our continuing growth,
combined with the increasing complexity of our industry, means that Redrow must
be recognised as `an employer of choice' so as to be able to attract the
highest calibre of employee, whether they be craft apprentices and graduates
commencing their careers within our industry or more experienced staff.
… THE COMMUNITY
To achieve that objective we must work to enhance the image of our industry
within the community in addition to providing the appropriate support and
training for our staff. Last year we announced the launch of the `Curriculum
Resource Pack'. This is now freely available to all primary schools in the UK
and seeks to promote a better understanding of the development process,
building upon the National Curriculum. Recently we have launched a new
initiative with the National Trust to bring together children from contrasting
backgrounds at selected National Trust properties to enhance their experiences
and to promote a better understanding of the role of their communities.
Within the Group the focus remains on providing comprehensive training
initiatives. Programmes have been specifically designed for craft apprentices
and graduates and to assist our staff at all levels in gaining professional
qualifications and enhancing their management skills.
Redrow remains a committed member of Business in the Community, an organisation
which seeks to link the corporate sector with the community. Through this
organisation Redrow employees continue to participate in a number of important
initiatives so promoting a better understanding of our industry.
… AND THE FUTURE
Redrow has entered the new financial year in excellent health. The Homes
Division enjoys record forward sales and an inherently profitable land bank
together with a product portfolio that recognises the needs and aspirations of
our customers. Redrow Commercial has established a development programme
harnessing the combined residential and commercial skills within the Group to
maximise the value from mixed use schemes. Further, the utilisation of the
project management expertise on all residential city centre developments
provides the Group with an enhanced level of control.
Accordingly, barring the impact of factors totally outside the control of the
Group, Redrow can look forward with confidence to maintaining its record of
delivering long term sustainable growth and by so doing deliver value to our
Shareholders.
Paul Pedley
Chief Executive
CONSOLIDATED PROFIT AND LOSS ACCOUNT
12 MONTHS ENDED 30 JUNE 2002
Continuing Operations
Existing Acquisition Total Restated
Operations
2002 2002 2002 2001
Note £m £m £m £m
Turnover 2 537.1 36.2 573.3 421.2
Cost of sales (413.1) (29.9) (443.0) (314.9)
______________________________________
Gross Profit 124.0 6.3 130.3 106.3
______________________________________
________________________________________________________________________
Net operating expenses 2 (31.4) (0.5) (31.9) (26.8)
before integration costs
Integration costs - (4.3) (4.3) -
________________________________________________________________________
Net operating expenses 2 (31.4) (4.8) (36.2) (26.8)
including integration
costs
______________________________________
Operating profit 2 92.6 1.5 94.1 79.5
_____________________
Interest payable 2 (9.0) (7.4)
_______________
Profit on ordinary 2 85.1 72.1
activities before taxation
Tax on profit on ordinary 4 (24.3) (21.6)
activities
_______________
Profit on ordinary 60.8 50.5
activities after taxation
Dividends 5 (9.6) (8.7)
_______________
Retained profit 51.2 41.8
_______________
Earnings per ordinary
share
- basic 6 38.5p 28.8p
- diluted 6 38.3p 28.7p
- adjusted 6 40.4p 28.8p
_______________
Dividends per ordinary 5 6.06p 5.50p
share
_______________
The Group has no recognised gains or losses other than the profit for the
period, which has been achieved from continuing operations.
There is no material difference between the profit on ordinary activities
before taxation and the retained profit for the period stated above and their
historic cost equivalents.
