Redrow adds to housing gloom

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Housebuilder Redrow took a £259.4m exceptional provision, throwing it into loss and passed its final dividend in the face of “unprecedented market conditions”, Alan Bowkett, its chairman, said on Tuesday.

The group said it had secured a new three year £450m banking facility and said it now had “an appropriate platform from which the group can move forward.”

However, at the end of June the group had forward sales of only 1,189 houses, 45 per cent down from the same time in 2007. As a result, it expected total sales in the year to end June 2009 to be “substantially” lower than for the financial year just ended.

Mr Bowkett said he expected “no meaningful increase in the availability of finance in the wider mortgage market before 2010”. House prices had fallen and could fall further, he said as the economy was under pressure.

He said that while the package of measures the government recently announced to help the market was welcome, “more needs to be done to help first time buyers”. A review of government proposals on land was necessary to prevent a “very significant” longer term impact on housing supply, he said.

“The stamp duty move and home-buying initiative are not really going to make the difference,” said Neil Fitzsimmons, chief executive. “What would be useful would be backing to the securitisation market.”

In the year to the end of June Redrow sold 3,925 houses, nearly 19 per cent fewer than in the previous year with most of the reduction in the second half, when reservations fell by 55 per cent. Margins came under pressure as the group offered greater discounts and incentives to secure sales, with the operating margin down from 16.4 per cent to 13 per cent.

Before the exceptional provision, pre-tax profits nearly halved from £121.1m to £65.5m. After the provision which reflected a write-down of the value of its land and work in progress, the group made a loss of £193.9m. Net debt at the year end was £223.3m.

The group said it had cut administrative costs by over £10m for the year, and had reduced headcount by more than 500 people – 40 per cent of the workforce – since January 1.

With no final dividend, the payout for the year was the 9.3p interim dividend, which was 19 per cent up on the previous year. When that dividend was declared in February, the group said it anticipated paying a 20 per cent higher dividend for the full year. It had raised the dividend by that amount for each of the last five years.

However, the group said that while recognising the importance of dividends to shareholders, “the significant deterioration in the fortunes of our markets in a very short period of time” meant it was in shareholders best interests to retain cash in the business, Redrow said. It said in future dividend cover of at least two times would be needed and payments would be “appropriate to earnings and prospects”.

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