17:00 Tue 06 Sep 2016
Redrow PLC - Final Results
Tuesday
Final results for the year to
REDROW DELIVERS A THIRD CONSECUTIVE YEAR OF RECORD RESULTS
Financial Results
|
2016 |
2015 |
% Change |
Revenue |
|
|
+20 |
Operating Profit |
|
|
+23 |
Profit before tax |
|
|
+23 |
EPS |
55.4p |
44.5p |
+24 |
Private Order Book |
|
|
+54 |
ROCE |
24.2% |
22.8% |
+6 |
Full Year Dividend |
10p |
6p |
+67 |
Financial highlights
· Group revenue up 20% to a record
· Operating margin rose to 18.9% (2015: 18.5%)
· Record pre-tax profit of
· Earnings per share up 24% to 55.4p
· Private Order Book up 54% at
· Return on Capital Employed up 6% to 24.2% (2015: 22.8%)
· Net debt reduced to
· Proposed final dividend of 6p per share, making 10p for the full year, up 67%
Operational highlights
· Continuing to deliver on growth strategy
· Legal completions up 17% to 4,716 (2015: 4,022) spurred by Help to Buy
· Outlets increased 9% to 128 (2015: 117)
· Number of employees up 19% to 1,962
· Owned and contracted land bank at the end of
"I am delighted to report that for the third consecutive year
Enquiries:
Barbara Richmond, Group Finance Director 01244 527411
Instinctif Partners 0207 457 2020
Mark Garraway 07771 860 938
Helen Tarbet 07825 609 737
James Gray 07583 936 031
There will be an analyst and investor meeting at
A live audio webcast and slide presentation of this event will be available at
Playback will be available by phone for the next 30 days +44 (0) 20 8196 1998 followed by Access Pin 5242464#.
CHAIRMAN'S STATEMENT
I am delighted to report that for the third consecutive year Redrow has delivered a record set of results. Pre-tax profits were
Financial Results
Group turnover rose by 20% to a record
Gross margin improved by 40 basis points to 24.2% mainly due to 94% of our completions coming from sites purchased post downturn with normal margins.
Operating expenses remained stable at 5.3% of turnover, despite the additional overheads of opening two new divisions (Colindale and South East) at the beginning of the financial year.
Operating profit was
Pre-tax profits increased by 23% to a record
This strong trading performance, together with increasing the level of deferred payments on our land purchases, has enabled us to reduce our net debt to
Two key measures of our performance, Return on Capital Employed and Return on Equity, improved to 24.2% (2015: 22.8%) and 26.8% (2015: 26.4%) respectively.
As a result of this excellent performance, and as I reported in my Interim Statement in February, the Board is proposing a final dividend of 6p per share (2015: 4p) making 10p in total for the year, an increase of 67% on 2015. Subject to shareholder approval at the Annual General Meeting, this will be paid on
Last year we updated our medium term guidance, targeting turnover of
Market
Demand for new homes was strong throughout the year. Our growth in output has benefitted from the Government's Help to Buy scheme which has continued to be a major support, not only to Redrow, but to the industry as a whole.
I reported in my Interim Statement in February that the higher end of the market, and in particular Central London, had slowed down, principally as a result of the Stamp Duty changes that came into effect last year and further hikes that came into effect in April this year. Activity in this section of the market remains sluggish; however, Redrow's exposure is very limited and all other areas in which we operate, including Outer London, have shown strong growth. We have seen very little impact as a result of the Brexit vote.
Land and Planning
Redrow has had a very successful year in acquiring land and obtaining planning permission on our forward land holdings, with the owned and contracted land bank increasing to 26,000 plots. This gives the Group a significant platform for increasing the number of new homes built going forward and to maintain our expansion plans; however obtaining planning through Local Authorities remains tortuous.
People
As a result of the continuing growth of the business, we have also expanded our workforce in the last 12 months from just over 1,600 people to just under 2,000 adding over 300 direct jobs, an increase of 19%. We continue our commitment to training and development and at the end of June employed 297 trainees across all disciplines, up 22% on 2015.
