Thursday 5 September 2019
Redrow plc
Final results for the year to 30 June 2019
SIXTH CONSECUTIVE RECORD YEAR
Financial Results
|
| 2019 | 2018 | % Change |
| Legal Completions | 6,443 | 5,718 | 13 |
| Revenue | £2.1bn | £1.9bn | 10 |
| Operating Profit | £411m | £382m | 8 |
| Profit before tax | £406m | £380m | 7 |
| EPS | 92.3p | 85.3p | 8 |
| ROCE | 28.5% | 28.5% | - |
| Full Year cash return (incl. B Share) | 60.5p | 28p | 116 |
Financial highlights
· Group revenue up 10% to a record £2.1bn driven by 13% increase in legal completions
· Record pre-tax profit of £406m, up 7% (2018: £380m)
· Earnings per share up 8% to 92.3p
· Return on Capital Employed in line with 2018 at 28.5%
· Strong cash generation delivered net cash of £124m (2018: £63m)
· Proposed final dividend of 20.5p per share, making 60.5p cash return per share to shareholders for the full year (including the B Share Scheme), up 116%
Operational highlights
· Continuing to deliver on growth strategy:
o Legal completions up 13% to 6,443 (2018: 5,718)
o New Thames Valley division opened July 2019
· 1,712 affordable homes delivered, up 55%
· 7,379 plots added to current land holdings, 40% of which were converted from forward land
Commenting on the results John Tutte, Executive Chairman of Redrow, said:
"I am delighted to report that Redrow for the sixth consecutive year has delivered record results. The Group completed 6,443 homes, 13% up on the previous year and passing the 6,000 milestone for the first time. Revenue reached £2.1bn and pre-tax profit increased by 7% to £406m.
This excellent trading performance led to strong cash generation and we ended the year with net cash of £124m after making the 'B share' payout in April. As a result we are proposing a final dividend of 20.5p per share giving a full year dividend of 30.5p per share, 9% up on last year.
We are understandably cautious about the post-Brexit future and also the eventual impact of the impending changes to the Help to Buy scheme. We do however, have a clear strategy to continue to grow centred on our award winning Heritage Collection that is so popular across a broad range of buyers.
Since the start of the new financial year, trading has been encouraging and the demand for our homes is strong with reservations running ahead of last year. Notwithstanding the political and economic uncertainty we face, we have every reason to be confident that 2020 will be another successful year for the Group."
Enquiries:
| Redrow plc John Tutte, Executive Chairman Barbara Richmond, Group Finance Director Matthew Pratt, Chief Operating Officer |
01244 527411 01244 527411 01244 527411 |
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| Instinctif Partners Mark Garraway James Gray | 0207 457 2020 07771 860 938 07814 379 412 |
There will be an analyst and investor meeting at 9.00 am at The London Stock Exchange,
10 Paternoster Square, London, EC4M 7LS. Coffee will be served from 8.30 am.
A live audio webcast and slide presentation of this event will be available at 9.00 am on www.redrowplc.co.uk.
Participants can also dial in to hear the presentation live at 9.00 am on +44 (0) 20 3003 2666 or
UK Toll Free on 0808 109 0700; password is Redrow.
Playback will be available by phone for the next 30 days +44 (0) 20 8196 1998 followed by
Access Pin 7787692#.
Chairman's Statement
This is my first Chairman's Statement since taking up the role at the beginning of April and I am delighted to be able to report that Redrow for the sixth consecutive year has delivered record results.
The Group completed 6,443 new homes passing the 6,000 milestone for the first time. The Group also celebrated handing-over its 100,000th home last November.
Financial Results
Group revenue grew by 10% to £2.1bn (2018: £1.9bn) as a result of a 13% rise in legal completions driven by a 55% increase in social housing output which accounted for the average selling price falling by 2% to £324,500 (2018: £332,300). The private average selling price increased by 2% to £389,500 (2018: £380,200) due to geographic mix and a small element of house price inflation.
Gross profit at £504m was £35m above last year: the gross margin reduced slightly to 23.9% mainly due to the increase in the proportion of social housing. With overall house price inflation barely covering underlying cost increases we have instigated a number of cost saving measures to maintain margins.
Operating expenses increased to £93m (2018: £87m) reflecting the investment in the new Thames Valley division which became fully operational at the beginning of July 2019. As a percentage of turnover operating expenses were fractionally lower at 4.4% (2018: 4.5%).
Operating profit was £411m, an 8% increase (2018: £382m) with an operating margin of 19.5% (2018: 19.9%).
