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Major house builder to scale back London operations as turnover falls by more than a third
Major house builder Redrow has issued a profit warning to investors as coronavirus causes returns to be “substantially below” last year’s and announced plans to scale back its London work.
In a stock exchange note, Redrow said the COVID-19 pandemic has had a “profound impact” on the group’s results in a year that was budgeted to be disproportionately weighted to the end of the second half.
Redrow said it expects its turnover to fall by 36% from last year’s £2.11bn to £1.34bn by the year ended on 28 June.
The group completed 4,032 homes in the year to the end of June compared with 6,443 in the previous year.
Redrow noted that coronavirus has shifted home movers’ priorities, with buyers wanting more inside and outside space and this has led the group to scale back its operations in London and focus on higher returning regional businesses.
“As a consequence of the impact of COVID-19 and making these provisions, the profit for 2020 will be substantially below 2019,” the group said.
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Since the reopening of sales offices, the house builder has seen strong “pent-up” demand especially through the government’s Help to Buy scheme, which Redrow called for an extension to.
“To ensure the recovery [of the housing market] is sustainable and buyers intending to use the scheme have the opportunity to do so, we urge the government to approve an extension to the existing scheme beyond March next year or change the scope of the new scheme to provide access to a broader range of buyers,” the note said.
Despite expected shortfalls in profits, the group said it has resilient cash flow and will therefore return all payments received under the government’s Coronavirus Job Retention Scheme, following a similar move by Taylor Wimpey.
Redrow also enters the new financial year with a record order book of £1.42bn, compared with £1.02bn last year.
Executive chair John Tutte said the pandemic has been a “challenging” time for the industry but that Redrow has demonstrated its resilience.
He added: “While these extraordinary times have been testing for the business, they have provided us with an opportunity to focus on our core strengths putting product, customer satisfaction and the environment at the heart of a recovery strategy to maximise shareholder returns.”
Redrow was one of a number of major house builders to announce it was cutting or deferring dividends as the pandemic hit.