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2002
As at As at
30 June 2002 30 June 2001
Note £m £m
Fixed assets 15.9 13.9
_________________________
Current assets
Assets held for resale 0.8 0.7
Land for development 8 294.5 252.0
Work in progress 8 192.0 155.6
Stock of showhomes 8 10.3 9.5
Debtors 8.8 6.2
Bank and cash deposits 9 1.0 8.0
_________________________
507.4 432.0
_________________________
Creditors
Bank borrowings (94.1) (120.2)
Land creditors 10 (66.9) (35.7)
Other creditors and provisions (123.7) (102.9)
_________________________
(284.7) (258.8)
_________________________
Equity shareholders' funds 238.6 187.1
_________________________
Movement in shareholders' funds: Restated
Opening shareholders' funds 187.1 261.8
Retained profit for the period 51.2 41.8
Shares issued 0.6 0.5
Contribution to QUEST (0.3) (0.1)
Capital redemption - (116.9)
_________________________
Closing shareholders' funds 238.6 187.1
_________________________
CONSOLIDATED CASH FLOW STATEMENT
12 MONTHS ENDED 30 JUNE 2002
2002 2001
£m £m
Cash inflow from operating activities 104.6 45.6
_______________
Returns on investments and servicing of
finance
Net interest paid (8.4) (6.1)
Issue costs of bank borrowings - (1.1)
_______________
Net cash (outflow) from returns on (8.4) (7.2)
investments and servicing of finance
_______________
Corporation tax paid (24.2) (17.4)
_______________
Capital expenditure and financial
investment
Net sales/(purchases) of tangible fixed 0.3 (2.3)
assets and investments
Net sales of current asset investments - 6.6
Acquisitions
Purchase of Tay Homes plc (30.6) -
Net overdrafts acquired (12.9) -
_______________
Dividends paid (9.0) (10.3)
_______________
Net cash inflow before financing 19.8 15.0
_______________
Financing and liquid resources
Capital redemption costs - (116.9)
Issue of ordinary share capital 0.3 0.3
Cash deposits-restricted use - 2.0
Net movement in bank borrowings (70.0) 110.0
_______________
Net cash (outflow) from financing (69.7) (4.6)
_______________
(Decrease)/increase in cash in period (49.9) 10.4
Cash deposits-restricted use - (2.0)
Net movement in bank borrowings 70.0 (110.0)
Net movement in issue costs of bank (1.0) 1.0
borrowings
_______________
Change in net (debt) 19.1 (100.6)
Net (debt) at start of period (112.2) (11.6)
_______________
Net (debt) at end of period (93.1) (112.2)
_______________
NOTES
1. Basis of preparation
The above results and the accompanying notes do not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985. They are
taken from the full accounts which have received an unqualified report by the
auditors and will be filed with the Registrar of Companies.
In preparing the results, the Group adopted FRS 19 'Accounting for Deferred
Taxation'. This resulted in an increase in the tax charge for the year to June
2002 of £0.3m and a restatement of the prior year charge resulting in an
increase of £2.6m. There was no change to Shareholders Funds as at June 2001.
2. Segmental information
Existing Acquisition Total
Operations
2002 2002 2002 2001
£m £m £m £m
Turnover
Homes 506.9 36.2 543.1 416.9
Commercial 30.2 - 30.2 4.3
_____________________________________
537.1 36.2 573.3 421.2
_____________________________________
Profit on ordinary
activities before
taxation
Homes 89.5 5.8 95.3 76.3
Commercial 3.1 - 3.1 1.8
Listed Investments - - - 1.4
_____________________________________
92.6 5.8 98.4 79.5
Integration costs - (4.3) (4.3) -
_____________________________________
92.6 1.5 94.1 79.5
_____________________
Interest (9.0) (7.4)
________________
85.1 72.1
____________
Net assets
Homes 317.8 268.6
Commercial 13.9 30.7
____________
331.7 299.3
Net (debt) (93.1) (112.2)
________________
238.6 187.1
____________
Net operating expenses comprise £31.9m administrative expenses and £4.3m
integration costs. The £4.3m integration costs are attributable within the
results of the Homes Division. £3.3m of the integration costs relate to the
acquisition of Tay Homes plc and the reorganisation and restructuring costs
arising from this. The remaining £1.0m relates to duplicate overheads arising
from the running of the Tay office facilities prior to their closure following
the implementation of the reorganisation plan.
In 2001, net operating expenses of £26.8m comprised administrative expenses of
£28.2m and other operating income of £1.4m in respect of listed investments. A
charitable donation of £1.0m was included within the £26.8m administrative
expenses and in the results of the Homes Division.
3. Acquisitions
On 9 January 2002, the Group acquired the entire issued share capital of Tay
Homes plc (now renamed Redrow Corporate Services Ltd) for a total consideration
of £30.6m.
This acquisition has been accounted for using the acquisition method of
accounting.
The consolidated profit and loss account of Tay Homes plc from 1 July 2001, the
beginning of its financial year, to the date of acquisition showed a profit
after taxation of £2.0m. The consolidated profit after taxation on ordinary
activities for the year ended 30 June 2001 was £3.2m.
The analysis of net assets acquired and the fair value to the Group is as
follows:
Book Other Accounting Taxation Fair value
Value policy to Group
alignment
£m £m £m £m £m
Tangible fixed 0.7 - - - 0.7
assets
Investments 2.9 - - - 2.9
Stocks and Work in 57.1 (4.1) (0.5) - 52.5
progress
Debtors 2.3 - - 3.1 5.4
Bank borrowings (12.9) - - - (12.9)
Creditors: amounts (15.2) (1.0) - - (16.2)
falling due within
one year
Creditors: amounts (1.3) - - - (1.3)
falling due after
more than one year
Provisions for (0.5) - - - (0.5)
liabilities and
charges
________________________________________________
Net assets 33.1 (5.1) (0.5) 3.1 30.6
________________________________________________
Consideration:
Cash 30.6
________________________________________________
Goodwill arising -
________________________________________________
The book value of the assets and liabilities shown above has been taken from
the consolidated management accounts of Tay Homes plc at the date of
acquisition.