Pre-tax profits were a record £406m, up 7% (2018: £380m) and earnings per share increased by 8% to 92.3p.
The Group's excellent trading performance led to strong cash generation and resulted in a cash positive position of £124m (2018: £63m) at the year-end after making a special pay-out of 30p per share under a 'B share' scheme in April. Return on Capital Employed was maintained at 28.5% due to tight control of working capital and negotiating favourable payment terms for land.
Due to the Group's ongoing strong cash position, the Board is proposing a final dividend of 20.5p per share (2018: 19p) making 30.5p for the year (excluding the 'B share' payment): a 9% increase on the prior year. Subject to shareholder approval at the Annual General Meeting, this will be paid on 13th November 2019 to all shareholders on the register as at close of business on 20th September 2019.
Market backdrop
The wider housing market continues to be affected by the uncertainty surrounding Brexit and the high cost of moving, particularly the burden of Stamp Duty Land Tax. During the year residential property transactions across the UK reduced and are currently running well below historical levels. House price inflation remains subdued with most indices only reporting small rises.
Against this more challenging backdrop, the new homes market has been less affected and remained comparatively resilient. The Group entered the new financial year with a strong order book of £1.02bn: a decrease of £129m largely as a result of previously reported weaker trading towards the end of the first half and lower volumes and average selling prices in London.
Market fundamentals remain encouraging. There is an undersupply of new housing, the mortgage market remains competitive and Help to Buy continues to support buyers of new homes. In the last financial year Help to Buy accounted for 1,881 private reservations (2018: 1,794). The scheme is now being more widely used in London where it has generally replaced investor sales.
The Government made an announcement during the year about the future of Help to Buy. With effect from April 2021 the scheme will only be available to first time buyers and regional price caps are to be introduced. The scheme will end in March 2023. The regional price caps if unaltered, will adversely affect the ability of first time buyers to acquire homes through the scheme in the more affluent areas of the north and midlands - this goes against the initial intention of the scheme when it was launched in 2013, to make homes more affordable across the country. London will be least affected by the changes in 2021 but, unless the scheme is extended or transitional arrangements are put in place, will be impacted most in 2023 as a consequence of the growing take-up and the higher equity loan available in the capital.
The Group's strategy to mitigate the impact of the changes to the Help to Buy scheme in 2021 and its demise in 2023, is to build on the continued success of the Heritage Collection to attract more buyers from the secondary market who would not ordinarily consider new. The Heritage Collection offers the character and space considered by many to be absent from new homes and, when combined with great placemaking, has a broad appeal to a wide range of customers.
Land and planning
During the year the Group added 7,371 plots to the owned and contracted land holdings. Of these 2,909 were converted from Forward Land holdings. After taking into account completions, the Group's owned and contracted land holdings with planning increased by 936 plots to 28,566 (2018: 27,630). The Group's Forward Land holdings increased by a net 800 plots to 31,500 (2018: 30,700). The Group is maintaining a cautious approach to land buying and will continue to do so until there is more certainty around Brexit and the outlook for the economy.
This more cautious approach combined with ongoing delays in the planning system, is inevitably having an impact on the rate at which new outlets are coming on-stream. However, our shift to acquiring and developing larger sites offering a wider range of product is helping to mitigate this by delivering better rates of sale.
During the year we launched our placemaking guide Designing a Better Way to Live. The guide sets out eight design principles that steer our teams to creating truly great places to live - the guide is very much a pragmatic and customer facing response to the Government's growing interest in design quality.
Quality and customer service
The significant investment we have committed to both improving the build quality of our homes and the service our customers receive in recent years is paying-off. Last year we regained our five star status in the annual HBF Customer Satisfaction Survey with a recommendation score of over 90% and a Net Promotor Score of 50.3 - one of the highest in the industry. It is also very pleasing to report that a record 28 of our site managers won NHBC Pride in the Job Awards.
People
As our growth moderates in line with our strategy, so does the need to expand the workforce. We created an additional 40 jobs in 2019 and we now directly employ 2,325 people. Of these 15% are trainees. During the year we recruited over 160 trainees including 107 apprentices.
It is encouraging to see a broader range of diversity across our workforce including more female apprentices. It is also a testament to our learning and development programmes that during the year 226 colleagues were promoted to positions of greater responsibility.
Our excellent results are very much down to the hard work and dedication of the Redrow team together with our subcontractors and suppliers, and I am immensely grateful to them all for their ongoing commitment to the business.
