REG - Redrow PLC - Half-year Report
09/02/2023 07:00
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RNS Number : 3549P Redrow PLC 09 February 2023
FOR IMMEDIATE RELEASE
Thursday 9 February 2023
REDROW plc
INTERIM RESULTS FOR THE
26 WEEKS tO 1 JANUARY 2023
FIRST HALF RESULTS IN LINE WITH H1 2022 RECORD
Financial Results
H1 2023 H1 2022 Var
Revenue £1,031m £1,052m -£21m
Operating Margin 19.3% 19.5% -0.2 ppts
Profit before tax £198m £203m -£5m
EPS 45.4p 48.1p -2.7p
Net Cash £107m £242m -£135m
Interim Dividend per share 10.0p 10.0p -
Total Order Book £1.1bn £1.5bn -£0.4bn
Summary
· Revenue similar to record first half last year at £1.031bn (2022:
£1.052bn)
· Operating margin of 19.3% (2022: 19.5%)
· Profit before tax comparable to H1 2022 at £198m (2022: £203m)
· Interim dividend maintained at 10p (2022: 10p)
· Economic and political uncertainty led to sales rate of 0.38 private
reservations per outlet per week for H1 (2022: 0.64)
· Encouraging start to the second half with the volume of private
reservations per outlet per week for the 5 weeks to 5 February of 0.51
· Air source heat pumps and underfloor heating on the ground floor will
in future be standard in detached homes on new developments
· Continue to be a 5 star builder
· Founding signatory to the New Homes Code of Practice
· Long Form Agreement with Government on Fire Safety now in final form
2023 Guidance
Previous Current
Revenue (£bn) 2.1 2.05
Operating Margin (%) 18 18 - 18.5
Underlying EPS (p) - 84
Full Year Dividend (p) - 28
Due to the recent change in market conditions the Company has withdrawn its
guidance for 2024.
Commenting on the results Matthew Pratt, Group Chief Executive said:
"Redrow's proven business model has played an important role during a time of
significant political and economic uncertainty. We have award-winning homes
and places, a strong forward order book, land acquired in the last few years
at good margins, and current cash reserves of £107m. This is despite
completing a £100m share buyback exercise on 13(th) January 2023, just after
the financial half-year under review.
We have experienced a positive start to second half trading. Whilst 2023 will
be a challenging year as the market resets, early indications are better than
anticipated and the market appears to be finding a new, natural level.
Redrow's sustainability strategy is integrated throughout the business via our
long standing three strategic themes - Building Responsibly, Valuing People
and Thriving Communities. In this way we bring to life our 'Better way to
live' core purpose for the benefit of our customers and communities.
Redrow has become the first large housebuilder to begin selling homes which
will incorporate air source heat pumps as standard. Underfloor heating will
also be provided as standard on the ground floor in our detached homes. The
approach has been shaped by customer trials, research and the work of our own
in-house design & innovation team.
Our environmental social and governance approach was recently validated with
approval of our Scope 1, 2 & 3 near term targets from the Science Based
Targets Initiative. This marks a key step on our road to net-zero carbon.
Building Responsibly is a key pillar of our strategy and we were in the first
select group of home builders to sign up for the New Homes Code of Practice,
which is overseen by the independent New Homes Quality Board.
We welcome its introduction and the enhanced peace of mind it will provide our
customers. We remain one of a handful of volume homebuilders to have
implemented the new code.
Furthermore we are, once again, tracking at a Five Star level of customer
satisfaction and we remain 'excellent' on Trustpilot with a TrustScore of 4.5.
We entered the second half with a total order book of £1.1bn, of which
£0.8bn was private. Our net private reservation rate for the first 5 weeks of
the second half was an encouraging 0.51 compared to 0.38 in the first half. We
therefore expect to achieve revenue of around £2.05bn for the full financial
year, with an operating margin in the region of 18% to 18.5%."
Enquiries:
Redrow plc
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 07500 027181
A webcast and slide presentation of our results will be available at 7.00 am
on https://www.redrowplc.co.uk/ (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 (http://www.redrowplc.co.uk) .
Participants can also dial in to hear the Q&A live at 9.30 am on +44 (0)
20 3936 2999 or
UK Toll Free 0800 640 6441; access code 462719.
LEI Number:
2138008WJZBBA7EYEL28
Announcement Classification:
1.2: Half yearly financial report and audit reports/limited reviews
Group Chief Executive's Statement
Overview
Redrow's proven business model has played an important role during a time of
significant political and economic uncertainty. We have award-winning homes
and places, a strong forward order book, land acquired in the last few years
at good margins, and current cash reserves of £107m. This is despite
completing a £100m share buyback exercise on 13(th) January 2023, just after
the financial half-year under review.