The record performances we have achieved in recent years have only been made possible by the hard work and commitment of our people and I would like to thank them for all their efforts in support of the business.
Current Trading and Outlook
Redrow entered the new financial year with a record private forward order book of
We have recently launched a number of significant new sites and have a strong pipeline in the planning process. Our strategy is to continue to grow the business, increasing the number of outlets and hence the number of homes we build. This process is on track and as such I am confident that this will be another year of significant progress for Redrow.
Steve Morgan
Chairman
CHIEF EXECUTIVE'S REVIEW
Group Performance
The Group has once again delivered record results. Turnover increased by 20% to
Market
The market throughout the year was stronger than the previous year which resulted in our average sales per outlet per week increasing by 6% to 0.72 with a seasonally stronger performance in the second-half. The top-end of the market however suffered from the impact of successive SDLT increases and this was particularly notable in London.
In response to the weaker top-end of the market we have focused our land buying and development programmes more towards our mid-range homes that have proven to be so popular with buyers - with many also being able to take advantage of Help to Buy. In London we announced some time ago that our strategy was to concentrate on more affordable apartments in the outer boroughs and it is within these areas we have acquired new sites. We have made good progress working through our legacy of prime London apartments, including
Delivering more Homes
To deliver more homes the industry needs more outlets. Increasing outlets is essential, but is a huge challenge: it requires talented and determined teams to close land deals and progress sites through what is a long-winded, under-resourced planning system. Despite the frustrations of the system we have a good track record of growing outlets year-on-year. Over the past three years we have increased outlets by nearly 40% from 92 to 128 and we expect the number of outlets to rise in 2017.
To grow outlets you need land. 2016 was a very successful year for land acquisition across the Group. We took advantage of a benign market and benefitted from an exceptional pull-through from the forward land portfolio that included 2,900 plots at Colindale, North London.
Placemaking
Our product distinguishes us from our major competitors. Heritage is and will remain our core collection. We make continuous but subtle changes to the range to ensure it maintains its leading and award winning position in the new homes market.
But creating great places to live is not just about individual homes; it's about much more. It's about Placemaking: designing developments that are sympathetic to the surroundings where our customers can enhance their wellbeing and feel part of a community. It's about creating a
We have also worked hard to make our developments more sustainable from an environmental perspective. We are working towards ISO14001 certification for our environmental management systems and became the first major housebuilder to score a maximum rating of 'three trees' in the WWF's Timber Scorecard.
Customers
We are a customer focused business and we recognised some time ago that our customers' expectations were rising at a faster rate than we could support. We responded by making a significant investment to raise our game in this area: we expanded our customer service teams, introduced new technology and most recently obtained accreditation from the
People
It is pleasing to report that a record 24 of our site managers received NHBC Pride in the Job awards in this year's competition. This is a great achievement at a time when the industry has a shortage of skilled trades, managers and technicians: a shortage that we recognised a number of years ago and have been doing more than our share to address ever since.
The wider industry needs to do more to address the skills crisis and I was delighted to accept the opportunity to Chair the
As we grow we have a responsibility for the welfare of an increasing number of people and we have to ensure our sites are safe places to live and work. We have expanded our Health and Safety teams during the year and despite a significant increase in build output, reduced the number of notifiable accidents per site.
Looking to the future
In summary, 2016 was an excellent year for the Group. We are an innovative organisation and our initiatives are aimed at both improving shareholder value and supporting our brand purpose - to create a better way for people to live. We produced a very strong set of record results but of equal importance made significant progress across those parts of the business that are essential to our strategy for sustainable growth. We have an excellent product with a strong brand, we have an operational structure with capacity to grow and expand and a land bank with which to do so. We have talented, dedicated and loyal teams of people that share the same values. The Group is in good shape and well-positioned for the future. I am confident 2017 will be another excellent year for the business.
John Tutte
Group Chief Executive
FINANCIAL REVIEW
Profitability
This was another record breaking financial year for the Group in terms of both revenue and profits.
