FOR IMMEDIATE RELEASE

Thursday 10 February 2022

REDROW plc

INTERIM RESULTS FOR THE

27 WEEKS tO 2 JANUARY 2022

CONTINUED STRONG PERFORMANCE REFLECTING POPULARITY OF THE HERITAGE COLLECTION

Financial Results

Summary

·    Record first half revenue of £1,052m (2021: £1,041m)

·    House price inflation continues to exceed build cost inflation

·    Operating margin returns to normalised level of 19.5%, one year ahead of previous guidance

·    EPS up 17% to 48.1p

·    Interim dividend up 4p to 10p as we return to a 33:67 payout ratio

·    Value of private reservations for the 27 weeks up 6% to £884m (2021: £836m)

·    All divisions achieved a 5 star customer recommend score

·    Further progress in the land market with 3,316 plots added to current land and 2,945 plots to forward land

·    Strong start to the second half with the value of private reservations per outlet per week for the 5 weeks to 6 February averaging £417,000 in total and £367,000 excluding a bulk deal in London (2021: £301,000)

·    Southern division on track to open in summer 2022

2024 Guidance updated

·    Revenue increased due to mix and House Price Inflation

·    EPS increased but impacted by the introduction of the Residential Property Developer Tax

Commenting on the results Matthew Pratt, Group Chief Executive said:

"Redrow continued to perform strongly in the first half, delivering record revenue for the period, which demonstrates the ongoing success of our strategy. Our premium quality product is more in demand and attractive to customers than ever before and is perfectly suited to accommodating the blending of family and work life that many of us are experiencing.

By continuing to evolve our highly successful Arts & Crafts style Heritage Collection, we have capitalised on strong demand, improved sales margins and continued to invest for growth. The value of our first half reservations was £884m, an increase of 6% on the same period last year (2021: £836m), and our total order book increased to £1.5bn (2021: £1.3bn), leaving us well placed for the future.

The Group continues to maintain its high level of customer satisfaction with a score of 93.7% in the latest NHBC 8-week quarterly customer recommend survey (Q3 2021). It is also pleasing to note that every one of our divisions are currently achieving a Five Star recommend score- a minimum of 90% or above customer satisfaction across the board.

We are very aware of the stress and burden experienced by residents of high-rise apartments that have fire-safety issues. We share the Government's desire to resolve this issue and are committed to being part of the solution. As we are predominantly a builder of family detached houses, we have historically only developed a relatively small number of high-rise apartment schemes. It is important that the whole industry plays its part in tackling the cladding issue, not just housebuilders. We will continue to participate in discussions with Government and all relevant parties to try and resolve this complex issue for the benefit of all leaseholders.

We have made a positive start to the second half and are delivering against our strategy. In the five weeks to 6th February, private reservations in terms of value have averaged £417,000 per outlet per week and £367,000 excluding a bulk deal in London (2021: £301,000). We have also appointed the leadership team for our new Southern division, which will open this summer and is currently acquiring its first sites.

With the ongoing popularity of our Heritage collection, strong land bank, and commitment of our teams across the country, I am confident the business will deliver further progress in the second half."

A webcast and slide presentation of our results will be available at 7.00 am on https://www.redrowplc.co.uk/.

There will be an analyst Q&A meeting with management at 9.30 am at The London Stock Exchange,

10 Paternoster Square, London, EC4M 7LS. Coffee will be served from 9.00 am.

A live audio webcast of this event will be available at 9.30 am on www.redrowplc.co.uk.

Participants can also dial in to hear the Q&A live at 9.30 am on +44 (0) 20 3936 2999 or

UK Toll Free 0800 640 6441; access code 954012.

A recording will be available until 17th February 2022 on +44 (0) 20 3936 3001; access code 378096.

LEI Number:

2138008WJZBBA7EYEL28

Announcement Classification:

1.2: Half yearly financial report and audit reports/limited review

Group Chief Executive's Statement

Overview

In the first half of the financial year, we have demonstrated the continued success of Redrow's strategy, with a product range, which perfectly meets customers' needs. It is clear the 'race for space' is a long-term trend, directly supporting our larger, quality homes and differentiated market position.

By continuing to evolve, rather than revolutionise, our highly successful Arts & Crafts style Heritage Collection, we have capitalised on strong demand; improved sales margins and continued to invest for growth.  The value of our first half reservations was £884m, an increase of 6% on the same period last year (2021: £836m), and our total order book increased to £1.5bn (2021: £1.3bn).

