Final Results

RNS Number : 3549Z

Redrow PLC

14 September 2022

 

FOR IMMEDIATE RELEASE

Wednesday 14 September 2022

REDROW plc

Final results for the 53 weeks to

3 JuLY 2022

A return to the record underlying profits achieved pre covid

Financial Results

	2022	2021	Var	Var %
Legal Completions	5,715	5,620	95	2
Revenue	£2.14bn	£1.94bn	£0.2bn	10
Underlying profit before tax1	£410m	£314m	£96m	31
Statutory profit before tax	£246m	£314m	£(68m)	(22)
Underlying EPS1	96.0p	73.7p	22.3p	30
Statutory EPS	57.7p	73.7p	(16.0p)	(22)
Final dividend per share (DPS)	22.0p	18.5p	3.5p	19
Underlying ROCE1	24.54%	18.53%	6.01ppts	32
Total order book1	£1.44bn	£1.43bn	£0.01bn	1

Highlights

· Revenue increased by 10% to £2.14bn, back to 2019 pre Covid record level (2019: £2.11bn)

· Underlying profit before tax up 31% to £410m, also back to pre Covid record level (2019: £406m)

· Statutory profit before tax of £246m (2021: £314m) after exceptional fire safety costs of £164m (2021: nil)

· Strong cash generation with net cash at 3 July 2022 of £288m (June 2021: £160m)

· Underlying Return on Capital Employed of 24.54% up from 18.53%

· Final dividend increased by 19% to 22.0p making 32.0p for the year (2021: 24.5p)

· Further progress in the land market with c6,000 plots added to current land and c5,000 to forward land

· Launch of share buyback in July 2022 for up to £100m

· 94.5% customer recommendation score and 5 star status in HBF survey

· 83% overall employee engagement score (2021: 82%)

· Revenue based carbon reduction targets have been set for Scope 1, 2 & 3 in line with the goals of the Paris agreement

2024 Guidance update

The company is updating its 2024 guidance, primarily due to the benefit of the share buyback on EPS and DPS:

	Sept 2022	Feb 2022
Revenue (£bn)	2.3 - 2.4	2.3 - 2.4
EPS (p)	> 96	≥ 92
DPS (p)	> 32p	≥ 31
ROCE (%)	> 23	22 - 25

This guidance is based on current housing market conditions and subject to any further changes in them going forward.

Footnote :

¹ Redrow uses a variety of statutory performance measures and alternative performance measures when reviewing the performance of the Group. Underlying is defined as any statutory or alternative performance measure pre exceptional items. See note 10 for an explanation and reconciliation of these alternative performance measures.

Commenting on the results Richard Akers, Non-Executive Chairman of Redrow, said:

" I am delighted to report a year of strong growth which has resulted in our underlying profits returning to the record levels achieved in 2019 prior to Covid. Revenue increased by 10% to £2.14bn and underlying profit before tax was up 31% year on year, both ahead of our pre-covid 2019 figures.

Our award winning Heritage range of family housing in well chosen locations and with excellent place making has increased its appeal as the market has evolved, and remains ideally suited to our target home mover customer who tends to be more financially resilient. In addition to the record revenue achieved, the Group still ended the year with an order book of £1.44bn.

Excellent progress has been made during the year executing our strategy to grow in the regions. The new Southern business, based in Crawley, officially opened at the end of June but the team has been active in the land market for some time. This division is expected to make a positive contribution to profits in the current financial year.

At the end of this financial year our total land holdings stood at 67,400 plots, compared with 60,100 at the end of the 2019 financial year. Although the planning system is difficult at present, this gives us a strong pipeline of new outlets to continue our growth.

The Board is proposing a final dividend of 22.0p making a total of 32.0p for the year, up 31%. In addition, we recently announced a share buyback of up to £100m in line with our published capital allocation policy.

Given rising inflation and higher interest rates it is not surprising the buoyant housing market has moderated recently and demand has returned to historically average levels. It is on this basis we have prepared our medium term plan and we are confident our timely investment in land, combined with strong demand for our Heritage homes, will support our continued growth. In addition, our opening order book of over £1.4bn has put us in an excellent starting position for the 2023 financial year. As a result, the business is well placed to deliver another set of strong results. "

Enquiries:
Redrow plc
Richard Akers, Non-Executive Chairman	01244 527411
Matthew Pratt, Group Chief Executive	01244 527411
Barbara Richmond, Group Finance Director	01244 527411
Instinctif Partners	0207 457 2020
Tim McCall, Head of Capital Markets	07753 561862
Bryn Woodward, Associate Partner	0207 457 2045

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

There will be an analyst Q&A meeting with management at 9.30 am at The London Stock Exchange,

10 Paternoster Square, London, EC4M 7LS. Coffee will be served from 9.00 am.

A live audio webcast of this event will be available at 9.30 am on www.redrowplc.co.uk.

Participants can also dial in to the Q&A live at 9.30 am on [phone] or UK Toll Free 0800 640 6441; access code 570281.

A recording will be available until 21 September 2022 on [phone]; access code 667660.

LEI Number:

2138008WJZBBA7EYEL28

Announcement Classification:

1.1: Annual financial and audit report

CHAIRMAN'S STATEMENT

I am delighted to report a year of strong growth which has resulted in our underlying profits returning to the record levels achieved in 2019 prior to Covid-19. Revenue increased by 10% to £2.14bn and underlying profit before tax¹ was up 31% year on year, both ahead of our pre-covid 2019 figures.

The Group entered the year with a record order book of £1.4bn and strong demand for housing. In particular, our award winning Heritage range of family housing in well chosen locations and with excellent place making has increased its appeal as the market has evolved and remains ideally suited to our target customer. In addition to the £2.1bn of revenue achieved, the Group still ended the year with an order book of £1.44bn.

