Half-year Report

RNS Number : 5329O

Redrow PLC

10 February 2021

 

FOR IMMEDIATE RELEASE

Wednesday 10 February 2021

Redrow plc

  Interim results for the six months to 27 December 2020

STRONG FIRST HALF PERFORMANCE AND

DIVIDENDS REINSTATED

Financial Results

	H1 2021	H1 2020	% Change
Revenue	£1,041m	£870m	20
Legal Completions	3,065	2,554	20
Profit Before Tax	£174m	£157m	11
EPS	41.0p	37.2p	10
Net Cash	£238m	£14m	N/A
Interim Dividend per share	6.0p	-	N/A
Total Order Book	£1.3bn	£1.2bn	8

Operational Summary

· Record first half revenue and legal completions which were both up 20% due to strong opening order book and resilient demand

· Reservations for the ongoing business* up 6% at £819m (2020: £772m)

· Over 95% forward sold for the current financial year

· Once again, we retain our Five star customer service rating, which is now further enhanced by the launch of our new Homeowner Support portal.

Financial Summary

· Group revenue of £1,041m (2020: £870m) up 20%

· First half pre-tax profit up 11% at £174m (2020: £157m)

· Earnings per share (EPS) up 10% to 41.0p (2020: 37.2p)

· Dividends reinstated with interim dividend of 6.0p per share (2020: Nil)

· Net cash of £238m (Dec 2019: £14m)

* Ongoing business is the regional business plus Colindale

Matthew Pratt, Group Chief Executive of Redrow, said

"The Group delivered a strong first-half performance whilst continuing to operate under strict COVID-secure procedures.  During a period of intensive activity to rebuild output, it is pleasing to report we have maintained high levels of customer satisfaction and I am grateful to our teams for their ongoing hard work and commitment during these challenging times.

We have seen a strong sales market during the first half driven by a combination of pent-up demand from the first national lockdown, the introduction of the Stamp Duty holiday and the impending end of the Help to Buy scheme for existing home owners.

At the end of December 2020, the Group had net cash of £238m compared to net debt of £126m at the end of June 2020 as we converted our high level of brought forward work in progress into completions.  Given the Group's cash position and order book, the Board has resumed dividend payments with an interim dividend of 6p (2020: 0p).

The changing trends in home ownership, accelerated by COVID-19, align with Redrow's Heritage product and 'Better Way to Live' philosophy. Our differentiated strategy taps into customers' changed priorities that balance work, home and the local community into a more sustainable lifestyle.

Despite a 20% increase in revenue in the first half, we have continued to maintain a very strong order book. At the end of the first half, we had a record December total order book of £1.3bn (2020: £1.2bn) of which 72% is contracted. We are now over 95% forward sold for the current financial year.

The acceleration of changing buyer trends, which are completely aligned to Redrow's strategy, point to a positive outlook for the business. Our private forward sold position of £750m beyond the end of both the original Help to Buy scheme and the Stamp Duty holiday, demonstrates the resilience of our target market and the desirability of our product and the places we create. These fundamentals mean we can look confidently to the future and fulfilling our ambitions to rebuild and grow the business."

Enquiries:

Redrow plc Matthew Pratt, Group Chief Executive Barbara Richmond, Group Finance Director	01244 527411 01244 527411
Instinctif Partners Mark Garraway Rosie Driscoll	0207 457 2020 07771 860938 07891 564641

A webcast and slide presentation of our results will be available at 7.00 am on http://investors.redrowplc.co.uk/ .

Participants can also dial in to hear the presentation at 7.00 am on [phone] or

UK Toll Free on 0800 640 6441 participant access code 684012.

Playback will be available by phone from 8.00am for the next 7 days [phone] followed by

Access Code 413463.

There will also be an analyst Q&A conference call with management at 9.00 am and an audiocast of this call will be available on http://investors.redrowplc.co.uk/reports-and-presentations this afternoon.

LEI Number:

2138008WJZBBA7EYEL28

Announcement Classification:

1.2: Half yearly financial report and audit reports/limited reviews

Group Chief Executive's Statement

Overview

The Group delivered a strong first-half performance whilst continuing to operate under strict COVID-secure procedures.  Completions were 20% ahead at 3,065 homes (2020: 2,554). During a period of intensive activity to rebuild output, it is pleasing to report we have maintained high levels of customer satisfaction and I am grateful to our teams for their ongoing hard work and commitment during these challenging times.

As a result of the high number of completions and resultant reduction in work in progress, the Group reversed an opening net debt position of £126m to end the first half with net cash of £238m. The Group has previously signalled its intention to resume dividends in 2021 and the Board has declared an interim dividend of 6p.

We have seen a strong sales market during the first half driven by a combination of pent-up demand from the first national lockdown, the introduction of the Stamp Duty holiday and the impending end of the Help to Buy scheme for existing home owners.  Demand in the regions for our Heritage homes has been particularly high as more buyers reflect on their lockdown experiences and prioritise space in their homes and access to green areas. The private revenue per outlet per week on a like-for-like basis in the first half (excluding PRS) was 13% ahead at £274,000 (2020:£243,000). As a consequence, we entered the second half with a total order book of £1.3bn (2020: £1.2bn).