Profit before tax is up 17% to £203m (2021: £174m). This was achieved with an operating margin of 19.5% for the first six months and we expect to deliver a similar margin for the full year. This means the Group will have returned to a normalised margin a full twelve months ahead of our previous guidance.

As a result of this strong performance the Board has declared an interim dividend of 10p, up 67% on the prior year (2021: 6p) as we return to a 33:67 payout ratio. The interim dividend will be paid on 8 April 2022 to shareholders on the register at the close of business on 25 February 2022.

We continued to purchase land in line with our growth strategy, adding 3,316 plots to our current land holdings with a GDV of c£1.2bn (2021: 2,284 plots and £800m GDV) and 2,945 to our strategic land bank (2021: 3,754).

Our guidance for active outlets in 2024 has reduced from 137 to 134, mainly due to planning delays.

It is clear the planning system is now at its lowest point for a number of years. Local Authority planning teams are experiencing resourcing issues, with a number of in-house planning officers choosing to leave and join the private sector. This is compounding the ongoing issues caused by a bureaucratic and unacceptably slow system.

While we can manage these issues, it is a particularly challenging barrier for small and medium sized housebuilders to overcome. It is in everyone's interests to see a vibrant small and medium-sized enterprise (SME) market - building on the construction skills pool and supporting a healthy subcontractor base. All these dynamics, when working in harmony, create a positive economic multiplier effect, which benefits local economies across the country. Therefore, we would repeat our call for Government to address these crucial planning problems. 

The scale down of our London business is progressing to plan. We have disposed of all the sites we decided not to build out and by the end of the next financial year, our only London development will be at Colindale.

I am very pleased to welcome Oliver Tant to the Board as an Independent Non-Executive Director and Audit Committee Chair Designate. Oliver brings strong financial and audit experience as well as broader commercial and operational expertise.

Financial Overview

Group revenue increased to £1,052m (2021: £1,041m), a new record for the first half of the year, as we capitalised on the strong demand for the superior quality of our homes and developments. The Average Private Selling Price of our homes rose by 8% to £419,000. This reflects geographical mix; house price inflation and a large increase in customers personalising their homes with extras. 

Total completions in the first half were lower than the same period last year at 2,749 (2021: 3,065). Completions of private homes were 140 lower at 2,290 homes. This was due to a reduction in apartment completions due to the transition out of London, and outlet constraints in some areas of the country due to very high demand and planning delays. Affordable completions were down 176 homes at 459. This was a timing difference with significantly higher affordable completions planned in the second half.

We increased our operating profit by 15% to £205m from £178m in the first half last year, and in doing so restored our operating margin to the 2019 level of 19.5%. Build costs continue to rise and we expect cost inflation of c6% for the full financial year. We are working closely with our partners to mitigate supply and cost issues. Despite ongoing build cost inflation, the house price increases embedded in our order book mean we expect to deliver a similar operating margin for the full year.

With interest expense at £2m, our Profit before Tax was £203m, up 17% on last year. Our Earnings per Share is up 17% to 48.1 pence.

We have more than doubled our Return on Capital Employed to 21.5% and are on target to return to 25% over the medium term.

We ended the first half with net cash of £242m (June 2021: £238m) and our average monthly net cash for the first half was higher at £257m (H1 2021: £66m).

The Redrow Difference

Recent Bank of England research of housing transactions during the pandemic found that just under half of the recent price increase could be attributed to the 'race for space' as people seek and value larger spaces outside city centres. (BOE: 13th December 2021: 'How much of the recent house price growth can be explained by the 'race for space?').

Customers desire our premium quality, larger detached homes more than ever before. They provide modern and flexible interior spaces, accommodating the blending of family and work life. At the same time, our Arts & Crafts style exteriors give homeowners the sense of well-being and comfort they want.

Our homes particularly appeal to second movers and rightsizers - who would usually look to the second hand market - and are well insulated from affordability issues.

Our highly successful 'My Redrow' online service enables customers to personalise their homes online. We have added Garden Rooms and fitted studies to our extensive range of options, which are more popular than ever before.

Our developments, designed with our 8 Redrow placemaking principles, are a key part of the Redrow difference. With the trend for more people working from home expected to continue, the concept of the 'walkable community' will become more desirable. We have responded to this in the design of our communities by delivering local mini destinations in the form of ponds, nature areas, walking and running routes, outdoor gyms, community orchards and allotments.