Board changes
During the year Steve Morgan stepped down from the Board almost ten years to the day since he returned in March 2009. Steve founded the business in 1974. His insightfulness, determination and leadership have been fundamental to the Group's growth and success. We are all indebted to him for his huge contribution to Redrow and the wider housing industry and we wish him all the best for the future.
Debbie Hewitt also stepped down from the Board after nine years' distinguished service. The Board would like to thank Debbie for her significant contribution throughout her tenure and wish her every success for the future.
As part of the reorganisation of the Board following Steve's announcement to step down and my appointment as Executive Chairman, Matthew Pratt was promoted to Chief Operating Officer and appointed to the Board in April 2019. Matthew has worked for the Group for 16 years at all senior management levels and has a wealth of operational knowledge and experience.
For the first time, the Board recently undertook an external evaluation of its performance. Whilst the evaluation concluded the Board and its committees operate well, a number of recommendations to improve performance were suggested and are all being implemented.
Outlook and summary
Since the start of the new financial year, trading has been encouraging and the demand for our homes is strong with reservations running ahead of last year. Additionally, we have exchanged contracts for a further PRS scheme at Colindale Gardens adding 347 plots to an already substantial order book.
Over the course of the past year, the Group has worked alongside its supply chain to identify any disruption the business could experience in the event the UK leaves the EU without a deal. Our suppliers have both increased stocks of imported goods and put in place plans to source materials from alternative suppliers.
We are understandably cautious about the post-Brexit future and also the eventual impact of the impending changes to the Help to Buy scheme. We do however have a clear strategy to continue to grow, albeit more modestly, centred on our award winning Heritage Collection that is so popular across a broad range of buyers.
We entered the new financial year with a strong order book, an excellent balance sheet and a pipeline of new outlets. Notwithstanding the political and economic uncertainty we face, based upon trading over recent weeks, we have every reason to be confident that 2020 will be another successful year for the Group.
John Tutte
Executive Chairman
Chief Operating Officer's Review
The Group continued its successful strategy of growth
Introduction
Having worked for Redrow for the last 16 years, it gives me great pleasure to present this report as Chief Operating Officer following what has been another year of record results.
Over the past year, the Group continued its successful strategy of growth and delivered 6,443 homes in the year, an increase of 13% from the previous year. Accordingly, revenues have risen by 10% to £2.1bn and profit before tax has risen by 7% to £406m (2018: £380m).
As part of our ongoing strategy to grow organically, we have opened a new office in Oxford. The new Thames Valley division will cover the growth areas around the county of Oxfordshire.
To reduce costs and operate more efficiently, we are consolidating our East and West London divisions into one office to be based at our Colindale development, where in time, we will be building a new purpose built office to house all our London operations. By making these changes, we will be able to share a number of functions across the two businesses, such as finance, planning and sales.
We are expanding the team at Harrow Estates who will now also have a satellite operation in the Thames Valley office to focus on the larger sites in the south helping to support our further growth in this area. The expansion of Harrow will also assist the divisions on larger more complicated schemes and forward land.
Investing in places
The land market remains attractive with plenty of opportunities to acquire quality sites in good selling areas. However we continue to exercise some caution in the market and will continue to do so until the wider political uncertainty is clarified.
In 2019 we acquired 7,371 plots of which 2,909 were transferred from our forward land holdings. In the year, our average site size was around 200 plots. As we have mentioned before, these larger sites have the strategic advantage of relieving pressure on replacement by ultimately slowing down the rate of outlet closure. Larger sites also allow much more scope for us as a design driven developer to provide our customers with a more desirable environment to live within. Design of the overall site is just as important to our purchasers in their decision on where to live as the aesthetics of the home they buy.
Our current land holdings have increased by 936 plots despite our more cautious approach to land acquisition. It is pleasing to note our pull through from forward land of 2,909 plots representing just under 40% of all purchases. The current land holdings provide around 4.4 years' supply at our 2019 completions rate.
Overall, our forward land holdings remain strong and will continue to play an essential part in delivering the homes the business needs to maintain our growth projections.
By geography the current land holdings remain weighted to the south of the country and broadly at the same percentages as last year.
Our forward land holdings remain strong in the north due to the history of the business; however, we are continuing to search for more opportunities in the south. The expansion of Harrow, to focus on identified growth areas such as Thames Valley, will ensure forward land makes a valuable contribution across all areas of our operations going forward.
Our current land holdings in Greater London continue to fall reflecting our concerns over the market. London is the most affected by the political uncertainty around Brexit and the end of Help to Buy in 2023 will most profoundly affect the capital. We are particularly cautious about future investment and will continue to de-risk any investment through either PRS or partnership agreements.