Financial results

The Group delivered 5,715 legal completions in the year (2021: 5,620). These completions generated revenue of £2.14bn (2021: £1.94bn). However, in terms of revenue from the sale of homes from the ongoing business¹, the increase was 20% to £2.07bn. Underlying profit before tax of £410m was up 31% on the previous year (2021: £314m). Underlying earnings per share increased by 30% to 96.0p (2021: 73.7p).

The Group generated £128m of cash to end the year with net cash of £288m, whilst continuing to invest in growth.

Our underlying Return on Capital Employed improved from 18.53% to 24.54%¹, close to our medium term target of 25%, and underlying Return on Equity increased from 17.95% to 21.45%¹.

In line with the company's policy of three times dividend cover the Board is proposing a final dividend of 22.0p making a total of 32.0p for the year, up 31%. Subject to shareholder approval at the Annual General Meeting on 11 November 2022, this will be paid on 16 November 2022 to all shareholders on the register at close of business on 23 September 2022.

In addition, following a recent review of the cash requirements of the business to achieve its long term growth plans, the Board announced on 14 July 2022 a share buyback of up to £100m in line with our published capital allocation policy. The programme is ongoing and scheduled to be completed by 31 July 2023. This is the second time the business has returned surplus cash to shareholders and follows the B share scheme of £111m in 2019.

Strategy

The Group has continued its withdrawal from the London market and that is expected to be complete by the end of calendar year 2022, other than the ongoing Colindale development.

Excellent progress has been made during the year executing our strategy to grow in the regions. The new Southern business, based in Crawley, officially opened at the end of June but the team has been active in the land market for some time. This division is expected to make a positive contribution to profits in the current financial year.

Capital released from London in the last two years has been reinvested in land to help grow the regional businesses. At the end of this financial year our total land holdings stood at 67,400 plots, compared with 60,100 at the end of the 2019 financial year. Although the planning system is difficult at present, this gives us a strong pipeline of new outlets to continue our growth.

Fire safety

On 5 April 2022, Redrow signed the Government's voluntary building safety pledge to remediate all residential buildings over 11 metres in which we were involved in the last 30 years. We have a full time team of colleagues expediting these works on a timely basis, in conjunction with the management companies of the buildings concerned. We have set aside provisions of £200m to cover these costs, including an exceptional charge of £164m and a non-exceptional charge of £10m in the 2022 financial year, and we expect the works to take a number of years to complete.

People

Nick Hewson will be stepping down as a Non-Executive Director at the forthcoming AGM having served nine years on the Board. Throughout most of his tenure, Nick has chaired the Audit Committee and since 2018 has been the Senior Independent Director. I would like to take this opportunity to thank Nick for his valuable contribution to the business.

On 1 February 2022, Oliver Tant was appointed to the Board as a Non-Executive Director and Audit Committee Chair-Designate. He is also a member of the Audit, Remuneration and Nomination Committees. He will take over as Chair of Audit on Nick's retirement from the Board.

I would like to thank everyone in the business for their efforts this year in contributing to our excellent financial performance and the ongoing success of our strategy.

Trading and outlook

Given rising inflation and higher interest rates it is not surprising the buoyant housing market has moderated recently and demand has returned to historically average levels. It is on this basis we have prepared our medium term plan and we are confident our timely investment in land, combined with strong demand for our Heritage homes, will support our continued growth. In addition, our opening order book of over £1.4bn has put us in an excellent starting position for the 2023 financial year. As a result, the business is well placed to deliver another set of strong results.

Richard Akers

Non-Executive Chairman

Footnote :

¹ Redrow uses a variety of statutory performance measures and alternative performance measures when reviewing the performance of the Group. Underlying is defined as any statutory or alternative performance measure pre exceptional items. See note 10 for an explanation and reconciliation of these alternative performance measures.

GROUP CHIEF EXECUTIVE'S REVIEW

Overview

It's been another excellent year of achievement for the Group. We have grown the business, whilst continuing to evolve our successful strategy based on our market leading Heritage Collection and prime locations.

Our underlying¹ profits have returned to the record levels achieved in 2019 pre Covid-19.

Our quality new homes reflect timeless exteriors with flexible and modern living spaces. Customers appreciate the additional value this brings and the unique way they can blend personal and work life to create a better way to live.

Cash buyers represented 33% (2021: 23%²) of our reservations as we continued to tap into the resilient downsizer market. Customers upgraded their homes with extras in record numbers, whether that be bespoke flooring, granite worktops or home offices. This continues to be a key point of differentiation for the business with customers selecting and completing their choices via the award winning My Redrow online service.

We have created sustainable value for our stakeholders and successfully delivered a number of strategic projects during the financial year, many of these as part of our successful Redrow 2025 initiative to accelerate innovation across the business. We have improved the customer experience; driven efficiency and pushed forward on improvements to our product range, in part to incorporate our climate change objectives. 

All these factors have ensured the underlying demand for our quality new homes continues to remain strong. Total legal completions increased to 5,715 from 5,620 in the previous year with revenues increasing by 10% to £2.14bn (2021: £1.94bn).

Reflecting the differentiation of our premium homes, the reservation value per outlet increased to £311k per week (2021: £288K) as we continued to deliver industry leading reservation rates on a revenue basis. Our average weekly reservation rate for the year was 0.68 (2021: 0.70) per outlet as we achieved a successful balance between pricing and volume.

Help to Buy was just 8.6% (2021: 28%²) of our reservations in the financial year under review (7% outside of London) as we successfully finalised our transition away from the scheme.

