Redrow predicts low-end profits in subdued housing market

Redrow PLC (LON:RDW) has warned revenue and profit are likely to be at towards the lower end of guidance after a spike in cancellations in a subdued housing market.

The housebuilder said the value of net private reservations in the period was 25% below the prior year at £384 million while gross private reservations per outlet per week for the period were 0.49 compared to 0.63 last year.

But it said mortgage difficulties lower down the housing chains had caused its cancellation rate for the year to date to rise to 25% compared to 23% a year ago resulting in a net weekly reservation rate of 0.36.

The average selling price of private reservations in the period was 2.5% lower at £471,000, compared to £483,000 in the prior year.

The housebuilder said it continue to expect results to be in the guidance range given in September of revenue between £1.65 billion and £1.7 billion and pre-tax profit of between £180 million and £200 million but they are more likely to be towards the lower end of the range.

Redrow said it operated from an average of 125 outlets in the period but due to the slower sales market, expect this number to for the full financial year will be around 113 rather than the 117 guidance issued in September.

Whilst build cost inflation continues to abate, Redrow still expects overall build cost inflation will be c7% for the current financial year given the inflation inherent in the opening work in progress.

Homes turnover for the period was 30% below last year at £456 million while the total order book at 3 November was £864 million, compared to £1.36 billion at the same time last year.

Due to improved timing of affordable legal completions, the firm now expects the revenue profile for the current financial year to be more evenly split than originally anticipated, with 45% in the first half and 55% in the second half.