Last year we announced our intention to scale down our London business to focus solely on our flagship Colindale development. We have to date exited four of the six sites not in build and expect to exit the remaining two before the end of the financial year.

Our financial performance

Group revenue was £1,041m in the first half compared to £870m last year due to legal completions increasing from 2,554 to 3,065.

The growth in completions benefited from very high levels of work in progress carried into the new financial year and a record opening forward order book following the first national lockdown.

Private completions of 2,430 were ahead by 365 and affordable completions at 635 were 146 higher than the same period last year. Affordable homes comprised 21% (2020: 19%) of total completions. The private average selling price was unchanged at £387,000 (2020: £387,000).

The gross margin at 21.3% (2020: 23.9%) was below the level in the same period last year mainly due to higher build cost as a result of COVID measures. However, it was ahead of our guidance for the 2021 full year gross margin of 20.5% due primarily to tenure mix. The full year guidance remains unchanged, as the second half margin will be impacted by completion of two PRS apartment contracts from the lower margin London build out developments and a higher proportion of affordable housing. 

Administrative expenses reduced from £49m to £44m as a result of a number of cost saving measures undertaken in the final quarter of the last financial year due to COVID-19. Administrative expenses in the second half are expected to increase reflecting the Group's investment to rebuild and grow the business. As a result, we are expecting the full year operating margin to be approximately 15.5%.

Operating profit increased from £159m to £178m, as a direct result of the increased turnover, and pre-tax profit was £174m (2020: £157m). Earnings per share were up 10% at 41.0p (2020: 37.2p).

At the end of December 2020, the Group had net cash of £238m compared to net debt of £126m at the end of June 2020 as we converted our high level of brought forward work in progress into completions. Whilst we have significant deferred land payments in the second half together with investing in new sites to grow the business, we still expect to end the year with net cash of over £100m.

Given the Group's cash position and order book, the Board has resumed dividend payments with an interim dividend of 6p (2020: 0p). The interim dividend will be paid on 9th April 2021 to holders of ordinary shares on the register at close of business on 26th February 2021.

Strategy underpinning demand and customer satisfaction

The changing trends in home ownership, accelerated by COVID-19, align with Redrow's Heritage product and 'Better Way to Live' philosophy. Our differentiated strategy taps into customers' changed priorities that balance work, home and the local community into a more sustainable lifestyle.

As a result, Redrow's larger, quality family homes - located in great places with plenty of open space - are proving more desirable than ever before.

The alignment of these trends with our unique product and places generated strong pent-up demand across our divisional network as we emerged from the first lockdown. Demand has remained resilient with strong forward sales secured beyond the cut-off dates of the existing Help to Buy scheme and the Government's Stamp Duty holiday.

Whilst reservations for the Group as a whole were unchanged year on year, those for the ongoing business, comprising the regions outside London plus Colindale (excluding PRS), was up 6% at £819m (2020: £772m) and the sales rate was up 11% at 0.69 (2020: 0.62). We will continue to target growth in the regions to offset the scaling down of the London business.

The successful Help to Buy scheme, in its current form since 2013, has helped thousands of people take a step onto the housing ladder and move-up into homes that better match their needs. It has now closed to applications and a new scheme has been launched restricting participation to first time buyers and capping prices on a regional basis.

The price caps favour buyers in the south of the country where they are considerably higher. Notwithstanding this, it is pleasing to note that as we progressed through the first half, reservations were not materially affected by these changes as our homes are targeted more at second time movers who often have larger deposits and an element of equity. Help to Buy was utilised on 44% of our private reservations in the first half (2020: 42%) (excluding PRS).

The market remained strong and we are seeing house price inflation across all of our operating areas except London.

We welcomed the Chancellor's introduction of the Stamp Duty holiday, which is expected to end on 31^st March 2021. It is an important initiative, which has led to a positive economic ripple effect beyond the new homes market. The success of the holiday illustrates that high levels of Stamp Duty deter buyers and we continue to urge Government to undertake a reform of the tax to make homes more affordable in the longer term.

In its current form, Stamp Duty is an arbitrary tax, which inhibits mobility and reduces the liquidity of the housing market. Ultimately, it penalises those looking to relocate for work or wanting to downsize as part of retirement plans. Stamp Duty needs to be reformed to help the housing market work more effectively and to stimulate more transactions, which will in itself drive tax generation throughout the home buying supply chain of estate agents, solicitors, removals, furnishings etc. 

Despite a 20% increase in turnover in the first half, we have continued to maintain a very strong order book. At the end of the first half, we had a record December total order book of £1.3bn (2020: £1.2bn) of which 72% is contracted.

Outlets averaged 116 (2020: 129) and the value of private reservations per outlet per week (excluding PRS) was 13% ahead at £274k (2020: £243k). Combining our higher than industry average selling price together with our strong sales rate continues to deliver industry leading reservation values per outlet.

