Redrow won't be needing government support but it is changing strategy to concentrate of building homes with space for gardens and home offices.
Redrow issued a trading update for the year to 28th June 2020 ahead of publication of its annual results in September. It completed 4,032 homes, compared to 6,443 in the previous year. Turnover is expected to be £1.34bn against £2.11bn last year.
Despite the decline in business, it is doing well enough not to need government hand-outs. “Given the business’s resilient cash flow, the group has decided not to utilise the government’s job retention scheme and is in the process of returning all payments received under the scheme,” it said.
Redrow shut its sites in March when the government announced the lockdown but returned to work in phases in May. It no longer has any of its workforce furloughed although remote working remains in place for many office-based staff. It is currently undertaking construction activities across 124 developments.
The new site protocols that have been put in place, along with extended customer handover procedures and lengthened build times, are continuing to have an impact on the pace of output, it said.
As a result of a strong sales performance earlier in the year, and the shortfall in legal completions due to the Covid-19 lockdown, the Redrow starts the new financial year with a record order book of £1.42bn (2019: £1.02bn) of which about 70% is contracted.
A year ago, Redrow was sitting on £124m of cash; now it has £126m of debt. At the beginning of the pandemic it increased its revolving credit facility to £350m and, as a precaution, obtained eligibility under the government’s covid corporate financing facility (CCFF). It said that it was now unlikely to draw on the CCFF.
Redrow has also decided on a strategy shift, focusing on larger properties in the suburbs and regions rather than the capital.
“Recent studies have highlighted that the Covid-19 pandemic has shifted home movers’ priorities. In particular, there is a desire for more inside and outside space, wanting to live closer to green spaces and having better home workspace. Redrow’s reputation for placemaking and its award winning Heritage product ideally position the business to meet these changing customer priorities,” the company said.
“Following a review of our divisional businesses, we have decided to scale-back our operations in London to focus on the Colindale Gardens development and continue to target the group’s future growth on the higher returning regional businesses and the Heritage product.”
The costs associated with this move will put a substantial dent in profits, it acknowledged. Exactly how much, we shall see in September.