As we expected, its removal has had no impact on our reservations. This reflects the strategic advantage of Redrow's Heritage Collection and how it continues to set us apart from the rest of the market.

The intrinsic value of our quality homes, along with sales discipline, also enabled us to capitalise on strong overall house price inflation (HPI). Reservation prices increased on average by 12% across the financial year due to a combination of geographical and product mix and HPI. The effective management of HPI placed the business in a strong position and, going forward, will help to insulate the Group from any macro-economic challenges ahead.

This offset build cost inflation at around 10%. Commodity prices were driven higher as global inflation accelerated, along with demand for building materials. Material availability is now improving across many areas and shortages are beginning to ease. As supply increases, we expect prices to moderate. Furthermore, our strong supplier relationships continued to help us mitigate build cost inflation and fulfilment issues. Our site teams worked largely uninterrupted, whilst improving both production output and build quality.

We ended the financial year with a strong forward order book of £1.44bn (2021: £1.43bn) of which 76% (2021: 73%²) is exchanged. As we executed our previously announced strategy to exit our London sites (with the exception of Colindale Gardens), the cash generated from these disposals funded land acquisitions within our strong regional network. This included our new Southern division which formally opened at the end of June 2022. It will contribute to profits in the current financial year. Covering Surrey and East and West Sussex, it is in a perfect position to capitalise on strong demand for our homes within London's commuter belt. 

During the financial year under review, our land buying activity was selective. We focused on land replacement and moderate growth - all at normal average hurdle rates. We were able to do this because of our substantial land investment in 2021, when we added over £3bn of Gross Development Value to our land holdings with planning.

We added 5,958 plots with planning across 24 sites in the year, with a GDV of over £2.3bn. During the year we also purchased a number of sites, some of which were allocated through the local plans at enhanced margins to reflect the time-risk associated with getting them through the planning process.

As previously guided our average outlets were 111 (2021: 117), which was in part a result of our reduced land purchases during the early stage of the Covid-19 pandemic, but particularly due to our strong sales rate, which meant outlets closed more quickly than originally expected. 

We expect next year's outlets to increase to 120 as a result of our land purchases in 2020, which are now coming on-stream.

We ended the year with net cash of £288m (2021: £160m). Having considered our strong land position, the cash needs of the business to achieve our growth plans and the prevailing share price, the Board concluded the Group has sufficient funds to enter into a capital return in the form of a Share Buy Back programme up to a maximum of £100m. Announced in July, it is delivering value for our shareholders, whilst maintaining our growth strategy.

Strategy and Meeting the Climate Challenge

Our purpose is to create a better way to live. We have a robust strategy in place to deliver on this aim, which is based on our three pillars: Thriving Communities, Building Responsibly and Valuing People. It focuses on the activities we believe will create the most value in the long term, for our stakeholders.

During the financial year we conducted an assessment using the double materiality approach to ensure that we continue to understand what matters most to our stakeholders. Understanding their most pressing issues is crucial to help shape our business strategy. It's clear one of the top issues is the shared goal of addressing climate change and reducing carbon emissions.

Steady progress has been made to reduce our Scope 1 and 2 emissions and we are taking further actions this year to make sure emissions continue to come down. We have taken the significant step of setting, and submitting for validation, our ambitious near-term science-based carbon reduction targets for Scope 1, 2 and 3 in line with the goals of the Paris Agreement.

Our Redrow 8 Placemaking principles, which we have been following for more than three years, are a key point of differentiation for Redrow. They are at the heart of what we do and have created a culture of great placemaking within the business, which is instrumental in delivering wider social value and benefits for wildlife - generating greater wellbeing for customers, communities and nature.

The housing industry is subject to intense Government pressure and a rapidly moving regulatory agenda. The upheaval in Westminster, with another recent change of Housing Minister, is unhelpful. This is particularly the case in an industry which benefits from a long-term strategic approach to housing.

Despite this, the Group is well positioned to embrace all aspects of the current Government policy plans.

We welcome the introduction of the New Homes Quality Code and the New Homes Ombudsman which will help to improve the reputation of the industry and provide additional reassurance to customers.

From our perspective it will help to further differentiate our approach to build quality and customer service. The introduction of our online Homeowner Support Portal with over 90% of customers submitting their moved-in incidents online; the launch of our new online complaints system and our extensive colleague training programme, means we are in an excellent position to embrace the new regime. We were very pleased that 94.5% of our customers would recommend Redrow as part of the NHBC survey and we continue to be rated as 'excellent' on Trustpilot.

In April 2022 we signed the Building Safety Pledge, formally agreeing to the principle that leaseholders should not have to pay for any costs associated with life critical fire-safety remediation work arising from the design, construction or refurbishment of buildings of over 11 metres and going back 30 years.

We have appointed a project team and scoped the number of buildings that fall within the pledge criteria. We have written to all responsible entities in relation to these buildings. The process of remediating affected blocks will take a number of years but we are committed to completing the process as efficiently as possible.

We repeat our calls for overseas-based developers to be subject to the same framework as domestic-based organisations. Equally relevant, materials providers in the supply chain need to address their responsibilities and contribute to the cost.

It is fundamentally unfair for domestic developers to bear the sole financial burden, whilst overseas developers seemingly evade any sort of contribution.

The Group is prepared for the introduction of the Part L regulations and has reflected the additional cost within all land purchases and existing sites. We are currently trialling Air Source Heat Pumps as part of our Future Homes Standard plans and have a clear pathway to meeting the required standards.

The 'fabric first' energy efficiency of our homes is the fundamental starting point and places new build at an advantage to second hand homes. This plays directly into our successful strategy of targeting that part of the overall housing market. 