Brexit and COVID-19

Following the UK's exit from the European Union, we have not experienced any disruption to our supply chain and we anticipate cost inflation to remain at around 2% to 3%, which we expect to be offset by house price inflation. Our long-standing supplier and sub-contractor relationships and tight cost controls both help to mitigate cost pressures.

Operating within a further national lockdown continues to present challenges. Our sales centres are open on an appointment-only basis, with comprehensive COVID-19 measures in place. Most of our office-based colleagues are working from home and, if required, can self-isolate at home whilst continuing to work. There has been some impact on build as an increasing number of subcontractor colleagues are unable to work whilst self isolating. We expect to see this situation improve as the country's overall COVID-19 infection rate decreases.

Over the last decade, we have been implementing an IT strategy with fully integrated and bespoke online services, including online reservations, tablet-based quality management systems and online customer extras. This investment has proven to be invaluable during COVID-19 helping customers and colleagues alike to connect with Redrow online. This has helped to maintain high levels of customer service and endorsed the Group's COVID-secure procedures.

We are pleased to have launched our Homeowner Support portal where customers can review helpful videos, see warranty information and log and upload photos of any issues for review and action.

The new system provides clear and accurate information for our customer service teams. Once the system is fully utilised we will be able to analyse data highlighting common faults, frequency and location so we can work with our teams to eradicate recurring issues.

Once again, we will retain our Five Star customer service rating. Our customer recommendation score is trending well above the previous closed survey year (2020: 91.9%). We have now held this award for eight out of the last eleven years and for the last three years consecutively. We continue to perform well on Trustpilot with an 'Excellent' rating with 4.6 stars from over 2,000 reviews.

Launch of Redrow 2025

During the period under review, I launched 'Redrow 2025.' Every Redrow colleague is being tasked to reimagine how the business should, and will, look in five years' time with a focus on innovation and embracing new ways of working.

These ideas will be captured underneath our three strategic pillars: Valuing People, Building Responsibly and Thriving Communities. These themes are embedded within our business and all colleagues have a clear understanding of how they contribute to them - ensuring that sustainability is woven into our business strategy and culture.

Again looking to the future, and in these difficult times when young people have been particularly hard hit, I am very proud of the fact we have recruited an additional 32 graduates, and a new intake of 19 sponsored degree students and maintained our apprentice numbers at around 210. In total, we now have 330 trainees within the business.

We are currently trialling new technology as we prepare for 2025 and the introduction of the Future Home Standards, which will see the removal of fossil fuels used within a new home. At the same time, our 'Reduce the Rubble' project is investigating how we can reduce waste during the homebuilding process.

Land and Planning

Our positive outlook for the future gives us the confidence to invest in land to rebuild and grow the business, including the replacement of the outlets from our previous London holdings.

The Group added 2,284 plots with planning and the owned and contracted land holdings with planning closed at 26,130 plots (June 2020: 27,000 plots). The Group is processing a sizeable pipeline of sites with terms agreed and we therefore expect acquisitions to accelerate in the second half.

Due to the nature of our product, we continue to invest in primary locations across the country. In the period, we have increased our strategic land holding which now contains a number of large key sites, which will support the company's growth targets. These larger holdings are expected to transfer in whole or part to our current land holdings over the next 12 months.

Board Changes

In advance of John Tutte's retirement ahead of the forthcoming AGM, the process of recruiting a new Chairman is progressing well.

Current Trading and Outlook

In the six weeks to 5^th February, private reservations in terms of value have averaged £265,000 per outlet per week (2020: £298,000). This is below a very strong comparable last year and is also being affected by reduced availability of product created by the strong forward sales position. The private sales rate of 0.67 per outlet per week (2020: 0.78) is however in line with our long term expectation of trading within a more normal market.

The acceleration of changing buyer trends, which are completely aligned to Redrow's strategy, point to a positive outlook for the business. Our private forward sold position of £750m beyond the end of both the original Help to Buy scheme and the Stamp Duty holiday, demonstrates the resilience of our target market and the desirability of our product and the places we create.

Our people, sub-contractors and partners have embraced our comprehensive COVID-19 measures, which have been embedded into every aspect of Redrow's operations. I would like to thank them, once again, for their hard work, understanding and continued passion to deliver our high quality products and places.

These fundamentals, alongside the encouraging progress being made to tackle the pandemic, mean we can look confidently to the future and fulfil our ambitions to rebuild and grow the business.