The combined estimated GDV of our current and forward land holdings is approximately £20bn
Focusing on Customers
Build Quality
Redrow's aim is to build houses and apartments that our customers are proud to call their homes. We were therefore delighted to achieve an HBF five star award for customer service in their annual survey. In the most recent published 12 month rolling score we continue to trend above the five star builder status with a 92% recommendation score.
Our product is hand built by skilled craftsmen in all weather and consists of many components that require a large number of different trades to install. Notwithstanding this, we recognise that we can still improve our quality to deliver the best possible home every time.
In the year we launched our quality control iPad-based system for our site teams to ensure our hand built product is thoroughly checked and logged for quality. The system allows our site managers to identify faults in the home, record these with marked up photographs showing what corrective works are required. Every subcontractor has access to our portal that provides a detailed list, with photographs of any works requiring rectification. Once remedial works have been completed the subcontractor can close down the instruction by returning a photo of the remediated works. The data from this system will allow us to review common faults and improve our training and specification to prevent repeating faults.
Ultimately the introduction of this system will allow us to identify faults and ensure they are correctly and quickly remediated. The new system will enable us to engage better with our subcontractors leading to improved quality and reductions in cost through shared best practice. The recording of the home at various stages of build also allows us to demonstrate to our customers the inspections we have undertaken and the inner-workings of their new home.
Customer experience
We continually review and ensure our customers are having a great Redrow experience.
In the year, we have enhanced our utilisation of social media as a means of communicating with our customers.
We have recently engaged with Trustpilot where customers can post reviews in addition to the HBF customer survey. Although in its infancy, we have been encouraging customers to leave feedback, and from an initial small number of responses we have now received over 570 reviews and have a Trustpilot rating of 4 out of 5 stars - 'great'.
Health and Safety
We continue to commit to continuous improvement in health and safety. In 2018 we significantly increased our health and safety team and split this into the two distinct areas of responsibility and assurance. The distinction between the roles has allowed us to both support our teams to produce the safest sites and also independently audit the teams for compliance.
In the year, three of our site managers were awarded highly commended at the NHBC annual Health and Safety awards. They were among only 27 site managers nationally who were awarded this achievement showing our commitment to constantly improve our safety with the ultimate aim to have safer sites. We continue to engage with our subcontractor base to ensure they work to the same high standards.
Cost initiatives and Modern Methods of Construction
The business continues to focus on tight build control and reducing costs. Whilst maintaining quality is key to this success, focusing on a number of small initiatives rather than wholesale changes can cumulatively have a significant effect. The business is currently highlighting reducing build times to save costs in overall prelims as well as improving build quality to reduce defects and waste.
Reducing build times is not about expecting trades to build faster; it is about reducing the gaps or standing time when plots are not being work on. By focusing on eliminating the standing time the overall build time reduces.
Whilst we do use modern methods of construction (MMC) across the Group, such as timber frame and steel frame, this is more specific to the site and the product we are building. As referred to above, we are looking at various smaller areas of efficiency rather than wholesale changes and a move to MMC. Although we pride ourselves on our traditional homes being built by skilled craftsmen, wherever possible we look to use off site manufactured components: for example, large off site manufactured arches for houses or the service pods for our multi-storey developments.
Our efforts to improve quality and efficiency do not stop with build. This year we launched our online reservation system. In the past a customer would need to set aside a significant amount of time with a sales consultant to run through all aspects of the property before making a reservation partly to ensure compliance with regulations. This was a time consuming process for all and could be a daunting process for our customers.
Our new system allows the customer to review all the information they require in the comfort of their own home at a pace they are comfortable with, being able to dip in and out of the process until it is complete. Once they have reviewed all the information and agreed and signed the relevant documents online they can progress to paying the reservation fee and securing their property.
Although this process makes the administration easier, it does not undermine the relationship with the sales teams that remains an essential part of the sales process and our service. It is another way where we are enhancing the customer journey whilst both improving the efficiency of onsite staff and strengthening our compliance to regulations.
Valuing people
In response to our continued growth we now employ over 2,300 people directly and many more times this through our supply-chain.
In our most recent employee survey 95% of our employees said they were proud to work for Redrow, testimony to our commitment to ensure our employees are engaged with the business.
In the year we have also increased our engagement directly with our subcontractors as well as our own employees. Looking forward, we expect to continue our work with them to improve the wellbeing of all people working on our sites. We have introduced dedicated help lines to support our subcontractors and also arranged Health Kiosks on sites where our subcontractors' personnel can measure their basic health statistics and receive advice.