An overly bureaucratic planning system continues to be a significant constraint on house builders, but also the economy as a whole. In addition, there are not enough council planning officers and the process continues to be beset with delays. This is further exacerbated by the water neutrality and nutrient neutrality issues.

The knock-on effect within the supply chain is very significant and ultimately it means communities do not have the opportunity to secure the quality new housing they so badly need. As a large housebuilder we are best placed to navigate these challenges, but inevitably they will eventually drive smaller to medium sized house builders out of the market.

People

In our recent Insight survey over 94% of our colleagues were, once again, proud to work for Redrow. We are delighted with this feedback, reflecting the moves we've made to modernise the way we work and the quality of our product and customer experience.

Around 15% of our workforce are trainees as we continue to inspire the next generation to build as part of our Valuing People strategic pillar. Our inhouse training team deliver a range of programmes to develop our trainees as they grow throughout the business. Pleasingly, in the financial year under review, we had 261 internal promotions.

Market Outlook

Over the last two years the market has been incredibly strong with elevated demand, partly resulting from people's changed priorities around working from home. We are now seeing a return to a more normal market where demand is moderating to historical levels.

We capitalised on last year's strong market with our focus on HPI. This was possible because of our strong, differentiated product and these gains are now embedded in our forward order book.

This provides the business with additional resilience to weather any potential deterioration in the macro-economic picture.

In this market environment our Heritage Collection remains highly desirable. Our focus on innovative placemaking, paired with our premium detached homes, keeps us well positioned to meet the requirements of our potential customers.

The fundamentals of the market remain good. Interest rates, despite recent increases, are at historically low levels; mortgage availability is very good and employment levels are strong.

We are well aware of the challenges of the increasing cost of living. It's clear our quality new homes will have a growing and additional point of differentiation from the second hand market around energy efficiency.

In the first 10 weeks of the new financial year demand has moderated to historic levels. The value of private reservations was £360m (2022: £340m) and, more importantly, our revenue per outlet per week continued to be at a market leading level of £296k (2022: £294k) demonstrating the desirability of our Heritage Collection.

Our colleagues and partners strive every day to create quality homes and places for our customers and I'd like to, once again, thank them for their dedication, hard work and support, which is so crucial to Redrow's ongoing success.

The advantage derived from our people, combined with our approach to evolve our proven strategy, places Redrow in an excellent position to continue its strong progress.

Matthew Pratt

Group Chief Executive

Footnotes :

¹ Redrow uses a variety of statutory performance measures and alternative performance measures when reviewing the performance of the Group. Underlying is defined as any statutory or alternative performance measure pre exceptional items. See note 10 for an explanation and reconciliation of these alternative performance measures.

² 2021 comparatives are for a like for like 53 week year.

FINANCIAL REVIEW

Underlying Performance

This year the Group has delivered an excellent financial performance. Our underlying operating profit at £414m¹ (2021: £321m) represents a return to the pre Covid-19 record levels achieved in 2019 (2019: £411m). Careful control of working capital resulted in a return on capital employed of 24.54% (2021: 18.53%) and we generated £128m of cash, ending the year with net cash of £288m (2021: £160m). FY22 was a 53 week year compared to FY21 which was a 52 week year.

These results, combined with the regular review of our cash needs to achieve our long term growth plans and the prevailing share price which was at a significant discount to net asset value, led to the launch in July of a share buyback of up to £100m. This will return to shareholders cash which is surplus to that needed for growth and our ongoing dividend payout ratio.

Revenue, legal completions and outlets

Total Group revenue was £2.1bn (2021: £1.9bn), an increase of 10%. Homes revenue increased by 11% to £2.1bn (2021: £1.9bn) from the completion of 5,715 new homes (2021: 5,620) and other revenue from land sales was lower than in the prior year as expected at £21m (2021: £37m which included the disposal of two London sites the Group decided not to build out).

Homes Revenue has grown substantially in all the regional businesses. Total Homes revenue for the ongoing business¹ increased by 20%, more than compensating for the reduced revenue as we build out our remaining non-core London sites. Despite outlets constraining volume growth, we have increased revenue due to product and geographical mix within and across regions, together with house price inflation.

Revenue from private houses increased by 23% to £1.7bn (2021: £1.4bn) whilst revenue from private apartments decreased by 28% to £0.2bn (2021: £0.3bn) in line with the growth of the regional housing businesses and reduction of the London apartments business.

Affordable revenue was marginally down at £207m (2021: £214m) due to the timing of legal completions. It represented 10% of homes revenue (2021: 11%).

Our Heritage Collection contributed 88% of private revenue in the year up from 79% last year. This reflects the strategic shift towards quality family detached homes in primary regional locations, focusing on the home mover segment.

Average selling price increased by 9% to £370,800 (2021: £338,500) reflecting an increase in both private and affordable housing selling prices compared to the previous year. The private average selling price at £428,200 was 9% higher than last year (2021: £391,900) and affordable housing selling prices increased by 2% to £165,600 (2021: £162,900).

We delivered 5,715 legal completions in FY22, a 2% increase on prior year levels (2021: 5,620). Affordable homes represented 22% of legal completions (2021: 23%).

Average active outlets decreased to 111 (2021: 117) broadly in line with the guidance we issued last year. This decrease reflects the combination of a strong housing market and the time required to obtain implementable planning permissions. Given our success in land buying in the last two years, we continue to guide to an average of 134 active outlets in the 2024 financial year subject as ever to the operation of the planning system.

Reservations and Order book

The Group secured £1.82bn of net private reservations in the 53 weeks to 3 July 2022 compared to £1.79bn on a like for like 53 week basis in the previous year. We ended the financial year with a private order book of £1.1bn (2021: £1.2bn) and a total order book of £1.4bn, broadly in line with last year.