As a consequence of the higher revenue, gross profit increased by
Operating profit increased by 23% to
Net financing costs at
The Group's record profit before tax of
Tax
The corporation tax charge for the year was
The Group paid
Dividends
As reported at the time of our half year results, the Board has proposed a 2016 final dividend of 6p per share, a 50% increase on last year, which will be paid on
The Group paid dividends totalling
Returns
Net assets at
Return on equity increased from 26.4% to 26.8%, well ahead of our 2018 guidance of 25%. Again we expect this to moderate towards the 2018 guidance in 2017.
Inventories
Our investment in land increased to
Our investment in work in progress increased to
Our net realisable value provision on land and work in progress reduced by
Land creditors increased by
Receivables
Trade receivables reduced by
Payables
Trade payables and accruals increased by
Current income tax liabilities increased by
Cash Flow and Net Debt
Net debt decreased by
Financial and Treasury Management
Financial management at Redrow is conducted centrally using policies approved by the Board.
Redrow is a UK based housebuilder and therefore the main focus of its financial risk management surrounds the management of liquidity and interest rate risk.
(i) Liquidity
The Group regularly prepares and reviews its cash flow forecasts which are used to manage liquidity risks in conjunction with the maintenance of appropriate committed banking facilities to ensure adequate headroom.
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 five 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 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.
Pensions
As at
Barbara Richmond
Group Finance Director
Consolidated Income Statement
12 months ended 30 June |
|
2016 |
2015 |
|
Note |
£m |
£m |
Revenue |
|
1,382 |
1,150 |
Cost of sales |
|
(1,048) |
(876) |
Gross profit |
|
334 |
274 |
Administrative expenses |
|
(73) |
(61) |
Operating profit |
|
261 |
213 |
Financial income |
|
3 |
3 |
Financial costs |
|
(14) |
(12) |
Net financing costs |
|
(11) |
(9) |
Share of profit of joint ventures after interest and taxation |
|
- |
- |
Profit before tax |
|
250 |
204 |
Income tax expense |
2 |
(50) |
(42) |
Profit for the year |
|
200 |
162 |
Earnings per share - basic |
4 |
55.4p |
44.5p |
- diluted |
4 |
55.2p |
44.4p |
Consolidated Statement of Comprehensive Income
|
|
2016 |
2015 |
12 months ended 30 June |
|
£m |
£m |
|
|
|
|
Profit for the year |
|
200 |
162 |
Other comprehensive income |
|
|
|
Items that will not be reclassified to profit or loss |
|
|
|
Remeasurements of post-employment benefit obligations |
|
8 |
8 |
Deferred tax on actuarial gains taken directly to equity |
|
(2) |
(2) |
Other comprehensive income for the year net of tax |
|
6 |
6 |
Total comprehensive income for the year |
|
206 |
168 |
Balance Sheet
|
|
|
As at 30 June |
|
|
|
|
2016 |
2015 |
|
|
|
£m |
£m |
|
|
Note |
|
|
Assets |
|
|
|
|
Intangible assets |
|
|
2 |
2 |
Property, plant and equipment |
|
|
17 |
12 |
Investments |
|
|
25 |
17 |
Deferred tax assets |
|
|
5 |
5 |
Retirement benefit surplus |
|
|
6 |
- |
Trade and other receivables |
|
|
12 |
13 |
Total non-current assets |
|
|
67 |
49 |
|
|
|
|
|
Inventories |
|
5 |
1,808 |
1,500 |
Trade and other receivables |
|
|
36 |
39 |
Cash and cash equivalents |
|
8 |
135 |
56 |
Total current assets |
|
|
1,979 |
1,595 |
|
|
|