These strengths are all underpinned by our experienced team who have a track
record of creating quality homes and successfully managing through similar
cycles in the market. This includes closely monitoring work in progress, along
with a very selective approach to land opportunities.
Over the second quarter of our financial year, the new homes market found
itself in the eye of the storm. The Government's disastrous mini-budget drove
significant increases in mortgage rates during an existing cost of living
crisis. Inevitably, consumer confidence was badly affected.
Cancellations were elevated, driven higher by those customers who reserved
prior to the mini-budget and who'd not secured a mortgage offer in advance of
mortgage rate rises. All these factors combined to bring forward the
traditional Christmas slowdown to October.
As the political and economic picture has stabilised, and mortgage rates
continue to reduce from their elevated levels, consumer confidence has begun
to show early signs of returning. Unique visitors to our website were up 17%
during January 2023 compared with the previous year.
The first five weeks of the second half have seen a net reservation position
of 0.51 per outlet per week.
I am very pleased that Geeta Nanda is joining the Board as an independent
non-executive director on 1 May 2023. Geeta has held a number of senior
executive and non-executive roles and will add valuable additional experience
to the Redrow Board.
Financial Overview
Group revenue was similar to the same period last year at £1.03bn (2022:
£1.05bn). Total home legal completions in the first half were 2,485 (2022:
2,749).
Profit before tax was also comparable to the same period last year at £198m
(2022: £203m). This was achieved with an operating margin of 19.3% (2022:
19.5%) for the first six months.
Our earnings per share for the first half is 45.4p, compared to 48.1p for the
comparative period last year. This is in part due to the higher Corporation
Tax and Residential Property Developer Tax rates at 24.5% versus 19% in 2022.
Our Return on Capital Employed is 23.2% (2022: 21.5%). We ended the first half
with net cash of £107m (June 2022: £288m) and our average net monthly cash
was broadly in line with the first half last year at £248m (H1 2022: £257m),
even after taking account of the share buyback.
As a result of this strong performance the Board has declared an interim
dividend of 10p, in line with the prior year (2022: 10p). The dividend will be
paid on 6 April 2023 to shareholders on the register at the close of business
on 24 February 2023. For the full year the company intends to maintain its
payout ratio of 33%.
We are still experiencing build cost increases across materials as energy
inflation, in particular, continues to have an impact. We expect cost
inflation of c7% for the full financial year. Over time we expect the current
market to drive more competition and to mitigate build cost inflation amongst
our suppliers and subcontractors.
This strong financial performance was delivered in the context of a broken
planning system. At a time when the Government is trying to achieve growth, it
remains a major barrier.
Planning permissions are taking a record amount of time - well in excess of
the statutory timescale of 13 weeks for reserved matters. This means a huge
missed opportunity for the country in lost school places, infrastructure,
employment and social mobility. We continue to call on the Government to
revisit its housing and planning strategy to help the country deliver growth
and the homes it so badly needs to address the chronic housing shortage.
At the time of writing we are reviewing the Government's Long Form Agreement.
It aims to legally formalise the industry-wide Building Safety Pledge, which
Redrow signed in April 2022. This new document also widens builders'
responsibilities with regard to potential remediation work, which may need to
be undertaken. Although this would mean an increase to our Building Safety
provision, we don't foresee this increase as being substantial. Regardless of
the Long Form Agreement formalities, we are proceeding with the remediation of
buildings we've identified as part of the pledge commitment.
We currently have 28,020 (2022: 29,600) plots in our current land holdings,
with 37,800 plots in our strategic land bank. Given current trading conditions
we are focused on obtaining planning permissions for our current land.
A Better Way to Live
Redrow's sustainability strategy is integrated throughout the business via our
long standing three strategic themes - Building Responsibly, Valuing People
and Thriving Communities. In this way we bring to life our 'Better way to
live' core purpose for the benefit of our customers and communities.
Redrow has become the first large housebuilder to begin selling homes which
will incorporate air source heat pumps as standard. Underfloor heating will
also be provided as standard on the ground floor in our detached homes. The
approach has been shaped by customer trials, research and the work of our own
in-house design & innovation team.
These steps are all being taken in advance of the Government's proposals to
make all new build properties gas-free from 2025. Currently, Redrow homes
benefit from a 10% reduction in heat loss compared to our previous builds and
are 63% more efficient than second hand homes built in the 1970s.