In response to growing mental health issues across the building industry, we have trained a number of mental health first aiders and have plans and volunteers to train a total of 120.
We have a number of strategic partnerships with colleges across the country. The first group of students have completed their first year of our dedicated housebuilding degree which has been developed in conjunction with Liverpool John Moores University and Coleg Cambria. Our second cohort have commenced and in total we now have 23 people working towards their BSc in Construction Management - Housebuilding
The market and outlook
The market for new homes remains resilient despite political and economic uncertainty brought about by ongoing conjecture over Brexit.
The business is in excellent shape to react to any changes and challenges we may face with an outstanding product which will not lose its desirability even in a shifting economy.
There remains strong demand for a quality product which continues to be supported by low interest rates.
We are well placed for the future with a strong order book, an excellent product and a dedicated team to deliver for the future.
Matthew Pratt
Group Chief Operating Officer
Financial Review
Profitability
This has been another year of record financial results for the Group with revenue exceeding £2bn for the first time at £2.1bn (2018: £1.9bn) and profit before tax of £406m (2018: £380m). This was achieved by completing a record 6,443 new homes (2018: 5,718).
Total Group revenue rose 10% to £2.1bn, with homes revenue increasing by 10% to £2.1bn (2018: £1.9bn) and other revenue from land sales in line with the previous year at £21m (2018: £20m).
As a result gross profit increased by £35m in the year to £504m (2018: £469m) giving a gross margin of 23.9% (2018: 24.4%). This 50 basis point reduction compared to last year is primarily due to the change in tenure mix of our residential housing turnover with 12% of Homes revenue coming from Affordable Homes compared to 7.5% last year.
The continued growth of the business has generated an operating profit for the year of £411m (2018: £382m), an 8% increase on that achieved in 2018. This represents an operating margin of 19.5% (2018: 19.9%). Administrative expenses reduced slightly as a percentage of turnover to 4.4% (2018: 4.5%) although they increased in absolute terms due to our ongoing investment in the business.
Net financing costs at £5m were £2m lower than the prior year due to the improved cash position in 2019. We had an average monthly positive cash balance during the year of £80m, with the equivalent level in 2018 being £22m.
As a result, the Group delivered a record profit before tax of £406m (2018: £380m) for the year with basic earnings per share up 8% at 92.3p (2018: 85.3p).
Tax
The corporation tax charge for the year was £77m (2018: £72m). The Group's tax rate for 2019 was 19% in line with 2018. The normalised rate of tax for the year ending 30 June 2020 is projected to be 18.5% based on rates which are substantively enacted currently.
The Group paid £77m of corporation tax in the year (2018: £74m) following the traditional quarterly pattern. For the financial year ending 30 June 2020 the new legislation for corporation tax payments by very large companies takes effect. This brings instalments for financial year 2020 onwards forward by four months and, for the financial year ending June 2020 only, results in Redrow effectively paying six instalments.
Dividends
The Board has proposed a 2019 final dividend of 20.5p per share which will be paid on 13 November 2019 to Shareholders on the register on 20 September 2019, subject to Shareholder approval at the 2019 Annual General Meeting. This is an 8% increase on last years' final. The full year dividend is therefore 30.5p (2018: 28p) up 9% on last year and maintains a payout ratio of 33% of earnings (2018: 33%). In addition, we delivered a B share cash return of 30p per share to shareholders during the year.
The Group distributed to shareholders £218m including the B shares (2018: £74m) during the year. Our total cash return to shareholders for the 2019 financial year is 60.5p per share.
Returns
Net assets at 30 June 2019 were £1,585m (2018: £1,483m), a 7% increase. Capital employed at the same date was £1,461m (2018: £1,420m) up 3%. Our return on capital employed was maintained in the year at 28.5% (2018: 28.5%). Return on equity reduced slightly from 28.0% to 26.5%.
Inventories
Our gross investment in land increased by £76m, or 5% in the year to £1,515m (2018: £1,439m) reflecting our continued success in securing sites to best utilise our product and place making skills on acceptable terms. Approximately 40% of our current land bank additions in 2019 came from our forward land holdings which is in line with the five year average contribution.
Land creditors increased by £51m to £438m at June 2019 (2018: £387m) representing 28% of gross land value (excluding cash on account), a slight increase on last year (2018: 27%).
Our owned plot cost has increased by £3,000 per plot to £74,000 at June 2019 (2018: £71,000), but has been maintained at 19% of the average selling price of private legal completions in the year (2018: 19%).