Customers are willing to move longer distances to secure their dream Redrow home and location. The interactive screens in our new Customer Experience Suites now give our Sales Consultants access to every one of our sites across England & Wales and our investment in digital technology allows us to be much more flexible in meeting customer requirements and helps us achieve a deeper engagement with them.

Meeting the ESG Challenge

We have made significant progress in the area of Environmental, Social and Governance (ESG). We have set out our intention to achieve net zero carbon by 2050 and are working towards our new developments achieving a minimum 10% biodiversity net gain.

In September 2021, we set an ambitious target to achieve net zero across the whole business and supply chain by 2050:

·    We have signed up to the Science Based Targets initiative's (SBTi) highest business ambition of pursuing efforts to limit global warming to 1.5°C.

·    We will set interim, science-based targets across scopes 1, 2, and 3 in 2022.

·    Redrow has joined the UNFCCC Race to Zero, becoming one of 3,067 companies globally committing to setting more ambitious climate targets.

·    The Carbon Trust have been appointed to help Redrow model its targets and develop its approach to meeting this strategy.

With new Building Regulations due in June 2022, we are actively preparing our building specification to ensure the roofs, walls, floors, windows and doors for all our new homes will meet the new Fabric Energy Efficiency Standards. We are currently trialling a range of new technologies to help us meet our aims, including air source heat pumps and our gas-free, low-carbon home in Yorkshire.

As part of our Building Responsibly strategic pillar, the Group continues to maintain its high level of customer satisfaction with a score of 93.7% in the latest NHBC's 8-week quarterly customer recommend score (2021: 92.9%). It is also pleasing to note that every one of our divisions are currently achieving a Five Star customer recommend score, which is a minimum of 90% satisfaction.

We welcome the introduction of the New Homes Ombudsman Scheme and see it is an opportunity to further highlight the quality of our product and services. We intend to register for the Scheme at the earliest opportunity. This will enable us to begin a process of preparation and transition to the new arrangements for future completions, all in conjunction with the New Homes Quality Board.

Since the launch last year of our ambitious Redrow 2025 vision - which was preceded by the biggest colleague consultation in the company's history - we have made significant progress. This includes the creation of a new 'agile office' concept to support truly flexible working, the groundwork for the launch of our new volunteering policy and an enhanced focus on health and well-being. I would like to thank all our colleagues and partners for their hard work and support, playing a key role in the Group's strong performance.

Fire Safety Improvement Works

The Rt. Hon Michael Gove MP (Secretary of State for Levelling Up, Housing & Communities and Minister for Intergovernmental Relations) recently announced his intention to secure more funding from developers to remediate the unsafe cladding on apartments by widening the scope of buildings concerned from those over 18 metres to those over 11 metres high.

As we are predominantly a builder of family detached houses, we have only developed a relatively small number of high-rise apartment schemes. However, as a consequence of the widening in scope of buildings concerned and more detailed cost estimates for the work required, we have increased our fire safety provision by £10m to £36m. This provision is for the estimated remediation of buildings for which we are the Principal Contractor. The level of this provision will be reassessed as work progresses, Government legislation or regulation changes as a result of the above announcement or if the Group makes any further commitments with respect to this matter.

We do believe the whole industry should play its part in tackling the cladding issue but in a fair and proportionate way. Alongside the Home Builders Federation, we will continue to try and work with Government to find answers to these issues, whilst trying to help meet this country's chronic housing shortage.

Current Trading & Outlook

We have made a strong start to the second half, with the value of private reservations per outlet per week for the 5 weeks to 6 February averaging £417,000 in total and £367,000 excluding a bulk deal in London (2021: £301,000). As stated in our 2021 Annual Report, and as expected, outlet numbers are lower at 112 (2021: 117) but we expect them to increase over time as new land comes on stream to satisfy continued strong demand for our products. We have appointed the leadership team for our new Southern division, which will open this summer and is currently acquiring its first sites.

I am confident the business will deliver further progress in the second half, combining a strong financial performance alongside our commitment to sustainable and responsible operating practices. Redrow will also continue to innovate to ensure we meet the needs of customers and our other stakeholders.

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Balance Sheet

Consolidated Statement of Changes in Equity

NOTES (Unaudited)

1.       Accounting policies

Basis of preparation

On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK adopted international accounting standards, with future changes being subject to endorsement by the UK Endorsement Board. Redrow plc transitioned to UK adopted international accounting standards in its consolidated financial statements on 28 June 2021. There was no impact or changes in accounting policies from the transition.