Matthew Pratt
Group Chief Executive

Consolidated Income Statement

		Unaudited 26 weeks ended 27 December	Unaudited 26 weeks ended 29 December	Audited 52 weeks ended 28 June
		2020	2019	2020
	Note	£m	£m	£m
Revenue		1,041	870	1,339
Cost of sales		(819)	(662)	(1,097)
Gross profit		222	208	242
Administrative expenses		(44)	(49)	(94)
Operating profit		178	159	148
Financial income		-	1	2
Financial costs		(4)	(3)	(10)
Net financing costs		(4)	(2)	(8)
Profit before tax		174	157	140
Income tax expense	2	(33)	(29)	(27)
Profit for the period		141	128	113
Earnings per share - basic	4	41.0p	37.2p	32.9p
- diluted	4	41.0p	37.1p	32.8p

Consolidated Statement of Comprehensive Income

		Unaudited 26 weeks ended 27 December	Unaudited 26 weeks ended 29 December	Audited 52 weeks ended 28 June
		2020	2019	2020
	Note	£m	£m	£m
Profit for the period		141	128	113
Other comprehensive income/(expense):
Items that will not be reclassified to profit or loss
Remeasurements of post-employment benefit obligations	5	2	(3)	1
Deferred tax on remeasurements taken directly to equity		-	1	-
Other comprehensive income/(expense) for the period net of tax		2	(2)	1
Total comprehensive income for the period		143	126	114

Consolidated Balance Sheet

		Unaudited At at 27 December	Unaudited As at 29 December		Audited As at 28 June
		2020	2019		2020
	Note	£m	£m*		£m
Assets
Intangible assets		2	2		2
Property, plant and equipment		19	17		19
Lease right of use assets		6	8		7
Investments		-	8		9
Deferred tax assets		1	4		1
Retirement benefit surplus	5	24	17		22
Trade and other receivables		-	7		-
Total non-current assets		52	63		60
Inventories	6	2,454	2,510		2,585
Trade and other receivables		64	37		38
Current corporation tax receivables		-	14		7
Cash and cash equivalents	8	242	89		44
Total current assets		2,760	2,650		2,674
Total assets		2,812	2,713		2,734
Equity
Retained earnings at 29 June 2020/1 July 2019		1,522	1,481		1,481
Profit for the period		141	128		113
Other comprehensive income/(expense) for the period		2	(2)		1
Dividends paid		-	(72)		(72)
Movement in LTIP/SAYE		2	3		(1)
Retained earnings		1,667	1,538		1,522
Share capital	10	37	37		37
Share premium account		59	59		59
Other reserves		8	8		8
Total equity		1,771	1,642		1,626
Liabilities
Bank loans	8	4	75		170
Trade and other payables	7	144	125		120
Deferred tax liabilities		5	4		5
Long-term provisions		8	8		8
Total non-current liabilities		161	212		303
Trade and other payables	7	879	859		805
Current income tax liabilities		1	-		-
Total current liabilities		880	859		805
Total liabilities		1,041	1,071		1,108
Total equity and liabilities		2,812	2,713		2,734
*Restated - see note 1.
Redrow plc Registered no. 2877315

Consolidated Statement of Changes in Equity

		Share
	Share	premium	Other	Retained
	capital	account	reserves	earnings	Total
	£m	£m	£m	£m	£m
At 1 July 2019	37	59	8	1,481	1,585
Total comprehensive income for the period	-	-	-	126	126
Dividends paid	-	-	-	(72)	(72)
Movement in LTIP/SAYE	-	-	-	3	3
At 29 December 2019 (Unaudited)	37	59	8	1,538	1,642
At 1 July 2019	37	59	8	1,481	1,585
Total comprehensive income for the period	-	-	-	114	114
Dividends paid	-	-	-	(72)	(72)
Movement in LTIP/SAYE	-	-	-	(1)	(1)
At 28 June 2020 (Audited)	37	59	8	1,522	1,626
At 29 June 2020	37	59	8	1,522	1,626
Total comprehensive income for the period	-	-	-	143	143
Dividends paid	-	-	-	-	-
Movement in LTIP/SAYE	-	-	-	2	2
At 27 December 2020 (Unaudited)	37	59	8	1,667	1,771

Consolidated Statement of Cash Flows
			Unaudited 26 weeks ended 27 December		Unaudited 26 weeks ended 29 December	Audited 52 weeks ended 28 June
			2020		2019	2020
	Note		£m		£m*	£m
Cash flows from operating activities
Operating profit			141		128	113
Depreciation and amortisation			2		3	7
Financial income			-		(1)	(2)
Financial costs			4		3	10
Income tax expense			33		29	27
Adjustment for non-cash items			6		(3)	1
(Increase)/decrease in trade and other receivables			(26)		13	20
Decrease/(increase) in inventories			131		(213)	(181)
Increase/(decrease) in trade and other payables			98		86	(75)
Cash inflow/(outflow) generated from operations			389		45	(80)
Interest paid			(1)		(1)	(5)
Tax paid			(25)		(77)	(64)
Net cash inflow/(outflow) from operating activities			363		(33)	(149)
Cash flows from investing activities
Acquisition of software, property, plant and equipment			(2)		(3)	(7)
Net payments to joint ventures			4		(2)	(3)
Net cash inflow/(outflow) from investing activities			2		(5)	(10)
Cash flows from financing activities
Issue of bank borrowings			-		75	170
Repayment of bank borrowings			(166)		(80)	(80)
Payment of lease liabilities			(1)		-	(3)
Purchase of own shares			-		-	(16)
Dividends paid	3		-		(72)	(72)
Net cash (outflow) from financing activities			(167)		(77)	(1)
Increase/(decrease) in net cash and cash equivalents			198		(115)	(160)
Net cash and cash equivalents at the beginning of the period			44		204	204
Net cash and cash equivalents at the end of the period	8		242		89	44

* Restated - see note 1

NOTES (Unaudited)

1.  Accounting policies

Basis of preparation

The condensed consolidated half-yearly financial information for the 26 weeks ended 27 December 2020 has been prepared on a going concern basis in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34 interim Financial Reporting adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The Directors consider this to be appropriate for the reasons outlined below.