Redrow designs, which typically have a larger square footage than other new
builds, work seamlessly with heat pump technology and allow ground floor
underfloor heating to complement our open-plan layouts. As well as being
desirable for customers, the lack of ground floor radiators also gives home
owners even more space. This forms an important part of our efforts to support
the goal of limiting global warming to 1.5c.
These efforts were further validated recently with the approval from the
Science Based Targets Initiative of our Scope 1, 2 & 3 near term targets.
This marks a key step on our road to net-zero carbon.
Building Responsibly is a key pillar of our strategy and we were in the first
select group of home builders to sign up for the New Homes Code of Practice,
which is overseen by the independent New Homes Quality Board.
We welcome its introduction and the enhanced peace of mind it will provide our
customers. We remain one of a handful of volume homebuilders to have
implemented the new code.
Furthermore we are, once again, tracking at a Five Star level of customer
satisfaction and we remain 'excellent' on Trustpilot with a TrustScore of 4.5.
Securing a pipeline of future talent is a central part of our Valuing People
pillar and it was positive to see a record intake of graduates last year. Our
new partnership with Nottingham Trent University looks to build on our
existing initiatives, including our apprenticeship degree programme.
We'll be working long-term with the university's School of Architecture,
Design and the Built Environment to engage with undergraduates throughout
their degree courses.
We also continue to make progress on matters of equality, diversity and
inclusivity and it was pleasing to see this recognised with our inclusion in
the Financial Times' ranking of Europe's Diversity Leaders 2023.
Current Trading & Outlook
During the uncertain times of the second quarter it was clear that maintaining
a reasonable sales rate would be difficult. Therefore, we reduced our
marketing spend and focused on preparing our new year campaign, ensuring the
appropriate messaging and incentives to increase both footfall and
reservations. This campaign has to date achieved our objective.
We have experienced a positive start to sales in the second half. Our net
private reservation rate per outlet per week over the first five weeks of
calendar year 2023 was 0.51 compared to 0.38 for the first half of the
financial year. We also entered the second half with a total order book of
£1.1bn, of which £0.8bn was private. We therefore expect to achieve revenue
of around £2.05bn for the full financial year, with an operating margin in
the region of 18% to 18.5%.
Despite economic turbulence over recent times, unemployment is still low,
inflation is forecast to decrease and mortgage rates have improved for fixed
rate products.
Our Heritage collection is uniquely positioned to capture the second hand
market and our approach to energy efficiency will further cement our distinct
market advantage.
Whilst 2023 will be a challenging year as the market resets, early indications
are better than anticipated and the market appears to be finding a new,
natural level.
We are well positioned to manage any changes in the market because of the
Redrow team and our loyal subcontractor and supplier partners. They continue
to deliver quality homes and places for thousands of families across England
& Wales and I'd like to thank them again for all their efforts.
Consolidated Income Statement
Unaudited Unaudited Audited Audited Audited
26 weeks ended 27 weeks ended 53 weeks ended 53 weeks ended 53 weeks ended
1 January 2023 2 January 2022 3 July 2022 3 July 2022 3 July 2022
Pre-exceptional item Exceptional item
Note £m £m £m £m £m
Revenue 1,031 1,052 2,140 - 2,140
Cost of sales (774) (797) (1,624) (164) (1,788)
Gross profit 257 255 516 (164) 352
Administrative expenses (58) (50) (102) - (102)
Operating profit 199 205 414 (164) 250
Financial income 2 - 2 - 2
Financial costs (3) (2) (6) - (6)
Net financing costs (1) (2) (4) - (4)
Profit before tax 198 203 410 (164) 246
Income tax expense 2 (48) (39) (82) 33 (49)
Profit for the period 150 164 328 (131) 197
Earnings per share - basic 4 45.4p 48.1p 96.0p 57.7p
- diluted 4 45.3p 48.0p 95.8p 57.5p
Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited Audited Audited
26 weeks ended 27 weeks ended 53 weeks ended 53 weeks ended 53 weeks ended