Profitability

Underlying gross profit was £516m¹, a 25% increase on the prior year (2021: £414m). This represents an underlying gross margin of 24.1%¹ (2021: 21.4%) with house price increases more than covering build cost inflation.

Administrative expenses increased by £9m to £102m (2021: £93m) due to cost inflation in the second half of the year and the increased investment in the Southern division prior to its official opening at the end of June. Administrative expenses are 4.8% of revenue, in line with the previous year (2021: 4.8%).

The Group therefore delivered an underlying operating profit of £414m¹ (2021: £321m) in the year at an operating margin of 19.3%¹ (2021: 16.6%).

Net financing costs at £4m were £2m lower than the prior year with bank interest reducing due to the improved net cash position. We had an average monthly net cash balance of £250m for the year compared to £142m the previous year.

As a result, the Group delivered an underlying profit before tax of £410m¹ (2021: £314m) for the year with underlying basic earnings per share up 30% at 96.0p¹ (2021: 73.7p). 

On 5 April 2022, the Group signed the Government's Building Safety Pledge in respect of funding the remediation of life critical fire safety issues on buildings over 11 metres in which the Group were involved, whether or not it constructed them, going back 30 years. An additional £164m legacy fire safety provision was created and charged to cost of sales in April in respect of the buildings the Group has agreed to remediate solely as a result of signing the voluntary Building Safety Pledge. This has been treated as exceptional as it is outside the normal course of business, non-recurring and material by size and nature. A copy of our signed pledge letter can be found on our website www.redrow.co.uk.

As a result of the exceptional item noted above statutory gross profit delivered was £352m (2021: £414m), statutory operating profit was £250m (2021: £321m) and statutory profit before tax was £246m, a reduction of £68m on the prior year (2021: £314m).

Tax

The corporation tax charge for the year was £49m (2021: £60m). The Group's tax rate for 2022 was 20% (2021: 19%). This increase in effective rate is a result of the introduction by HMRC of Residential Property Developer Tax (RPDT) at the rate of 4% from 1 April 2022 as the Group falls within the scope of this new tax which aims to provide funds for the Government's Building Safety fund. The normalised rate of corporation tax for the year ending 30 June 2023 is projected to increase to 24.5% based on corporation tax and RPDT rates which are substantively enacted currently.

The Group paid £55m of corporation tax in the year (2021: £54m), in four instalments.

Dividends

The Board has proposed a 2022 final dividend of 22.0p per share which will be paid on 16 November 2022 to Shareholders on the register on 23 September 2022, subject to Shareholder approval at the 2022 Annual General Meeting. This gives a full year dividend of 32.0p (2021: 24.5p) on underlying earnings per share of 96.0p¹ (2021: 73.7p), a payout ratio of 33% of underlying earnings, in line with our stated policy.

Returns

Net assets at 3 July 2022 were £1,950m (2021: £1,872m), a 4% increase representing a net asset value of £5.54 per share (2021: £5.32 per share). Capital employed at the same date was £1,662m (2021: £1,712m) down 3% due to the increased net cash. Our return on capital employed increased to 24.54%¹ (2021: 18.53%). Return on equity also increased from 17.95% to 21.45%¹.

Land

Our gross investment in land at £1,710m (2021: £1,526m) increased significantly as we continued to invest in land and comprises land holdings owned with planning of approximately 5.2 years (2021: 5.2 years).

Our land buying expertise, placemaking and design abilities and strong balance sheet helps us secure quality land holdings in primary locations. During the financial year the Group acquired c6,000 plots with planning permission to add to our current (owned and contracted) land holdings (2021: c8,300). We closed the year with 29,600 plots in the current land holdings, a slight increase on prior year levels (2021: 29,460 plots).

Forward land is also important to us and we purchased a number of strategically important forward land holdings during the year, closing the year with forward land holdings of 37,800 plots (2021: 34,400 plots). Approximately 27% of our current land holding additions in FY22 came from our forward land holdings. This is lower than the prior year due to the time taken to secure implementable planning permissions (2021: 43%).

Land creditors increased by £82m to £376m at June 2022 (2021: £294m) representing 22.0% of gross land value, an increase on the prior year (2021: 19.3%).

Our owned plot cost has increased by £5,000 to £81,000 (2021: £76,000) whilst still representing 19% (2021: 19%) of the average selling price of private legal completions in the year. This reflects the geographic mix of our land purchases in the year.

Work in progress

Our investment in work in progress has increased by £43m to £1,030m (2021: £987m) reflecting increased activity levels. As a percentage of Homes turnover it reduced to 49% from 52% last year, due to the reduction in apartment schemes.

Receivables

Trade receivables and contract assets decreased by £30m at 3 July 2022 to £45m (2021: £75m) due primarily to the timing of PRS receipts. Other receivables increased from £21m to £25m mainly due to the timing of the recovery of VAT on land purchases.

Payables

Trade payables, customer deposits and accruals were £6m higher than 2021 levels at £613m (2021: £607m) with trade payables increasing and customer deposits and accruals decreasing reflecting levels and timing of activity.

Provisions

Provisions increased by £173m during the year due to the £164m exceptional legacy fire safety provision mentioned earlier together with a pre pledge £10m increase on June 2021 remedial provision levels actioned at our December 2021 half year end. We expect £97m to be utilised in FY23.

Cash flow and Net Cash

There was a cash inflow generated from operations of £318m in the year (2021: £362m). This is due to the increase in legal completions and hence revenue and cash receipts more than offsetting our continued investment in inventories. As a result we closed the year with a net cash of £288m (2021:£160m). Our cash conversion percentage (see note 10) was 125% compared to 110% in the prior year.