Our investment in work in progress was broadly in line with 2018 at £782m (2018: £779m). As a percentage of Homes turnover it reduced from 41% to 37%. This reflects the reduced WIP on apartment schemes and the timing of planning leading to a slightly lower than originally expected number of outlets in June 2019.
Receivables
Trade receivables increased by £21m at June 2019 to £37m (2018: £16m) due primarily to the timing of Help to Buy and Housing Association receipts. Other receivables decreased from £29m to £19m partly due to the timing of the recovery of VAT on land payments.
Payables
Trade payables, customer deposits and accruals decreased by £10m to £442m (2018: £452m) due to reduced levels of Greater London private apartment deposits.
Cash flow and Net Cash
The cash inflow generated from operations was £371m (2018: £276m). This equates to a cash conversion from EBITDA of 90% in 2019, up from 72% in 2018. This significant cash generation more than funded both the growth in the business and the £111m B share cash return in the year. As a result our net cash balance increased from £63m at the end of June 2018 to £124m at the end of June 2019.
Financing and Treasury Management
During the year we have maintained our committed unsecured syndicated loan facility of £250m which matures in December 2022.
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 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 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 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 and no interest rate swaps are held currently.
Pensions
As at June 2019, the Group's financial statements showed a £18m surplus (2018: £22m 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). The £4m reduction is mainly due to the decrease in the discount rate together with an allowance for GMP equalisation.
Barbara Richmond
Group Finance Director
Consolidated Income Statement
| 12 months ended 30 June | | 2019 | 2018 |
| | Note | £m | £m |
| Revenue | | 2,112 | 1,920 |
| Cost of sales | | (1,608) | (1,451) |
| Gross profit | | 504 | 469 |
| Administrative expenses | | (93) | (87) |
| Operating profit | | 411 | 382 |
| Financial income | | 3 | 3 |
| Financial costs | | (8) | (10) |
| Net financing costs | | (5) | (7) |
| Share of profit of joint ventures after interest and taxation | - | 5 | |
| Profit before tax | | 406 | 380 |
| Income tax expense | 2 | (77) | (72) |
| Profit for the year | | 329 | 308 |
| Earnings per share - basic | 4 | 92.3p | 85.3p |
| - diluted | 4 | 92.0p | 85.2p |
| | | 2019 | 2018 |
| 12 months ended 30 June | | £m | £m |
| | | | |
| Profit for the year | | 329 | 308 |
| Other comprehensive (expense)/income | | | |
| Items that will not be reclassified to profit or loss | | | |
| Remeasurements of post-employment benefit obligations | | (7) | 22 |
| Deferred tax on actuarial losses/(gains) taken directly to equity | | 1 | (4) |
| Other comprehensive (expense)/ income for the year net of tax | (6) | 18 | |
| Total comprehensive income for the year | | 323 | 326 |
Balance Sheet
| | | As at 30 June | |
| | | 2019 | 2018 |
| | Note | £m | £m |
| Assets | | | |
| Intangible assets | | 2 | 2 |
| Property, plant and equipment | | 16 | 15 |
| Investments | | 6 | 6 |
| Deferred tax assets | | 4 | 4 |
| Retirement benefit surplus | | 18 | 22 |
| Trade and other receivables | | 9 | 8 |
| Total non-current assets | | 55 | 57 |
| | | | |
| Inventories | 5 | 2,297 | 2,218 |
| Trade and other receivables | | 48 | 42 |
| Cash and cash equivalents | 8 | 204 | 68 |
| Total current assets | | 2,549 | 2,328 |
| | | | |
| Total assets | | 2,604 | 2,385 |
| | | | |
| Equity | | | |
| Retained earnings at 1 July 2018/2017 | | 1,379 | 1,131 |
| Profit for the year | | 329 | 308 |
| Other comprehensive (expense)/income for the year | | (6) | 18 |
| Dividend Paid | | (218) | (74) |
| Movement in LTIP/SAYE | | (3) | (4) |
| Retained earnings at 30 June 2019/2018 | | 1,481 | 1,379 |
| Share capital | 9 | 37 | 37 |
| Share premium account | | 59 | 59 |
| Other reserves | | 8 | 8 |
| Total equity | | 1,585 | 1,483 |
| | | | |
| Liabilities | | | |
| Bank loans | 8 | 80 | 5 |
| Trade and other payables | 6 | 167 | 178 |
| Deferred tax liabilities | | 4 | 5 |
| Long-term provisions | | 8 | 9 |
| Total non-current liabilities | | 259 | 197 |
| | | | |
| Trade and other payables | 6 | 726 | 671 |