The annual financial statements of the group for the 52 weeks to 27 June 2021 will be prepared in accordance with International Financial Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. As required by the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the company's published consolidated financial statements for the year ended 28 June 2020 which were prepared in accordance with IFRSs as adopted by the EU.

Going concern

As a precaution against an extended lockdown, the Group increased its available banking facilities by £100m in April 2020. As a result, the Group has a £350m Revolving Credit Facility (RCF) provided by an established syndicate of six banks being Barclays Bank PLC, Lloyds Bank Plc, The Royal Bank of Scotland Plc, Santander UK PLC, HSBC UK Bank PLC and Svenska Handelsbanken AB (PUBL). This expires in December 2022 and is a committed unsecured facility. No change to the RCF covenants was made as a result of the increase to £350m. As at 10 February 2021, £350m of this facility was undrawn. It is likely that the RCF will be renewed prior to its expiry in December 2022.

In addition the Group has a further £13m of committed, unsecured facilities also expiring in December 2022 and £3m of unsecured, uncommitted facilities.

The Group also gained eligibility as an issuer for the Government's COVID Corporate Funding Facility (CCFF) with an issuer limit of £300m. Given the timely return to work and the effectiveness of measures to protect its cash flow, the Group has not used the CCFF and our forecasts do not assume the utilisation of this facility.

The Directors have prepared forecasts including cashflow forecasts for a period of 22 months from the date of approval of these financial statements to 30 December 2022. These forecasts indicate that the Group will have sufficient funds to meet its liabilities as they fall due, taking into account the following severe but plausible downside assumptions:

A 20% price reduction on all unexchanged private legal completions for FY21 and a 10% price reduction on all unexchanged social legal completions for FY21;

A 10% price reduction on all unexchanged private legal completions for FY22 and a 5% price reduction on all unexchanged social legal completions for FY22;

FY23 legal completions at September 2020 forecast prices; and

A reduction in sales rate to 0.4 per budgeted active outlet per week from January 2021 to Sept 2021.

These downside assumptions reflect the further potential impact of COVID 19 being increased economic uncertainty, further Government lockdown restrictions and increasing rates of unemployment and consumer confidence levels.

Allowing for the above downside scenario, the model shows the Group has adequate levels of liquidity from its committed facilities and complies with all its banking covenants throughout the forecast period. The Directors therefore consider that the Group will have sufficient funds to continue to meet its liabilities as they fall due for the forecast period and have therefore adopted the going concern basis of accounting in preparing these financial statements.

Redrow plc is a public listed company, listed on the London Stock Exchange and domiciled in the UK.

The half-yearly condensed consolidated report should be read in conjunction with the annual consolidated financial statements for the 52 weeks ended 28 June 2020, which have been prepared in accordance with IFRSs as adopted by the European Union.

This half-yearly financial information does not comprise statutory accounts within the meaning of section 435 of the Companies Act 2006. This condensed half-yearly financial information has been reviewed, not audited. The comparative figures for the financial period ended 28 June 2020 are not the Group's statutory accounts for that financial year. Audited statutory accounts for the 52 weeks ended 28 June 2020 were approved by the Board of Directors on 15 September 2020 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006.

The principal accounting policies adopted in the preparation of this condensed half-yearly financial information are included in the annual consolidated financial statements for the 52 weeks ended 28 June 2020. The accounting policies are consistent with those followed in the preparation of the financial statements to the 52 weeks ended 28 June 2020 where there was a change in accounting in respect of Inventories. Inventories were previously stated net of cash on account (payments on account from social and private rented sector customers). These payments are now disclosed in Trade and Other payables and the 2019 comparatives have been restated.

The preparation of condensed half-yearly financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may subsequently differ from these estimates. In preparing this condensed half-yearly financial information, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the annual consolidated financial statements for the 52 weeks ended 28 June 2020.

The main operation of the Group is focused on housebuilding. As it operates entirely within the United Kingdom, the Group has only one reportable business and geographic segment. After considering the requirements of IFRS 15 to present disaggregated revenue, the Group does not believe there is any disaggregation criteria applicable to its one reportable business and geographic segment. There is no material difference between any assets or liabilities held at cost and their fair value.

Principal risks and uncertainties

As with any business, Redrow plc faces a number of risks and uncertainties in the course of its day to day operations.

The principal risks and uncertainties facing the Group are outlined within our half-yearly report 2020 (note 16). We have reviewed the risks pertinent to our business in the 26 weeks to 27 December 2020 and which we believe to be relevant for the remaining 26 weeks to 27 June 2021. The only material change from those outlined in our Annual Report 2020 is the considerable unknowns still remaining now the UK has left the EU. We have however not experienced any significant direct impact to date.