Financing and Treasury Management

Our unsecured £350m syndicated loan facility was extended in March 2021 and is due to mature in September 2025.

Redrow remains a UK based housebuilder and therefore the main focus of its financial risk management surrounds the management of liquidity and interest rate risk. Financial management at Redrow is conducted centrally using policies approved by the Board.

(i)  Liquidity

The Group regularly prepares and reviews its cash flow forecasts and stress tests them. These are used to manage liquidity risks in conjunction with the maintenance of appropriate committed banking facilities to ensure we maintain medium term committed banking facilities sufficient for a major market breakdown.

Facilities are kept under regular review and the Group maintains regular contact with its banks and other financial institutions; this ensures Redrow remains attuned to new developments and opportunities and that our facilities remain aligned to our strategic and operational objectives and market conditions.

Our current banking syndicate comprises six banks and in addition to our committed facilities, Redrow also has further uncommitted bank facilities which are used to assist day to day cash management.

(ii)  Interest rate risk

The Group is exposed to interest rate risk as it borrows money at floating rates. Redrow occasionally uses simple risk management products, notably sterling denominated interest rate swaps, as appropriate to manage this risk. Such products are not used for speculative or trading purposes. Redrow regularly reviews its hedging requirements. No hedging was undertaken in the year or the previous financial year and no interest rate swaps are held currently (2021: nil). 

Pensions

As at 3 July 2022, the Group's financial statements showed a £39m surplus (2021: £40m surplus) in respect of the defined benefits section of The Redrow Staff Pension Scheme (which closed to future accrual with effect from 1 March 2012).

Barbara Richmond

Group Finance Director

Footnote :

¹ Redrow uses a variety of statutory performance measures and alternative performance measures when reviewing the performance of the Group. Underlying is defined as any statutory or alternative performance measure pre exceptional items. See note 10 for an explanation and reconciliation of these alternative performance measures.

Consolidated Income Statement

53 WEEKS ENDED 3 JULY 2022 / 52 WEEKS ENDED 27 JUNE 2021		2022 Pre- Exceptional Item £m	2022 Exceptional Item £m	2022 Total £m	2021 £m
	Note
Revenue		2,140	-	2,140	1,939
Cost of sales		(1,624)	(164)	(1,788)	(1,525)
Gross profit		516	(164)	352	414
Administrative expenses		(102)	-	(102)	(93)
Operating profit		414	(164)	250	321
Financial income		2	-	2	1
Financial costs		(6)	-	(6)	(8)
Net financing costs		(4)	-	(4)	(7)
Profit before tax		410	(164)	246	314
Income tax expense	2	(82)	33	(49)	(60)
Profit for the year		328	(131)	197	254
Earnings per share - basic	4	96.0p		57.7p	73.7p
- diluted	4	95.8p		57.5p	73.6p

Statement of Comprehensive Income

53 WEEKS ENDED 3 JULY 2022 / 52 WEEKS ENDED 27 JUNE 2021		2022 Pre- Exceptional Item £m	2022 Exceptional Item £m	2022 Total £m	2021 £m
Profit for the year		328	(131)	197	254
Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss
Remeasurements of post-employment benefit obligations		(1)	-	(1)	16
Deferred tax on remeasurements taken directly to equity		-	-	-	(9)
Other comprehensive (expense)/income for the year net of tax		(1)	-	(1)	7
Total comprehensive income/(expense) for the year		327	(131)	196	261

Balance Sheet

		As At 3 July 2022	As At 27 June 2021
	Note	£m	£m
Assets
Intangible assets		1	-
Property, plant and equipment		20	19
Lease right of use assets		5	6
Investments		-	-
Deferred tax assets		1	1
Retirement benefit surplus		39	40
Trade and other receivables		-	-
Total non-current assets		66	66
Inventories	5	2,740	2,513
Trade and other receivables		76	100
Current corporation tax		7	1
Cash and cash equivalents	8	288	160
Total current assets		3,111	2,774
Total assets		3,177	2,840
Equity
Retained earnings at 28 June 2021/29 June 2020		1,768	1,522
Profit for the year		197	254
Other comprehensive income for the year		(1)	7
Dividend paid		(100)	(21)
Movement due to equity based share options and owned shares held by EBT		(18)	6
Retained earnings at 3 July 2022/27 June 2021		1,846	1,768
Share capital	9	37	37
Share premium account		59	59
Other reserves		8	8
Total equity		1,950	1,872
Liabilities
Bank loans	8	-	-
Trade and other payables	6	91	152
Deferred tax liabilities		15	15
Long-term provisions		110	34
Total non-current liabilities		216	201
Trade and other payables	6	914	767
Provisions		97	-
Total current liabilities		1,011	767
Total liabilities		1,227	968
Total equity and liabilities		3,177	2,840
Redrow plc Registered no. 2877315

Statement of Changes in Equity

	Note	Share capital £m	Share premium account £m	Other reserves £m	Retained earnings £m	Total £m
Total equity at 29 June 2020		37	59	8	1,522	1,626
Profit for the year		-	-	-	254	254
Other comprehensive income for the year		-	-	-	7	7
Total comprehensive income relating to the year (net)		-	-	-	261	261
Dividend paid - distributions to owners	3	-	-	-	(21)	(21)
Net purchase of own shares to satisfy share options		-	-	-	-	-
Other LTIP/DB/SAYE credit		-	-	-	6	6
Total equity at 27 June 2021		37	59	8	1,768	1,872
Profit for the year		-	-	-	197	197
Other comprehensive expense for the year		-	-	-	(1)	(1)
Total comprehensive income relating to the year (net)		-	-	-	196	196
Dividend paid - distributions to owners	3	-	-	-	(100)	(100)
Net purchase of own shares to satisfy share options		-	-	-	(22)	(22)
Other LTIP/DB/SAYE credit		-	-	-	4	4
Total equity at 3 July 2022		37	59	8	1,846	1,950