| Current income tax liabilities | | 34 | 34 |
| Total current liabilities | | 760 | 705 |
| | | | |
| Total liabilities | | 1,019 | 902 |
| | | | |
| Total equity and liabilities | | 2,604 | 2,385 |
| | | | |
| Redrow plc Registered no. 2877315
| | | |
Statement of Changes in Equity
| | | 2019 | 2018 |
| £m | £m | ||
| 12 months ended 30 June | | | |
| Profit for the year | | 329 | 308 |
| Other comprehensive (expense)/income for the year | | (6) | 18 |
| Total comprehensive income relating to the year (net) | | 323 | 326 |
| Dividend paid | | (218) | (74) |
| Movement in LTIP/SAYE | | (3) | (4) |
| Net increase in equity | | 102 | 248 |
| | | | |
| Opening equity | | 1,483 | 1,235 |
| Closing equity | | 1,585 | 1,483 |
Statement of Cash Flows
| | | 12 months ended 30 June | |
| | | 2019 | 2018 |
| | Note | £m | £m |
| Cash flows from operating activities | | | |
| Operating profit before financing costs | | 411 | 382 |
| Depreciation and amortisation | | 3 | 3 |
| Adjustment for non-cash items | | (7) | (6) |
| Increase in trade and other receivables | | (6) | (5) |
| Increase in inventories | | (79) | (175) |
| Increase in trade and other payables | | 50 | 76 |
| (Decrease)/increase in provisions | | (1) | 1 |
| Cash inflow generated from operations | | 371 | 276 |
| | | | |
| Interest paid | | (2) | (4) |
| Tax paid | | (77) | (74) |
| | | | |
| Net cash inflow from operating activities | | 292 | 198 |
| | | | |
| Cash flows from investing activities | | | |
| Acquisition of software, property, plant and equipment | | (4) | (2) |
| Interest received | 1 | - | |
| Net receipts from joint ventures - continuing operations | - | 26 | |
| Net cash (outflow)/inflow from investing activities | | (3) | 24 |
| | | | |
| Cash flows from financing activities | | | |
| Issue of bank borrowings | 7 | 80 | 5 |
| Repayment of bank borrowings | 7 | (5) | (90) |
| Purchase of own shares | | (10) | (12) |
| Dividend paid | | (218) | (74) |
| Net cash (outflow) from financing activities | | (153) | (171) |
| | | | |
| Increase in net cash and cash equivalents | | 136 | 51 |
| Net cash and cash equivalents at the beginning of the year | | 68 | 17 |
| Net cash and cash equivalents at the end of the year | 8 | 204 | 68 |
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 30 June 2019 under s495 of the Companies Act 2006, which do not contain a statement under s498 (2) or s498 (3) of the Companies Act 2006 and are unqualified. The statutory accounts for the year ended 30 June 2018 have been delivered to the Registrar of Companies and the statutory accounts for the year ended 30 June 2019 will be filed with the Registrar in due course.
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 European Union, IFRIC interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The principal accounting policies have been applied consistently in the periods other than for the effect of applying new standards.
2. Income Tax expense
| | | 12 months ended 30 June | |
| | | 2019 | 2018 |
| | | £m | £m |
| Current year | | | |
| UK Corporation Tax | | 77 | 73 |
| | | | |
| Deferred tax | | | |
| Origination and reversal of temporary differences | | - | (1) |
| Total income tax charge in income statement | | 77 | 72 |
| | | | |
| Reconciliation of tax charge for the year | | | |
| Profit before tax | | 406 | 380 |
| | | | |
| Tax calculated at UK Corporation Tax Rate at 19.0% (2018: 19.0%) | 77 | 72 | |
| Tax charge for the year | | 77 | 72 |
3. Dividends
The following dividends were paid by the Group:
| | | 2019 | 2018 |
| | | £m | £m |
| Prior year final dividend per share of 19.0p (2018: 11.0p); current | | 107 | 74 |
| year interim dividend per share of 10.0p (2018: 9.0p) | | 111 | - |
| B share dividend 30.15p (2018: nil p) | | 218 | 74 |
The Board made an additional cash return of 30 pence per share through a B share scheme. Each shareholder at the record date was issued with one B share for every existing ordinary share held at the time. Barclays Bank PLC (or a subsidiary thereof) (acting as principal, and not as agent, nominee or trustee for Redrow plc) made an offer to purchase the B shares for an amount of 30 pence per B share (free of all commissions). The Company accepted the offer on behalf of shareholders and paid a single dividend to Barclays as holders of all the B shares of 30.15p per share.