The other adjustments represent:
the restatement of land to its estimated market value
the write down of work in progress to an assessment of its net realisable value
the assessment of costs in relation to completed sites
The accounting policy alignment relates to a provision against option and
predevelopment costs which were included within work in progress by Tay Homes
plc and which is not in accordance with accounting policies of the Group.
The taxation adjustment relates to the recognition of a deferred tax asset in
respect of the fair value adjustments and losses in the acquired Group in
accordance with FRS 19.
Cash consideration of £30.6m includes £0.7m of fees and incremental costs
relating to the acquisition including stamp duty.
4. Tax on Profit on Ordinary Activities
Restated
2002 2001
£m £m
Current year
UK corporation tax at 30% 25.3 19.0
(2001:30%)
Over provision in respect of (1.3) -
prior year
_________________
24.0 19.0
Deferred tax
Origination and reversal of 0.3 2.6
timing differences
_________________
24.3 21.6
_________________
Reconciliation of current
taxation charge
Tax on total profits @ 30% 25.5 21.6
(2001:30%)
Over provision in respect of (1.3) -
prior year
Origination and reversal of (0.3) (2.6)
timing differences
Expenses not deductible for tax 0.1 -
purposes
_________________
Current tax charge 24.0 19.0
_________________
5. Dividends
The final dividend of 4.04p will be recommended to Shareholders for approval at
the Annual General Meeting on 4 November 2002. This dividend will be paid on
22 November 2002 to Shareholders whose names are on the Register of Members at
close of business on 20 September 2002. The shares will become ex-dividend on
18 September 2002. This dividend when added to the interim makes a total
dividend for the year of 6.06p (2001:5.50p).
6. Earnings per share
The calculation of the basic earnings per share of 38.5p (2001:Restated 28.8p)
is based on Group profit on ordinary activities after taxation of £60.8m (2001:
Restated £50.5m) and on the weighted average number of 10p ordinary shares in
issue of 158.1m (2001:175.5m). The average reflects an adjustment in respect of
surplus shares held in trust under the Redrow Long Term Share Incentive Plan.
Diluted earnings per share has been calculated in accordance with FRS 14 based
on the weighted average number of 10p ordinary shares in issue of 158.8m (2001:
176.5m).
Adjusted earnings per share before integration costs (net of tax) is 40.4p and
is calculated based on earnings of £63.8m and the weighted average number of
shares in issue disclosed above.
7. Half year comparison
6 months to 6 months to
30 June 2002 31 December 2001
Homes Legal Completions
Existing Operations 1,845 1,728
Acquisition 335 -
____________ _______________
2,180 1,728
____________ _______________
£m £m
Turnover 272.5 264.6
Existing Operations
Acquisition 36.2 -
____________ _______________
308.7 264.6
____________ _______________
Operating profit
Existing Operations 47.1 45.5
Acquisition 5.8 -
____________ _______________
52.9 45.5
Integration costs (4.3) -
____________ _______________
48.6 45.5
Interest (5.1) (3.9)
____________ _______________
43.5 41.6
____________ _______________
8. Stocks and work in progress
2002 2001
£m £m
Land held for development 294.5 252.0
Work in progress 203.3 162.7
Stock of showhomes 10.3 9.5
____________ _______________
508.1 424.2
Cash on account (11.3) (7.1)
____________ _______________
496.8 417.1
____________ _______________
9. Bank and cash deposits
Bank and cash deposits at 30 June 2002 of £1.0m (2001:£8.0m) represent balances
on Treasury deposit and High Interest Business Accounts.
10. Amounts due in respect of development land
2002 2001
£m £m
Due within one year 41.0 24.6
Due after more than one 25.9 11.1
year
____________ _______________
66.9 35.7
____________ _______________
11. Analysis of cash flow from operating activities
2002 2001
£m £m
Operating profit 94.1 79.5
Depreciation, including profits and 1.3 0.9
losses on disposal of fixed assets
Profit on disposal of current asset - (1.4)
investments
Increase in stock and (27.3) (55.5)
work-in-progress
Movement in other current assets, 36.5 22.1
creditors and provisions
______ _____
Cash inflow from operating activities 104.6 45.6
______ _____
12. Annual General Meeting
The Annual General Meeting of Redrow plc will be held at St. David's Park
Hotel, St. David's Park, Flintshire on 4 November 2002, commencing at 12.00
noon.
A copy of this statement is available for inspection at the registered office.
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