Statement of Cash Flows

		53 weeks ended 3 July 2022	52 weeks ended 27 June 2021
Cash flows from operating activities	Note	£m	£m
Profit for the year		197	254
Depreciation and amortisation		5	7
Financial income		(2)	(1)
Financial costs		6	8
Income tax expense		49	60
Adjustment for non-cash items		7	4
Decrease/(increase) in trade and other receivables		24	(62)
(Increase)/decrease in inventories		(227)	72
Increase/(decrease) in trade and other payables		86	(6)
Increase in provisions		173	26
Cash inflow generated from operations		318	362
Interest paid		(2)	(4)
Tax paid		(55)	(54)
Net cash inflow from operating activities		261	304
Cash flows from investing activities
Acquisition of software, property, plant and equipment		(4)	(2)
Interest received		1	-
Receipts from joint ventures		-	9
Net cash (outflow)/inflow from investing activities		(3)	7
Cash flows from financing activities
Issue of bank borrowings	7	-	-
Repayment of bank borrowings	7	-	(170)
Payment of lease liabilities		(3)	(3)
Purchase of own shares		(27)	(1)
Dividend paid	3	(100)	(21)
Net cash (outflow) from financing activities		(130)	(195)
Increase in net cash and cash equivalents		128	116
Net cash and cash equivalents at the beginning of the year		160	44
Net cash and cash equivalents at the end of the year		288	160

NOTES

1.  Basis of preparation

The financial information set out above does not constitute the company's statutory accounts for the period ended 3 July 2022 but is derived from those accounts. Statutory accounts for the year ended 27 June 2021 have been delivered to the registrar of companies, and those for 3 July 2022 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way on emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The audited consolidated financial statements from which these results are extracted have been prepared under the historical cost convention and in accordance with UK-adopted international accounting standards (IFRS) and applicable law.

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

Going concern

The financial statements have been prepared on a going concern basis which the Directors consider to be appropriate for the reasons outlined below.

The Group has a £350m Revolving Credit Facility (RCF) (2021: £350m) provided by an established syndicate of six banks being Barclays Bank PLC, Lloyds Bank Plc, The Royal Bank of Scotland Group Plc, Santander, HSBC and Svenska. This expires in September 2025 (2021: September 2025) and is a committed unsecured facility. As at 13 September 2022, £350m of this facility was undrawn. It is likely that the RCF will be renewed prior to its expiry in September 2025.

In addition the Group is in a net cash position at 3 July 2022 and 13 September 2022 and also has £3m of unsecured, uncommitted facilities.

The Directors have prepared forecasts including cashflow forecasts for a period of at least 12 months from the date of signing of these financial statements (the going concern assessment period). These forecasts incorporate assumptions about the timing of legal completions of new homes and land purchases, build cost inflation, profitability and working capital requirements. 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 10% price reduction on all unexchanged private and social legal completions for the going concern assessment period compared to the base case Board approved budgeted prices;

· 15% volume reduction for the going concern assessment period compared to the base case Board approved budgeted volumes; and

· In addition to the build inflation incorporated within the base case Board approved budgeted costs, an additional 5% build cost inflation increase has been applied to all build costs from Q1 FY23 and further increases of 5% from Q1 FY24 and 2% from Q1 FY25.

These downside assumptions reflect the further potential impact of the war in Ukraine, disruption in the energy and fuel market, increasing inflation, increased economic uncertainty, increasing rates of unemployment and the impact on 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 has adequate resources in place for the forecast period and have therefore adopted the going concern basis of accounting in preparing these financial statements.

The principal accounting policies have been applied consistently.

2.  Income Tax expense
		2022 Pre- Exceptional Item £m	2022 Exceptional Item £m	2022 Total £m	2021 £m
Current year
UK Corporation Tax in respect of current year		82	(33)	49	59
Adjustments in respect of prior years		-	-	-	-
Current tax charge/(credit)		82	(33)	49	59
Deferred tax
Origination and reversal of temporary differences		-	-	-	1
Adjustments in respect of prior years		-	-	-	-
Deferred tax charge		-	-	-	1
Total income tax charge/(credit) in income  statement		82	(33)	49	60
Reconciliation of tax charge for the year
Profit before tax		410	(164)	246	314
Tax calculated at UK Corporation Tax rate at 19.0% (2021: 19.0%)		78	(31)	47	60
Residential Property Developer Tax at 1.0% (2021: N/A)		4	(2)	2	-
Tax charge for the year		82	(33)	49	60

An increase in the UK corporation tax rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2022. This will increase the Company's future current tax charge accordingly. In addition, the Government introduced a new Residential Property Developer tax of 4% on profit effective from 1 April 2022. The deferred tax asset at 3 July 2022 has been calculated at 29% based on these rates (2021: 25%) with the exception of the deferred tax liability on employee benefits which has been calculated at 35% (2021: 35%). This reflects the results of the latest triennial valuation of the defined benefit section of The Redrow Staff Pension Scheme which now suggests the return of the IAS 19 surplus is highly likely to take the form of a lump sum cash refund rather than a reduction in future deficit contributions.

Residential Property Developer Tax commenced on 1 April 2022 at a rate of 4.0% per annum, hence 1.0% for the 3 months ended 3 July 2022.