The Board decided to propose a final dividend of 20.5p per share in respect of 2019 (£72m (2018: 19.0p £70m)). The dividend has not been provided for and there are no income tax consequences.
4. Earnings per ordinary share
The basic earnings per share calculation for the year ended 30 June 2019 is based on the weighted average number of shares in issue during the period of 356m (2018: 361m) excluding those held in trust under the Redrow Long Term Incentive Plan (9m shares (2018: 9m 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.
12 months ended 30 June 2019
| | Earnings | No. of shares | Per share |
| | £m | millions | pence |
| Basic earnings per share | 329 | 356 | 92.3 |
| Effect of share options and SAYE | - | 2 | (0.3) |
| Diluted earnings per share | 329 | 358 | 92.0 |
12 months ended 30 June 2018
| | Earnings | No. of shares | Per share |
| | £m | Millions | pence |
| Basic earnings per share | 308 | 361 | 85.3 |
| Effect of share options and SAYE | - | 1 | (0.1) |
| Diluted earnings per share | 308 | 362 | 85.2 |
5. Inventories
| | | As at 30 June | |
| | | 2019 | 2018 |
| | | £m | £m |
| Land for development | | 1,547 | 1,443 |
| Work in progress | | 790 | 781 |
| Stock of showhomes | | 67 | 67 |
| | | 2,404 | 2,291 |
| Cash on account | | (107) | (73) |
| | | 2,297 | 2,218 |
Inventories of £1,526m were expensed in the year (2018: £1,375m). Work in progress includes £3m (2018: £2m) in respect of part exchange properties.
Cash on account comprises £32m (2018: £4m) attributable to land and £75m (2018: £69m) attributable to work in progress.
6. Land Creditors
(included in trade and other payables)
| | | As at 30 June | |
| | | 2019 | 2018 |
| | | £m | £m |
| Due within one year | | 271 | 209 |
| Due in more than one year | | 167 | 178 |
| | | 438 | 387 |
7. Borrowings and loans
| | | As at 30 June | |
| | | 2019 | 2018 |
| | | £m | £m |
| Opening net book amount | | 5 | 90 |
| Issue of bank borrowings | | 80 | 5 |
| Repayment of bank borrowings | | (5) | (90) |
| Closing net book amount | | 80 | 5 |
At 30 June 2019 the Group had total unsecured bank borrowing facilities of £253m representing £250m committed facilities and £3m uncommitted facilities.
8. Analysis of net cash
| | | As at 30 June | |
| | | 2019 | 2018 |
| | | £m | £m |
| Cash and cash equivalents | | 204 | 68 |
| Bank loans | | (80) | (5) |
| | | 124 | 63 |
9. Share capital
| | | As at 30 June | |
| | | 2019 | 2018 |
| | | £m | £m |
| Issued and fully paid | | 37 | 37 |
| | | Number of ordinary | |
| | | shares | |
| | | | |
| As at 1 July 2018 (ordinary shares of 10p each) | | 369,799,938 | |
| As at 30 June 2019 (ordinary shares of 10.5p each) | 352,190,420 | ||
On 8 April 2019, 369,799,941 B shares of 0.1 pence each were allotted and issued to shareholders on the basis of 1 B share for every existing ordinary share of 10 pence each held at the record date. Following the purchase by Barclays of all the B shares, and payment by the Company of a single dividend to Barclays as holder of all of the B shares, the B shares were reclassified as deferred shares of 0.1 pence and were immediately repurchased and cancelled by the Company.
Alongside the B Share Scheme, on 8 April 2019 the issued share capital of the Company was consolidated. Each shareholder at the record date received 20 new ordinary shares of 10.5 pence each for every existing 21 ordinary shares of 10 pence each held.
On 29 March 2019, in order to ensure that a whole number of new ordinary shares was created following the implementation of the share consolidation, 3 existing ordinary shares were issued by the Company to the Employee Benefit Trust. Following the consolidation, the total number of shares in issues was 352,190,420 ordinary shares of 10.5 pence each.
10. 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
11. Annual General Meeting
The Annual General Meeting of Redrow plc will be held at the offices of Instinctif Partners, 1st Floor, 65 Gresham Street, London EC2V 7NQ on 6 November 2019, commencing at 11.30am.
A copy of this statement is available for inspection at the registered office.
LEI Number:
2138008WJZBBA7EYEL28
Announcement Classification:
1.1: Annual financial and audit reports