1 January 2023 2 January 2022 3 July 3 July 3 July
2022 2022 2022
Pre-exceptional item Exceptional item
Note £m £m £m £m £m
Profit for the period 150 164 328 (131) 197
Other comprehensive income:
Items that will not be reclassified to profit or loss
Remeasurements of post-employment benefit obligations 5 (16) 10 (1) - (1)
Deferred tax on remeasurements taken directly to equity 5 (3) - - -
Other comprehensive (expense)/income for the period net of tax (11) 7 (1) - (1)
Total comprehensive income for the period 139 171 327 (131) 196
Consolidated Balance Sheet
Unaudited Unaudited Audited
As at As at As at
1 January 2023 2 January 2022 3 July 2022
Note £m £m £m
Assets
Intangible assets 1 - 1
Property, plant and equipment 22 19 20
Lease right of use assets 7 5 5
Deferred tax assets 1 1 1
Retirement benefit surplus 5 23 50 39
Total non-current assets 54 75 66
Inventories 6 2,943 2,644 2,740
Trade and other receivables 35 48 76
Current corporation tax 4 - 7
Cash and cash equivalents 8 107 242 288
Total current assets 3,089 2,934 3,111
Total assets 3,143 3,009 3,177
Equity
Retained earnings at 3 July 2022/27 June 2021 1,846 1,768 1,768
Profit for the period 150 164 197
Other comprehensive (expense)/income for the period (11) 7 (1)
Dividends paid (76) (65) (100)
Net purchase of own shares arising from share buyback programme (96) - -
Movement due to equity based share options and owned shares held by EBT 2 (25) (18)
Retained earnings 12 1,815 1,849 1,846
Share capital 11 36 37 37
Share premium account 59 59 59
Other reserves 8 8 8
Total equity 1,918 1,953 1,950
Liabilities
Bank loans 8 - - -
Trade and other payables 7 120 141 91
Deferred tax liabilities 9 18 15
Long-term provisions 10 90 43 110
Total non-current liabilities 219 202 216
Trade and other payables 7 893 853 914
Provisions 10 113 - 97
Current income tax liabilities - 1 -
Total current liabilities 1,006 854 1,011
Total liabilities 1,225 1,056 1,227
Total equity and liabilities 3,143 3,009 3,177
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 28 June 2021 37 59 8 1,768 1,872
Total comprehensive income for the period - - - 171 171
Dividends paid - - - (65) (65)
Movement in LTIP/SAYE - - - (25) (25)
At 2 January 2022 (Unaudited) 37 59 8 1,849 1,953
At 28 June 2021 37 59 8 1,768 1,872
Total comprehensive income for the period - - - 196 196
Dividends paid - - - (100) (100)
Net purchase of own shares to satisfy share options - - - (22) (22)
Other LTIP/DB/SAYE credit - - - 4 4
At 3 July 2022 (Audited) 37 59 8 1,846 1,950
At 4 July 2022 37 59 8 1,846 1,950
Total comprehensive income for the period - - - 139 139
Dividends paid - - - (76) (76)
Net purchase of own shares arising from share buyback programme (1) - - (96) (97)
Other LTIP/DB/SAYE credit - - - 2 2
At 1 January 2023 (Unaudited) 36 59 8 1,815 1,918
Consolidated Statement of Cash Flows
Unaudited Unaudited Audited
26 weeks ended 27 weeks ended 53 weeks ended
1 January 2023 2 January 2022 3 July 2022
Note £m £m £m
Cash flows from operating activities
Profit for the period 150 164 197
Depreciation and amortisation 3 3 5
Financial income (2) - (2)
Financial costs 3 2 6
Income tax expense 48 39 49
Adjustment for non-cash items (1) - 7
Decrease in trade and other receivables 41 52 24
(Increase) in inventories (203) (131) (227)
Increase in trade and other payables 8 75 86
(Decrease)/increase in provisions (4) 9 173
Cash inflow generated from operations 43 213 318
Interest paid (1) - (2)
Tax paid (45) (37) (55)
Net cash (outflow)/inflow from operating activities (3) 176 261
Cash flows from investing activities
Acquisition of software, property, plant and equipment (5) (1) (4)
Interest received 2 - 1
Net cash (outflow) from investing activities (3) (1) (3)
Cash flows from financing activities
Payment of lease liabilities (2) (1) (3)
Purchase of own shares (97) (27) (27)
Dividends paid 3 (76) (65) (100)
Net cash (outflow) from financing activities (175) (93) (130)
(Decrease)/increase in net cash and cash equivalents (181) 82 128
Net cash and cash equivalents at the beginning of the period 288 160 160
Net cash and cash equivalents at the end of the period 8 107 242 288
NOTES (Unaudited)
1. Accounting policies
Basis of preparation
The condensed consolidated half-yearly financial information for the 26 weeks
ended 1 January 2023 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, as adopted by the United Kingdom.
