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September 19, 2012 11:16 pm
Steve Morgan on Wednesday refused to be drawn on his plans to take Redrow private, as he unveiled a sharp increase in profits at the housebuilder he founded in 1974.
Three weeks ago, Mr Morgan announced he had made a provisional offer of 152p for each share he does not own, having built a 40 per cent stake in Redrow since his return to the group three years ago as executive chairman.
However, Mr Morgan, who also owns Wolverhampton Wanderers Football Club, would not comment further on his bid for the company he floated on the stock exchange in 1994.
Instead he highlighted the rise in the company’s profitability in the year to June, which he attributed to stable costs, expansion in the south-east, and a rising ratio of sales generated from cheaper sites bought since the downturn.
Revenues rose 6 per cent year on year to £478.9m, but pre-tax profits jumped 70 per cent to £43m. Operating profits were 54 per cent higher at £48m while earnings per share jumped from 4.4p last year to 9.7p.
But Mr Morgan stressed that the group had still not recovered to pre-2008 profitability and that market conditions remained challenging. He said house prices had been “pretty stable” and with rents increasing were likely to remain so.
He welcomed government attempts to kick-start the housing market, but said planning constraints and mortgage availability continued to be big obstacles. He said high mortgage rates charged by lenders were still standing in the way of initiatives such as the “NewBuy” mortgage indemnity scheme, through which a mortgage of up to 95 per cent is guaranteed jointly by the developer and the government.
Redrow’s shares closed up 2.18 per cent at 155p. They have risen close to 50 per cent since June as speculation mounted that Mr Morgan, frustrated by Redrow’s stock market valuation, was planning to take it private with the backing of Penta Capital and Toscafund, the hedge fund, which owns 14 per cent of Redrow’s shares.
“The City values all bar one housebuilder below their net asset values,” was his only comment on Wednesday.
Mr Morgan has been buying shares in Redrow since his return to run the company in 2009 after a nine-year absence. In May this year, he boosted his holding again after many institutional shareholders shunned a capital-raising at which shares were offered at a premium to the share price.
The fundraising reduced Redrow’s net debt from £61m to £14m. However, the group warned that gearing would rise again as it expanded and invested more in new land. It also said it would not pay a dividend this year.
Redrow’s results follow numbers from Galliford Try, the FTSE 250-listed construction company which this week said pre-tax profits had risen to £63.1m from £35.1m a year earlier, as it benefited from the sale of homes built on cheaper land.
Like Mr Morgan, Greg Fitzgerald, Galliford’s chief executive, urged the government to press ahead with further plans to bolster the housing market.
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