3.  Dividends

The following dividends were paid by the Group:

		2022	2021
		£m	£m
Prior year final dividend per share of 18.5p (2021: nil);
Current year interim dividend per share of 10.0p (2021: 6.0p)		100	21
		100	21

The Board is proposing a final dividend of £77m being 22.0p per share (2021: £65m being 18.5p per share) subject to shareholder approval at the Annual General Meeting on 11 November 2022.

4.  Earnings per ordinary share

The basic earnings per share calculation for the 53 weeks ended 3 July 2022 is based on the weighted average number of shares in issue during the period of 342m (2021: 344m) excluding those held in trust under the Redrow Long Term Incentive Plan (11m shares (2021: 8m shares)), 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.

For the 53 weeks ended 3 July 2022

	Earnings	No. of shares	Per share
UNDERLYING - PRE-EXCEPTIONAL ITEM	£m	millions	pence
Basic earnings per share	328	342	96.0
Effect of share options and SAYE	-	1	(0.2)
Diluted earnings per share	328	343	95.8

	Earnings	No. of shares	Per share
STATUTORY	£m	millions	pence
Basic earnings per share	197	342	57.7
Effect of share options and SAYE	-	1	(0.2)
Diluted earnings per share	197	343	57.5

For the 52 weeks ended 27 June 2021

	Earnings	No. of shares	Per share
	£m	Millions	pence
Basic earnings per share	254	344	73.7
Effect of share options and SAYE	-	1	(0.1)
Diluted earnings per share	254	345	73.6

5.  Inventories

		2022	2021
		£m	£m
Land for development		1,710	1,526
Work in progress		962	910
Stock of showhomes		68	77
		2,740	2,513

Inventories of £1,715m were expensed in the year (2021: £1,465m).Land for development includes £111m of strategic land owned without a residential planning consent net of net realisable value provision of £14m (2021: £11m and £6m).

6.  Land Creditors(included in trade and other payables)

		2022	2021
		£m	£m
Due within one year		289	144
Due in more than one year		87	150
		376	294

7.  Borrowings and loans

		2022	2021
		£m	£m
Opening net book amount		-	170
Issue of bank borrowings		-	-
Repayment of bank borrowings		-	(170)
Closing net book amount		-	-

At the year end the Group had £350m (2021: £350m) of undrawn committed bank facilities available.

8.  Analysis of net cash

		2022	2021
		£m	£m
Cash and cash equivalents		288	160
Bank loans		-	-
		288	160

9.  Share capital

		2022	2021
		£m	£m
Issued and fully paid		37	37

		Number of ordinary
		shares
As at 27 June 2021 and 3 July 2022 (ordinary shares of 10.5p each)		352,190,420

10.  Alternative Performance Measures

Redrow uses a variety of Alternative Performance Measures (APMs) which are not defined or specified by

IFRSs but which the Directors believe are pertinent to reviewing and understanding the broader performance of the Group, in conjunction with IFRS defined measures.

Cash conversion percentage

				2022	2021
Cash inflow generated from operations per statement of cash flows				£318m	£362m
divided by
Operating profit per consolidated income statement				£250m	£321m
Amortisation and depreciation				£5m	£7m
				£255m	£328m
Cash conversion percentage				125%	110%

Full year dividend per share

Interim and final dividend per share declared in respect of the financial year.

Homes revenue from ongoing business

				2022 £m	2021 £m
Revenue per consolidated income statement				2,140	1,939
Revenue from the sale of land				(21)	(37)
Revenue from the sale of new housing				2,119	1,902
Revenue from London Build Out sites				(52)	(181)
Homes revenue from ongoing business				2,067	1,721

Hurdle rates

Gross margin and internal rate of return minimum rates required for land purchase appraisals.

Land holding years

No. of plots in owned land holdings at balance sheet date divided by no. of legal completions in financial year.  

				2022	2021
Owned land holdings at 3 July 2022/27 June 2021				29,600	29,460
Legal completions				5,715	5,620
Land holding years				5.2	5.2

Legal completions

The number of homes legally completed in the financial year.

Net asset value per ordinary share

Total net assets at balance sheet date divided by the number of ordinary shares in issue at balance sheet date.

Number of trainees

No. of trainees at year end as a percentage of employees at year end.

Order book

The value of reserved and exchanged sales which had not legally completed at the year end.

Private reservation rate

No. of private reservations per week in financial year divided by average no. of sales outlets.

Underlying return on capital employed (Underlying ROCE)

Operating profit before exceptional items adjusted for joint ventures as a percentage of opening and closing capital employed.

Underlying return on equity (Underlying ROE)

Profit before tax before exceptional items adjusted for joint ventures as a percentage of opening and closing net assets.

				2022 £ m	2021 £ m
Net assets at 3 July 2022/27 June 2021				1,950	1,872
Net assets at 27 June 2021/30 June 2020				1,872	1,626
Average net assets				1,911	1,749
Profit before taxation - pre-exceptional				410	314
Return on equity %				21.5%	18.0%

Revenue value of private reservations secured in the year

The fair value receivable in the future of private house sales reserved by customers during the year, net of

cancellations.

Sales outlets

Average no. of sales outlets open in the year.

Underlying profit before tax

Profit before tax pre-exceptional item

Underlying earnings per share

As statutory earnings per share but based on pre-exceptional profit for the year per the consolidated income statement.

Underlying gross profit

Gross profit per the consolidated income statement pre-exceptional item.

Underlying operating profit

Operating profit per the consolidated income statement pre-exceptional item.

11.  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

12.  Annual General Meeting

The Annual General Meeting of Redrow plc will be held on 11 November 2022 and the Notice of Meeting, together with explanatory notes, will be sent to shareholders in due course.

A copy of this statement is available for inspection at the registered office.

 

END

 

 

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