|
|
Total assets |
|
|
2,046 |
1,644 |
|
|
|
|
|
Equity |
|
|
|
|
Share capital |
|
9 |
37 |
37 |
Share premium account |
|
|
59 |
59 |
Other reserves |
|
|
8 |
8 |
Retained earnings |
|
|
913 |
745 |
Total equity |
|
|
1,017 |
849 |
|
|
|
|
|
Liabilities |
|
|
|
|
Bank loans |
|
8 |
230 |
150 |
Trade and other payables |
|
6 |
156 |
84 |
Deferred tax liabilities |
|
|
2 |
1 |
Retirement benefit obligations |
|
|
- |
3 |
Long-term provisions |
|
|
7 |
7 |
Total non-current liabilities |
|
|
395 |
245 |
|
|
|
|
|
Bank overdrafts and loans |
|
8 |
44 |
60 |
Trade and other payables |
|
6 |
566 |
471 |
Current income tax liabilities |
|
|
24 |
19 |
Total current liabilities |
|
|
634 |
550 |
|
|
|
|
|
Total liabilities |
|
|
1,029 |
795 |
|
|
|
|
|
Total equity and liabilities |
|
|
2,046 |
1,644 |
Statement of Changes in Equity
|
|
2016 £m |
2015 £m |
12 months ended 30 June |
|
|
|
Profit for the year |
|
200 |
162 |
Other comprehensive income for the year |
|
6 |
6 |
Total comprehensive income relating to the year (net) |
|
206 |
168 |
Dividend paid |
|
(30) |
(15) |
Movement in LTIP/SAYE |
|
(8) |
- |
Net increase in equity |
|
168 |
153 |
|
|
|
|
Opening equity |
|
849 |
696 |
Closing equity |
|
1,017 |
849 |
The Statement of Cash Flows
|
|
|
12 months ended 30 June |
|
|
|
|
|
|
|
|
|
|
|
2016 |
2015 |
|
|
|
Note |
£m |
£m |
|
Cash flows from operating activities |
|
|
|
|
|
Operating profit before financing costs |
|
|
261 |
213 |
|
Depreciation and amortisation |
|
|
1 |
1 |
|
Adjustment for non-cash items |
|
|
(5) |
(5) |
|
Operating profit before changes in working capital and provisions |
|
|
257 |
209 |
|
|
|
|
|
|
|
Decrease/(increase) in trade and other receivables |
|
|
7 |
(2) |
|
Increase in inventories |
|
|
(308) |
(343) |
|
Increase in trade and other payables |
|
|
174 |
196 |
|
Increase in provisions |
|
|
- |
1 |
|
Cash inflow generated from operations |
|
|
130 |
61 |
|
|
|
|
|
|
|
Interest paid |
|
|
(6) |
(6) |
|
Tax paid |
|
|
(46) |
(22) |
|
|
|
|
|
|
|
Net cash inflow from operating activities |
|
|
78 |
33 |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
Sale of business |
|
|
- |
9 |
|
Acquisition of software, property, plant and equipment |
|
|
(6) |
(1) |
|
Net payments to joint ventures - continuing operations |
|
|
(11) |
(6) |
|
Net cash (outflow)/inflow from investing activities |
|
|
(17) |
2 |
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
Issue of bank borrowings |
|
7 |
230 |
150 |
|
Repayment of bank borrowings |
|
7 |
(150) |
(175) |
|
Purchase of own shares |
|
|
(16) |
(2) |
|
Dividend paid |
|
|
(30) |
(15) |
|
Net cash inflow/(outflow) from financing activities |
|
|
34 |
(42) |
|
|
|
|
|
|
|
Increase/(decrease) in net cash and cash equivalents |
|
95 |
(7) |
(7) |
|
Net cash and cash equivalents at the beginning of the year |
|
(4) |
3 |
3 |
|
Net cash and cash equivalents at the end of the year |
|
8 |
91 |
(4) |
|
NOTES
1. Basis of preparation
The above results and the accompanying notes do not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006.
The Auditors have reported on the Group's statutory accounts for the year ended
The audited consolidated financial statements from which these results are extracted have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards (IFRS) as adopted by the
The principal accounting policies have been applied consistently to all the periods presented.