The condensed consolidated half-yearly financial information for the 27 weeks ended 2 January 2022 has been prepared on a going concern basis in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34 interim Financial Reporting, as adopted by the United Kingdom. The Directors consider this to be appropriate for the reasons outlined below.

The condensed consolidated financial statements are unaudited. A copy of the audited statutory accounts for year ended 27 June 2021 has been delivered to the Registrar of Companies.

The annual financial statements of the group for the 53 weeks to 3 July 2022 will be prepared in accordance with applicable International Financial Reporting Standards (IFRSs) and UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006. As required by the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the company's published consolidated financial statements for the year ended 27 June 2021 which were prepared in accordance with applicable IFRSs.

Going concern

The financial statements have been prepared on a going concern basis which the Directors consider to be appropriate for the reasons outlined below.

The Group renewed its available banking facilities in March 2021. As a result, the Group has a £350m Revolving Credit Facility (RCF) (2020: £350m) provided by an established syndicate of six banks being Barclays Bank PLC, Lloyds Bank Plc, The Royal Bank of Scotland Group Plc, Santander, HSBC and Svenska. This expires in September 2025 (2020: December 2022) and is a committed unsecured facility. No change to the RCF covenants was made as a result of the renewal. As at 9 February 2022, £350m of this facility was undrawn. It is likely that the RCF will be renewed prior to its expiry in September 2025.

In addition the Group is in a net cash position at 2 January 2022 and 9 February 2022 and also has £3m of unsecured, uncommitted facilities.

The Directors have prepared forecasts including cashflow forecasts for a period of at least 12 months from the date of signing of these financial statements (the going concern assessment period). These forecasts indicate that the Group will have sufficient funds to meet its liabilities as they fall due, taking into account the following severe but plausible downside assumptions:

·    A 10% price reduction on all unexchanged private and social legal completions for the going concern assessment period compared to the base case Board approved budgeted prices;

·    A 15% volume reduction for the going concern assessment period compared to the base case Board approved budgeted volumes; and

·    A 6% build cost increase on budgeted costs in FY2022 and an 8% increase on budgeted costs in FY2023.

These downside assumptions reflect the further potential impact of Covid-19 being increased economic uncertainty, further Government lockdown restrictions and legislation and increasing rates of unemployment and the impact on consumer confidence levels.

Allowing for the above downside scenario, the model shows the Group has adequate levels of liquidity from its

committed facilities and complies with all its banking covenants throughout the forecast period. The Directors therefore consider that the Group will have sufficient funds to continue to meet its liabilities as they fall due for the forecast period and have therefore adopted the going concern basis of accounting in preparing these financial statements.

Redrow plc is a public listed company, listed on the London Stock Exchange and domiciled in the UK.

The half-yearly condensed consolidated report should be read in conjunction with the annual consolidated financial statements for the 52 weeks ended 27 June 2021, which have been prepared in accordance with IFRSs as adopted by the European Union.

This half-yearly financial information does not comprise statutory accounts within the meaning of section 435 of the Companies Act 2006. This condensed half-yearly financial information has been reviewed, not audited. The comparative figures for the financial period ended 27 June 2021 are not the Group's statutory accounts for that financial year. Audited statutory accounts for the 52 weeks ended 27 June 2021 were approved by the Board of Directors on 14 September 2021 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006.

The principal accounting policies adopted in the preparation of this condensed half-yearly financial information are included in the annual consolidated financial statements for the 52 weeks ended 27 June 2021. The accounting policies are consistent with those followed in the preparation of the financial statements to the 52 weeks ended 27 June 2021 where there was a change in accounting in respect of Inventories. Inventories were previously stated net of cash on account (payments on account from social and private rented sector customers). These payments are now disclosed in Trade and other payables and the 2020 comparatives have been restated.

The preparation of condensed half-yearly financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may subsequently differ from these estimates. In preparing this condensed half-yearly financial information, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the annual consolidated financial statements for the 52 weeks ended 27 June 2021.

The main operation of the Group is focused on housebuilding. As it operates entirely within the United Kingdom, the Group has only one reportable business and geographic segment. After considering the requirements of IFRS 15 to present disaggregated revenue, the Group does not believe there is any disaggregation criteria applicable to its one reportable business and geographic segment. There is no material difference between any assets or liabilities held at cost and their fair value.