2.  Income Tax expense

Income tax charge is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year (19% (2020: 18.5%)). Deferred taxation balances have been valued at 19% being the corporation tax rate from 1 April 2020 substantively enacted on 22 July 2020.

3.  Dividends

A dividend of £nil was paid in the 26 weeks to 27 December 2020 (26 weeks to 29 December 2019: £72m).

4.  Earnings per share

The basic earnings per share calculation for the 26 weeks ended 27 December 2020 is based on the weighted number of shares in issue during the period of 344m (26 weeks ended 29 December 2019: 344m) excluding those held in trust under the Redrow Long Term Incentive Plan, which are treated as cancelled.

Diluted earnings per share has been calculated after adjusting the weighted average number of shares in issue for all potentially dilutive shares held under unexercised options.

26 weeks ended 27 December 2020 (Unaudited)

		Earnings		No. of shares			Per share
		£m		millions			Pence
Basic earnings per share			141		344	41.0
Effect of share options and SAYE			-		-	-
Diluted earnings per share			141		344	41.0

26 weeks ended 29 December 2019 (Unaudited)

		Earnings		No. of shares			Per share
		£m		millions			Pence
Basic earnings per share			128		344	37.2
Effect of share options and SAYE			-		1	(0.1)
Diluted earnings per share			128		345	37.1

52 weeks ended 28 June 2020 (Audited)

		Earnings		No. of shares			Per share
		£m		millions			Pence
Basic earnings per share			113		343	32.9
Effect of share options and SAYE			-		2	(0.1)
Diluted earnings per share			113		345	32.8

5.  Pensions

The amounts recognised in respect of the defined benefit section of the Group's Pension Scheme are as follows:

		Unaudited 26 weeks ended 27 December		Unaudited 26 weeks ended 29 December	Audited 52 weeks ended 28 June
		2020	2019		2020
		£m	£m		£m
Amounts included within the consolidated income statement
period operating costs
Scheme administration expenses		-	-		-
Net interest on defined benefit liability		-	-		-
		-	-		-
Amounts recognised in the consolidated income statement
of comprehensive income
Return on scheme assets excluding interest income		5	1		24
Actuarial movements arising from change in financial assumptions		(3)	(3)		(22)
Actuarial movements arising from change in demographic assumptions		-	(1)		(1)
		2	(3)		1
Amounts recognised in the consolidated balance sheet
Present value of the defined benefit obligation		(155)	(134)		(151)
Fair value of the Scheme's assets		179	151		173
Surplus in the consolidated balance sheet		24	17		22

6.  Inventories

		Unaudited As at 27 December		Unaudited As at 29 December	Audited
					As at 28 June
		2020	2019		2020
		£m	£m*		£m
Land for development		1,502	1,510		1,538
Work in progress		878	928		972
Stock of showhomes		74	72		75
		2,454	2,510		2,585

*Restated - see note 1.

7.  Land Creditors

  (included in trade and other payables)

		Unaudited As at 27 December		Unaudited As at 29 December	Audited
					As at 28 June
		2020	2019		2020
		£m	£m*		£m
Due within one year		195	229		186
Due in more than one year		140	125		116
		335	354		302

*Restated - see note 1.

8.  Analysis of Net Cash/(Debt)

		Unaudited As at 27 December		Unaudited As at 29 December	Audited
					As at 28 June
		2020	2019		2020
		£m	£m		£m
Cash and cash equivalents		242	89		44
Bank loans		(4)	(75)		(170)
		238	14		(126)

Net cash excludes land creditors and lease liabilities arising under IFRS 16.

9.  Bank facilities

At 27 December 2020, the Group had total unsecured bank borrowing facilities of £366m (29 December 2019: £253m), representing £363m committed facilities and £3m uncommitted facilities.

The Group's syndicated loan facility matures in December 2022.

10.    IssuedShare capital

Allotted, called up and fully paid.

		£m
At 29 December 2019 - 352,190,420 ordinary shares of 10.5p each (unaudited)		37
At 28 June 2020 - 352,190,420 ordinary shares of 10.5p each (audited)		37
At 27 December 2020 - 352,190,420 ordinary shares of 10.5p each (unaudited)		37
		Number of ordinary
		shares of 10.5p each
As at 28 June 2020 and 27 December 2020		352,190,420

11.  Contingent Liabilities

The Company has guaranteed the bank borrowings of its subsidiaries. Performance bonds and other building or performance guarantees have been entered into in the normal course of business. Management consider the possibility of a cash outflow in settlement to be remote.

12.  Related parties

Key management personnel, as defined under IAS 24 'Related Party Disclosures', are identified as the Executive Management Team and the Non-Executive Directors. Summary key management remuneration is as follows:

		Unaudited 26 weeks ended 27 December		Unaudited 26 weeks ended 29 December	Audited
					52 weeks ended 28 June
		2020	2019		2020
		£m	£m		£m
Short-term employee benefits		2	3		4
Share-based payment charges		1	1		1
		3	4		5

13.  Alternative performance measures

Redrow uses return on capital employed (ROCE) as one of its financial measures. The Directors consider this to be an important indicator of whether the Group is achieving appropriate returns on its invested capital. As this is not defined or specified by IFRSs, a definition and calculation is provided below:

Capital employed is defined as total equity plus net debt or minus net cash.