The Directors consider this to be appropriate for the reasons outlined below.
The condensed consolidated financial statements are unaudited. A copy of the
audited statutory accounts for year
ended 3 July 2022 has been delivered to the Registrar of Companies.
The annual financial statements of the group for the 52 weeks to 2 July 2023
will be prepared in accordance with UK adopted international accounting
standards (IFRS) 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 53 weeks ended 3 July 2022 which were prepared in
accordance with applicable IFRSs.
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 renewed its available banking facilities in March 2021. As a result,
the Group has a £350m Revolving Credit Facility (RCF) (2022: £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 and is a committed unsecured facility. No change to
the RCF covenants was made as a result of the renewal. As at 8 February 2023,
£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 1 January 2023 and 7 February 2023 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 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;
• A 20% volume reduction for the going concern assessment period
compared to the base case Board approved budgeted volumes; and
• A 7% build cost increase on budgeted costs in FY23 and a 3% increase
on budgeted costs in FY24.
These downside assumptions reflect the potential impact of increased economic
uncertainty, the further potential impact of the war in Ukraine, disruption in
the energy and fuel market, inflation pressure, 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 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 53 weeks ended 3
July 2022, which have been prepared in accordance with UK adopted
international accounting standards.
This half-yearly financial information does not comprise statutory accounts
within the meaning of section 435 of the Companies Act 2006. The comparative
figures for the financial period ended 3 July 2022 are not the Group's
statutory accounts for that financial year. Audited statutory accounts for the
53 weeks ended 3 July 2022 were approved by the Board of Directors on 13
September 2022 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 53 weeks ended 3 July 2022. The accounting
policies are consistent with those followed in the preparation of the
financial statements to the 53 weeks ended 3 July 2022.
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 53 weeks ended 3 July 2022.
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 2023 (note 18). We have reviewed the risks pertinent to our
business in the 26 weeks to 1 January 2023 and which we believe to be relevant
for the remaining 26 weeks to 2 July 2023.
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
(24.5% (2022: 20%)) based on substantively enacted corporation tax and
Residential Property Developer Tax (RPDT) rates. Deferred taxation balances
have been valued at 29% (2022: 25%) being the corporation tax rate from 1
April 2023 substantively enacted on 24 May 2021 plus 4% RPDT with the
exception of the deferred tax liability on employee benefits which has been
calculated at 35% (2022: 35%).
3. Dividends
A dividend of £76m was paid in the 26 weeks to 1 January 2023 (27 weeks ended
2 January 2022: £65m).
4. Earnings per share
The basic earnings per share calculation for the 26 weeks ended 1 January 2023
is based on the weighted number of shares in issue during the period of 330m
(27 weeks ended 2 January 2022: 341m) excluding treasury shares held by the
company and 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 1 January 2023 (Unaudited)
Earnings No. of shares millions Per share Pence
£m
Basic earnings per share 150 330 45.4
Effect of share options and SAYE - 1 (0.1)
Diluted earnings per share 150 331 45.3
27 weeks ended 2 January 2022 (Unaudited)
Earnings No. of shares millions Per share Pence
£m
Basic earnings per share 164 341 48.1
Effect of share options and SAYE - 1 (0.1)
Diluted earnings per share 164 342 48.0
53 weeks ended 3 July 2022 (Audited)
Underlying pre exceptional item Earnings No. of shares millions Per share Pence
£m
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
Statutory Earnings No. of shares millions Per share Pence
£m
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
5. Pensions
The amounts recognised in respect of the defined benefit section of the
Group's Pension Scheme are as follows:
Unaudited Unaudited 27 weeks ended 2 January 2022 Audited
26 weeks ended 1 January 2023 53 weeks ended 3 July 2022
£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 (28) 15 (40)
Actuarial movements arising from change in financial assumptions 18 (5) 40
Actuarial movements arising from experience adjustments (6) - (1)
(16) 10 (1)
Amounts recognised in the consolidated balance sheet
Present value of the defined benefit obligation (84) (141) (97)
Fair value of the Scheme's assets 107 191 136
Surplus in the consolidated balance sheet 23 50 39
On 27 January 2023 the Trustees of the Redrow Staff Pension Scheme (the
"Scheme") entered into a bulk annuity buy-in contract with Standard Life. As
part of this process, the Trustees made an investment strategy decision that
culminated in them agreeing to exchange the assets of the Scheme for an
insurance policy, which exactly matches the projected cashflows for all future
pension benefits. This change in investment strategy eliminates significant
risks associated with the Scheme. However, by the Trustees entering into this
contract, the Company has not agreed to a full buy-out of the Scheme, which
would pass the obligations of the Scheme to the insurer. Therefore the Company
retains responsibility for all its obligations in relation to the Scheme.