Principal risks and uncertainties

As with any business, Redrow plc faces a number of risks and uncertainties in the course of its day to day operations.

The principal risks and uncertainties facing the Group are outlined within our half-yearly report 2022 (note 16). We have reviewed the risks pertinent to our business in the 27 weeks to 2 January 2022 and which we believe to be relevant for the remaining 26 weeks to 3 July 2022. The only material change from those outlined in our Annual Report 2021 is that we have separately identified climate change as a risk category whereas it was previously included within the sustainability category. Risks surrounding "Key Supplier or Subcontractor failure" and "Planning and Regulatory Environment" have increased.

2.          Income Tax expense

Income tax charge is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year (19% (2021: 19%)) based on substantively enacted rates. However, if as expected the Residential Property Developers Tax (RPDT) is substantively enacted at 4% to commence on 1 April 2022, the tax rate including RPDT for the full financial year will increase to 20%. Deferred taxation balances have been valued at 25% (2020: 19%) being the corporation tax rate from 1 April 2023 substantively enacted on 24 May 2021 with the exception of the deferred tax liability on employee benefits which has been calculated at 35% (2020: 19%).

3.          Dividends

A dividend of £65m was paid in the 27 weeks to 2 January 2022 (26 weeks to 27 December 2020: £nil).

4.         Earnings per share

The basic earnings per share calculation for the 27 weeks ended 2 January 2022 is based on the weighted number of shares in issue during the period of 341m (26 weeks ended 27 December 2020: 344m) excluding those held in trust under the Redrow Long Term Incentive Plan, 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.

27 weeks ended 2 January 2022 (Unaudited)

26 weeks ended 27 December 2020 (Unaudited)

52 weeks ended 27 June 2021 (Audited)

5.          Pensions

The amounts recognised in respect of the defined benefit section of the Group's Pension Scheme are as follows:

6.         Inventories

7.          Land Creditors        

             (included in trade and other payables)

8.         Analysis of Net Cash/(Debt)

Net cash excludes land creditors and lease liabilities arising under IFRS 16.

9.         Bank facilities

At 2 January 2022, the Group had total unsecured bank borrowing facilities of £353m (27 December 2020: £366m), representing £350m committed facilities and £3m uncommitted facilities.

The Group's syndicated loan facility matures on 30 September 2025.

10.        Issued Share capital

Allotted, called up and fully paid.

11.        Contingent Liabilities

The Company has guaranteed the bank borrowings of its subsidiaries. Performance bonds and other building or performance guarantees have been entered into in the normal course of business. Management consider the possibility of a cash outflow in settlement to be remote.

12.        Related parties

Key management personnel, as defined under IAS 24 'Related Party Disclosures', are identified as the Executive Management Team and the Non-Executive Directors. Summary key management remuneration is as follows:

13.        Alternative performance measures

Redrow uses return on capital employed (ROCE) as one of its financial measures. The Directors consider this to be an important indicator of whether the Group is achieving appropriate returns on its invested capital. As this is not defined or specified by IFRSs, a definition and calculation is provided below:

Capital employed is defined as total equity plus net debt or minus net cash.

ROCE - at half year end, this is calculated as operating profit for the 53 weeks to 2 January 2022 and 52 weeks to 27 December 2020 before exceptional items as a percentage of the average of current year 2 January 2022 and prior year 27 December 2020 capital employed.

14.        General information

Redrow plc is a public limited company incorporated and domiciled in the UK and has its primary listing on the London Stock Exchange.

The registered office address is Redrow House, St David's Park, Flintshire, CH5 3RX.

Financial Calendar

5.          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

Shareholder helpline: 0370 707 1257

16.        Risks and Risk Management

Responsibility Statement

We confirm that to the best of our knowledge:

·    the condensed set of financial statements has been prepared in accordance with the UK adopted International Interim Financial Reporting Accounting Standard 34, and

·    the interim management report includes a fair review of the information required by:

a)    DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

b)    DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

The Directors of Redrow plc as at the date of this statement are:

Richard Akers

Matthew Pratt

Barbara Richmond

Nicholas Hewson

Nicky Dulieu

Oliver Tant

By order of the Board

Graham Cope

Company Secretary

9 February 2022

Redrow plc

Redrow House

St David's Park

Flintshire
CH5 3RX