ROCE - at half year end, this is calculated as operating profit for the 52 weeks to December before exceptional items as a percentage of the average of current year December and prior year December capital employed.

	December 2020 £m		December 2019 £m
Operating Profit
26 weeks to December 2020	178	26 weeks to December 2019	159
52 weeks to June 2020	148	52 weeks to June 2019	411
26 weeks to December 2019	(159)	26 weeks to December 2018	(187)
52 weeks to December 2020	167	52 weeks to December 2019	383
Capital Employed
Total equity December 2020	1,771	Total equity December 2019	1,642
Net cash December 2020	(238)	Net cash December 2019	(14)
Capital employed December 2020	1,533	Capital employed December 2019	1,628
Total equity December 2019	1,642	Total equity December 2018	1,560
Net cash December 2019	(14)	Net debt December 2018	(101)
Capital employed December 2019	1,628	Capital employed December 2018	1,459
Average capital employed	1,581	Average capital employed	1,544
ROCE %	11%	ROCE %	25%

14.  General information

Redrow plc is a public limited company incorporated and domiciled in the UK and has its primary listing on the London Stock Exchange.

The registered office address is Redrow House, St David's Park, Flintshire, CH5 3RX.

Financial Calendar

Interim dividend record date  26 February 2021

Interim dividend payment date  9 April 2021

Announcement of results for the 52 weeks to 27 June 2021  15 September 2021

Final dividend record date  24 September 2021

Circulation of Annual Report  4 October 2021

Annual General Meeting  12 November 2021

Final dividend payment date  17 November 2021 

15.  Shareholder enquiries

The Registrar is Computershare Investor Services PLC. Shareholder enquiries should be

addressed to the Registrar at the following address:

Registrars Department

The Pavilions

Bridgwater Road

Bristol

BS99 6ZZ

Shareholder helpline: 0370 707 1257

16.  Risks and Risk Management

Risk	Risk Owners	Key Controls and Mitigating Strategies
Housing Market The UK housing market conditions have a direct impact on our business performance. This year has seen the added risk of distortions in the housing market due to reaction to a global pandemic together with related economic uncertainty. The UK's exit from the EU may also lead to increased economic uncertainty.	Group Chief Executive	Close monitoring of Government guidance. Delegated Crisis Committee established with Executive Board meetings a minimum of twice weekly in times of crisis. Market conditions and trends are being closely monitored allowing management to identify and respond to any sudden changes or movements. Weekly review of sales at Group, divisional and site level with monitoring of pricing trends and Help To Buy (HTB) levels. Ensuring strong relationships with lenders and valuers to ensure they recognise our premium product. Ongoing and regular monitoring of Government policy and lobbying as appropriate. The UK has now left the EU. We currently have not experienced any significant direct impact however it is still early days and there are considerable unknowns. The Risk of COVID-19 and the effect on the UK economy continues to add uncertainty.
Availability of Mortgage Finance Availability of mortgage finance is a key factor in the current environment.	Group Finance Director	Proactively engage with the Government, Lenders and Insurers to support the housing market. Expert New Build Mortgage Specialists provide updates on and monitoring of regulatory change.
Liquidity and Funding The Group requires appropriate facilities for its short-term liquidity and long-term funding.	Group Finance Director	Medium term committed banking facilities sufficient for a major market breakdown. Regular communication with our investors and relationship banks, including visits to developments as appropriate. Regular review of our banking covenants appropriateness and design and capital structure. Ensuring our future cash flow is sustainable through detailed budgeting process and reviews and scenario modelling. Strong forecasting and budgeting process.
Customer Service Failure of our customer service could lead to relative under performance of our business. This year has seen the added risk of customer technicians entering occupied homes at a time of a global pandemic.	Group Customer and Marketing Director	Customer and Quality Director appointed. My Redrow website to support our customers purchasing their new home. Increased use of digital and virtual communication tools. Attention to customer feedback supported by a process at nine months post occupation to address toot cause of customer fatigue and dissatisfaction. Regular review of our marketing and communications policy at both Group and divisional level.
Land Procurement The ability to purchase land suitable for our products and the timing of future land purchases are fundamental to the Group's future performance.	Group Chief Executive	Proactive monitoring of the market conditions to implement a clear defined strategy at both Group and divisional level. Experienced and knowledgeable personnel in our land, planning and technical teams. Appropriate investment in strategic land programme supported by specialist Group team. Effective use of our Land Bank Management system to support the land acquisition process. Close monitoring of progress of relevant local plans. Peer review by Legal Directors and use of third party legal resources for larger site acquisitions to reduce risk.
Planning and Regulatory Environment The inability to adapt to changes within the planning and regulatory environment could adversely impact on our ability to comply with regulatory requirements.	Group Chief Executive Group Human Resources Director Group Company Secretary	Close management and monitoring of planning expiry dates and CIL. Well prepared planning submissions addressing local concern and deploying good design. Careful monitoring of the regulatory environment and regular communication of proposed changes across the Group through the Executive Management Team. Proactive approach to managing data protection with multi-functional team meeting regularly.
Appropriateness of Product The failure to design and build a desirable product for our customers at the appropriate price may undermine our ability to fulfil our business objectives.	Group Design and Technical Director	Regular review and product updates in response to the demand in the market and assessment of our customer needs. Design focused on high quality build and flexibility to planning changes. Regular site visits and implementation of product changes to respond to demands. Focus on award winning Heritage Collection.
Attracting and Retaining Staff The loss of key staff and/ or our failure to attract high quality employees will inhibit our ability to achieve our business objectives.	Group Human Resources Director	Personal Development Programmes supported by National training centres at four locations. Graduate training, Undergraduate placements and Apprentice training programmes to aid succession planning. Bespoke housebuilding degree course in conjunction with Liverpool John Moores University and Coleg Cambria. Remuneration strategy in order to attract and retain talent within the business is reviewed regularly and benchmarked. Engagement Team and continued refinement of internal communications platform in addition to annual employee survey to create framework for strong, two-way communication. Flexible working policy. Equality, Diversity and Inclusion working group with membership from across the business.
Health and Safety/ Environment Non-compliance with regulations could put our people and the environment at risk. Increased elvels of scrutiny of the industry heightens the risk environment as does ensuring safe COVID-19 working practices are adhered to.	Group Health and Safety and Environmental Director	Dedicated in-house team operating across the Group to ensure compliance of appropriate Health and Safety standards supported by external professional expertise. Separate focus on Assurance visits to site and proactive management support to develop planning and processes. Monthly Divisional H, S & E Leadership meetings. Bi-annual Group H, S & E Leadership meetings. Internal and external training provided to all employees. Divisional Construction (Design and Management) Regulation (CDM) inspections carried out to assess our compliance with our client duties under CDM. Health and Safety discussion at both Group and divisional level board meetings. CDM competency accreditation requirement as a minimum for contractor selection process.
Key Supplier or Subcontractor Failure The failure of a key component of our supply chain to perform due to financial failure or production issues could disrupt our ability to deliver our homes to programme and budgeted cost. Failure to secure required resources as a result of leaving the EU.	Group Commercial Director	Use of reputable supply chain partners with relevant experience and proven track record and maintain regular contact. Monitoring of subcontract supply chain to maintain appropriate number for each trade to identify potential shortage in skilled trades in the near future. Subcontractor utilisation on sites monitored to align workload and capacity. Materials forecast issued to suppliers and reviewed regularly. Collaborate with Supply Chain Partners in development of updated Brexit supply continuity strategies. Collaborate with Supply Chain Partners in development of return to work plans. Group Monthly Product Development meetings to identify and monitor changes in the regulatory environment.
Cyber Security Failure of the Group's IT systems and the security of our internal systems, data and our websites can have significant impact to our business. The introduction of GDPR has increased the requirements for the control of personal data.	Chief Information Officer	Communication of IT policy and procedures to all employees. Regular systems back up and storage of data offsite. Internal IT security specialists. Use of third party entity to test the Group's cyber security systems and other proactive approach for cyber security including Cyber Essentials Plus accreditation. Compulsory GDPR and IT security online training to all employees within our business. The systems have proved resilient to increased home working.
Fraud/Uninsured Loss A significant fraud or uninsured loss could damage the financial performance of our business.	Group Finance Director	Systems, policies and procedures in place which are designed to segregate duties and minimise any opportunity for fraud. Regular Business Process Reviews undertaken to ensure compliance with procedure and policies followed by formal action plans. Timely management reporting. Insurance strategy driven by business risks. Fraud awareness training.

Responsibility Statement

We confirm that to the best of our knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS 34 interim Financial Reporting adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union;

· the interim management report includes a fair review of the information required by:

a)  DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

b)  DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

The Directors of Redrow plc as at the date of this statement are:

John Tutte

Matthew Pratt
Barbara Richmond
Nicholas Hewson
Sir Michael Lyons
Nicky Dulieu

By order of the Board

Graham Cope

Company Secretary

10 February 2021

Redrow plc

Redrow House

St David's Park

Flintshire
CH5 3RX

INDEPENDENT REVIEW REPORT TO REDROW PLC 

Conclusion 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the period ended 27 December 2020 which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and the related explanatory notes up to note 15.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the period ended 27 December 2020 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").

Scope of review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion. 

Directors' responsibilities 

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA. 

The latest annual financial statements of the group were prepared in accordance with International Financial Reporting Standards as adopted by the EU and the next annual financial statements will be prepared in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006.  The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

Our responsibility 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the DTR of the UK FCA.  Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. 

Nick Plumb

for and on behalf of KPMG LLP 

Chartered Accountants  

8 Princes Parade

Liverpool

L3 1 QH

10 February 2021

 

END

 

 

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