A reassuring trading update ahead of today’s AGM helped shares in housebuilder Redrow (RDW) to gain 2.8% to 453.2p.
The company continues to expect to reinstate dividend payments at the half year stage and to be cash positive for the remainder of the financial year, according to the statement covering the 18-week period ending 30 October.
HUGE CASH PILE
The update, which will be presented at its AGM by chairman John Tutte, will say that Redrow’s balance sheet is strong with net cash of £115 million, compared to net debt £32 million in 2019.
Tutte will say that the housebuilder ‘entered the new financial year in a position of strength’, which has been ‘reinforced with strong trading since the start of the year’. Also, there has been resolute demand for homes with more space to live and work as customers reflect on their lockdown experiences.
Redrow is making good progress on scaling-back its operations in London. It has now exited three of the six sites that it decided not to develop and it continues to make headway on the balance.
Revenue and the order book are up year-on-year for the period, by 48% to £657 million and 10% to £1.5 billion respectively, with the main fly in the ointment delays on planning.
ANALYST REASSURED BY UPDATE
Canaccord Genuity analyst Aynsley Lammin said: ‘The AGM update reads very reassuringly. Trading since the start of the new financial year has been very strong with pricing remaining firm. There is particular strength in the regions with demand for homes with more space.
‘The group’s order book remains very strong at circa £1.5 billion despite a strong increase in turnover to date. The net cash position was also stronger than we expected and the group expects to remain cash positive to the end of the financial year.
‘The update reiterates that dividends are expected to be reinstated this year. The only negative is the comment that planning issues remain frustrating but the group is on track for an average of 118 sites this year as expected.
‘We would expect consensus 2020 pre-tax profit to move up on this positive update on better revenue expectations and more confidence in the guided margin range.’