2. Income Tax expense
|
12 months ended 30 June |
|
|
2016 |
2015 |
|
£m |
£m |
Current year |
|
|
UK Corporation Tax at 20.00% (2015: 20.75%) |
51 |
41 |
|
|
|
Deferred tax |
|
|
Origination and reversal of temporary differences |
(1) |
1 |
Impact of change in deferred tax rate |
- |
- |
Total income tax charge in income statement |
50 |
42 |
|
|
|
Reconciliation of tax charge for the year |
|
|
Profit before tax |
250 |
204 |
|
|
|
Tax on total profit at 20.00% (2015: 20.75%) |
50 |
42 |
Impact of change in deferred tax rate |
- |
- |
Short term temporary differences |
- |
- |
Tax charge for the year |
50 |
42 |
3. Dividends
The following dividends were paid by the Group:
|
2016 |
2015 |
|
£m |
£m |
Prior year final dividend per share of 4.0p (2015: 2.0p); current year |
|
|
interim dividend per share of 4.0p (2015: 2.0p) |
30 |
15 |
|
30 |
15 |
The Board decided to propose a final dividend of 6.0p per share in respect of 2016 (
4. Earnings per share
The basic earnings per share calculation for the year ended
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.
12 months ended
|
Earnings |
No. of shares |
Per share |
|
£m |
millions |
pence |
Basic earnings per share |
200 |
361 |
55.4 |
Effect of share options and SAYE |
- |
1 |
(0.2) |
Diluted earnings per share |
200 |
362 |
55.2 |
12 months ended
|
Earnings |
No. of shares |
Per share |
|
£m |
millions |
pence |
Basic earnings per share |
162 |
364 |
44.5 |
Effect of share options and SAYE |
- |
1 |
(0.1) |
Diluted earnings per share |
162 |
365 |
44.4 |
5. Inventories
|
|
As at 30 June |
|
|
|
2016 |
2015 |
|
|
£m |
£m |
Land for development |
|
1,215 |
1,020 |
Work in progress |
|
539 |
426 |
Stock of showhomes |
|
54 |
54 |
|
|
1,808 |
1,500 |
Inventories of
Of the net realisable value provision of
The net realisable value provision movement is analysed below:
|
Total |
|
£m |
|
|
As at |
28 |
Utilised during the year |
(9) |
Created during the year |
3 |
Released during the year |
(3) |
As at |
19 |
The net realisable value provisions of
6. Land Creditors
(included in trade and other payables)
|
|
As at 30 June |
|
|
|
2016 |
2015 |
|
|
£m |
£m |
Due within one year |
|
222 |
182 |
Due in more than one year |
|
156 |
84 |
|
|
378 |
266 |
7. Borrowings and loans
|
|
12 months ended 30 June |
|
|
|
2016 |
2015 |
|
|
£m |
£m |
Opening net book amount |
|
150 |
175 |
Issue of bank borrowings |
|
230 |
150 |
Repayment of bank borrowings |
|
(150) |
(175) |
Closing net book amount |
|
230 |
150 |
At
8. Analysis of net debt
|
|
As at 30 June |
|
|
|
2016 |
2015 |
|
|
£m |
£m |
Cash and cash equivalents |
|
135 |
56 |
Bank overdrafts |
|
(44) |
(60) |
Net cash and cash equivalents |
|
91 |
(4) |
Bank loans |
|
(230) |
(150) |
|
|
(139) |
(154) |
9. Share capital
|
|
As at 30 June |
|
|
|
2016 |
2015 |
|
|
£m |
£m |
Authorised |
|
|
|
480,000,000 ordinary shares of 10p each |
|
48 |
48 |
Issued and fully paid |
|
37 |
37 |
|
|
Number of ordinary |
|
|
|
shares of 10p each |
|
|
|
|
|
As at |
|
|
369,799,938 |
10. Shareholder Enquiries
The Registrar is
The Pavilions
Bristol
BS99 6ZZ
11. Annual General Meeting
The Annual General Meeting of
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