6. Inventories
Unaudited Unaudited As at Audited
As at 2 January 2022 As at
1 January 2023 3 July
2022
£m £m £m
Land for development 1,816 1,607 1,710
Work in progress 1,056 963 962
Stock of showhomes 71 74 68
2,943 2,644 2,740
7. Land Creditors
(included in trade and other payables)
Unaudited Unaudited As at 2 January 2022 Audited
As at As at
1 January 2023 3 July
2022
£m £m £m
Due within one year 297 200 289
Due in more than one year 115 138 87
412 338 376
8. Analysis of Net Cash
Unaudited Unaudited As at Audited As at
As at 2 January 2022 3 July
1 January 2023 2022
£m £m £m
Cash and cash equivalents 107 242 288
Bank loans - - -
107 242 288
Net cash excludes land creditors and lease liabilities arising under IFRS 16.
9. Bank facilities
At 1 January 2023, the Group had total unsecured bank borrowing facilities of
£353m (2 January 2022: £353m), representing £350m committed facilities and
£3m uncommitted facilities. The Group's syndicated loan facility matures on
30 September 2025.
10. Provisions
Legacy Fire Safety Provision £m Other Total
£m £m
At 3 July 2022 (audited) 200 7 207
Provisions utilised (4) - (4)
As at 1 January 2023 (unaudited) 196 7 203
Unaudited As at Audited
1 January As at
2023 3 July
£m 2022
£m
Current provisions 113 97
Non-current long term provisions 90 110
203 207
Legacy fire safety provision
Redrow is predominantly a housebuilder, however the Group historically built a
small number of high rise buildings, mostly on a design and build basis by
main contractors. The Group signed the Government's Building Safety Pledge in
April 2022 and is committed to funding the remediation of life critical fire
safety issues on buildings over 11 metres in which the Group was involved
going back 30 years. The Legacy fire safety provision reflects the estimated
cost of works outstanding to complete the remediation of life critical fire
safety issues on all identified buildings within scope. In estimating the cost
of the works, Management has used relevant Building Safety Fund cost
information and other external information as the basis of its estimates and
classified buildings identified as in scope on the basis of a high level risk
assessment including their EWS1 (External Wall Fire Review) status. However,
these estimates are inherently uncertain as this is a highly complex area
involving bespoke buildings for which investigations and assessments will be
ongoing for some time. It is expected that £113m of the remaining provision
will be utilised in the next 12 months and the remainder over the following
three years although these timescales are subject to the completion of
negotiations with relevant stakeholders. Provisions are discounted to net
present value where the effect is material.
11. Issued Share capital
Allotted, called up and fully paid.
Number £m
At 3 July 2022 ordinary shares of 10.5p each 352,190,420 37
Purchased and cancelled in share buyback programme (12,404,382) (1)
As at 1 January 2023 ordinary share of 10.5p 339,786,038 36
As part of the £100m share buyback programme announced on 14 July 2022, in
addition to the 12,404,382 ordinary shares purchased and cancelled, a further
8,269,586 ordinary shares were purchased and are held as treasury shares at 1
January 2023. Post half year end, the Company completed its share buyback
programme with the purchase of 746,207 further ordinary shares of which
447,724 were cancelled and 298,483 held as treasury shares. This is a
non-adjusting post balance sheet event.
12. Retained Earnings
Included in retained earnings of £1,815m at 1 January 2023 is £38m in
respect of treasury shares held by the Company (at 2 January 2022 : £nil)
13. 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.
14. 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 Unaudited 27 weeks ended Audited
26 weeks ended 2 January 2022 53 weeks ended
1 January 2023 3 July
2022
£m £m £m
Short-term employee benefits 2 2 5
Share-based payment charges 1 1 2
3 3 7
15. 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.
Interim dividend per share
Interim dividend per share declared in respect of financial year.
Legal completions
The number of homes legally completed in the half year.
Order Book
The value of reserved and exchanged sales which had not legally completed at
the half year end.
Return on capital employed
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 1 January 2023 and 53 weeks to 2
January 2022 before exceptional items as a percentage of the average of
current year 1 January 2023 and prior year
2 January 2022 capital employed.
26 weeks ended 1 January 27 weeks ended 2
2023 January 2022
£m £m
Operating Profit
26 weeks to 1 January 23 199 27 weeks to 2 January 2022 205
53 weeks to 3 July 2022 414 52 weeks to 27 June 2021 321
27 weeks to 2 January 2022 (205) 26 weeks to 27 December 2020 (178)
52 weeks to 1 January 2023 408 53 weeks to 2 January 2022 348
Capital Employed
Total equity 1 January 2023 1,918 Total equity 2 January 2022 1,953
Net cash 1 January 2023 (107) Net cash 2 January 2022 (242)
Capital employed 1 January 2023 1,811 Capital employed 2 January 2022 1,711
Total equity 2 January 2022 1,953 Total equity 27 December 2020 1,771
Net cash 2 January 2022 (242) Net debt 27 December 2020 (238)
Capital employed 2 January 2022 1,711 Capital employed 27 December 2020 1,533
Average capital employed 1,761 Average capital employed 1,622
ROCE % 23.2% ROCE % 21.5%
16. 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 24 February 2023
Interim dividend payment date 6 April 2023
Announcement of results for the 52 weeks to 2 July 2023 13 September 2023
Final dividend record date 22 September 2023
Circulation of Annual Report 6 October 2023
Annual General Meeting 10 November 2023
Final dividend payment date 16 November 2023
17. 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
18. Risks and Risk Management
Risk Risk Owners Key Controls and Mitigating Strategies Example Key Risk Indicators
Housing Market Group Chief Executive Ongoing and regular monitoring of Government policy consultations and · Leading market indicators re volumes and values
developments and lobbying as appropriate.
The UK housing market conditions have a direct impact on our business
· Weekly sales statistics
performance. Close monitoring of Government guidance.
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 customer demographics.
Ensuring strong relationships with lenders and valuers to ensure they
recognise our premium product.
Delegated Crisis Committee established with Executive Board meetings a minimum
of twice weekly in times of crisis.
Key Supplier or Subcontractor Failure Group Head of Use of reputable supply chain partners with relevant experience and proven · Material and trade shortages
track record and maintain regular contact.
The failure of a key component of our supply chain to perform due to Commercial
· Material and trade price increases
Monitoring of subcontract supply chain to maintain appropriate number for each
financial failure or production issues could disrupt our ability to deliver trade to identify potential shortage in skilled trades in the near future. · Advance payment applications
our homes to programme and budgeted cost.
Subcontractor utilisation on sites monitored to align workload and capacity. · Reluctance to tender for new business
Materials forecast issued to suppliers and reviewed regularly.
Collaborate with Supply Chain Partners in development of supply continuity
strategies.
Group Monthly Product Development meetings to identify and monitor changes in
the regulatory environment.
Tracking of construction cost movements.
Customer Service Group Customer and Marketing Director Customer and Quality Director. · Customer satisfaction metrics
Failure of our customer service could lead to relative under performance of My Redrow website to support our customers purchasing their new home. · NHBC Construction Quality Review scores and Reportable Items
our business.
Increased use of digital and virtual communication tools.
Online systems provide a full audit trail of the sales process.
Full training on New Homes Ombudsman requirements.
Attention to customer feedback supported by a process at nine months post
occupation to address root cause of customer fatigue and dissatisfaction.
Regular review of our marketing and communications policy at both Group and
divisional level.
Bespoke digitalisation of complaints management system for improved visibility
and efficiency.
Planning and Regulatory Environment Group Lobby and communicate with local authorities to facilitate early collaboration · Government consultations
to shape developments including where a National Model Design Code (NMDC) is
The inability to adapt to changes within the planning and regulatory Communications required. · Planning approval statistics
environment could adversely impact on our ability to comply with regulatory
requirements. Director, Group Close management and monitoring of planning expiry dates and CIL. · Proposed Government legislation
Human Resources Well prepared planning submissions addressing local concern and deploying good
design.
Director, Group
Careful monitoring of the regulatory environment and regular communication of
Company Secretary and proposed changes across the Group through the Executive Management Team.
Managing Director Proactive approach to managing data protection with multi-functional team
meeting regularly.
(Harrow Estates)
Effective engagement with local authorities to understand the extent of their
policies relating to climate change.
Sustainability Group Preparation and planning underway for Future Homes standard. · Group GHG emissions scope 1 & 2
Risks associated with climate change and failure to embed sustainable Communities Preparation for future Environmental Bill through implementation of our Nature · % of timber certified
development principles.
for People Strategy.
Director
· Average SAP rating
Close monitoring of Government guidance.
· Tonnes of construction waste per 100m2 build
Regular benchmarking against peers.
· % of materials suppliers and manufacturers who have actively
ESG scorecard. confirmed compliance with the Modern Slavery legislation and Redrow Code of
Conduct
Training for divisional teams.
Health and Safety/ Environment Group Health and Safety and Environmental Director Dedicated in-house team operating across the Group to ensure compliance of · Accident incident rate
appropriate Health and Safety standards supported by external professional
Non-compliance with Health & Safety standards and Environmental expertise. · H,S&E Assurance Audits outcomes
regulations could put our people and the environment at risk. H,S&E Assurance Audits. · 'Near Miss' statistics
Monthly Divisional H,S&E Leadership meetings.
Group and Regional 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
supported by performance information.
CDM competency accreditation requirement as a minimum for contractor selection
process.
Regular monitoring and reporting on environmental performance.
Cyber Security Chief Information Officer Cyber Awareness campaigns. · Level of instances reported in the media
Failure of the Group's IT systems and the security of our internal systems, Communication of IT policy and procedures to all employees. · Penetration test results
data and our websites can have significant impact to our business.
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.
Cyber Insurance.
Land Procurement Group Chief Executive Proactive monitoring of the market conditions to implement a clear defined · Forward land pull through
strategy at both Group and divisional level.
The ability to purchase land suitable for our products and the timing of
· Owned land holding years
future land purchases are fundamental to the Group's future performance. Experienced and knowledgeable personnel in our land, planning and technical
teams. · Land offer statistics
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.
Monitoring of emerging legislation to inform land assessments and purchase
terms.
Fraud/Uninsured Loss Group Finance Director Systems, policies and procedures in place which are designed to segregate · Business Process Review outcomes
duties and minimise any opportunity for fraud.
A significant fraud or uninsured loss could damage the financial performance
· Insurance Review outcomes
of our business. 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 including Cyber Insurance.
Fraud awareness training.
Availability of Mortgage Finance Group Finance Director Proactively engage with the Government, Lenders and Insurers to support the · Loan to value metrics
housing market.
Availability of mortgage finance is a key factor in the current environment.
· Number of mortgage products readily available
Expert New Build Mortgage Specialists provide updates on and monitoring of
regulatory change.
Appropriateness of Product Group Design and Technical Director Regular review and product updates in response to the demand in the market and · Customer satisfaction metrics
assessment of our customer needs.
The failure to design and build a desirable product for our customers at the
· Focus Group feedback
appropriate price may undermine our ability to fulfil our business objectives. Design focused on high quality build and flexibility to planning changes.
· Emerging planning regulation
Regular site visits and implementation of product changes to respond to
demands.
Focus on award winning Heritage Collection.
Regular design and technical seminars.
Monitor Government emerging legislation.
Attracting and Retaining Staff Group Human Resources Director In-house training offering blended learning to all employees. · Employee turnover levels
The loss of key staff and/ or our failure to attract high quality employees Suite of development programmes for identified talent from first line manager · Employee engagement score
will inhibit our ability to achieve our business objectives. to Director.
Move to agile working practices embracing use of remote working.
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.
Liquidity and Funding Group Finance Director Medium term committed banking facilities sufficient for a major market · Cash conversion
breakdown.
The Group requires appropriate facilities for its short-term liquidity and
· Forecast undrawn committed facilities
long-term funding. 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.
Monitor requirements for future bonds in emerging planning agreements.
Climate Change Group Risks and opportunities assessment aligned with TCFD framework. · Group GHG emissions
Risks associated with the potential physical effects of Communities Ensure appropriate consideration is given to product design to mitigate · Scope 1 & 2
impacts.
climate change and the regulatory and mandatory reporting environment around Director
· Average SAP rating
climate change. Identify new products, processes and services aimed at improved energy
performance and reducing Green House Gas emissions.
Undertake climate-related scenario analysis.
Commitment made to the Business Ambition for 1.5c and to reach science-based
net zero carbon emissions no later than 2050. Near-term scope 1, 2 and 3
targets have been approved by the Science Based Target Initiative.
Responsibility Statement
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in
accordance with the UK adopted International Interim Financial Reporting
Accounting Standard 34, and
· 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:
Richard Akers
Matthew Pratt
Barbara Richmond
Nicky Dulieu
Oliver Tant
By order of the Board
Graham Cope
Company Secretary
8 February 2023
Redrow plc
Redrow House
St David's Park
Flintshire
CH5 3RX
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