Redrow on track as profits rise

Redrow boss Steve Morgan said the housebuilder’s recovery remained on track after a return to half-year profits was followed by encouraging January trading.

The owner of Wolverhampton Wanderers, who two years ago rejoined the company he founded in 1974 after it posted its worst-ever set of results, said reservations in the first six weeks of 2011 are “comfortably up” on a year ago but it was too early to judge the key spring buying season.

He has revived the company by returning it to its roots and building more family homes under its New Heritage Collection, which reduces the company’s exposure to first-time buyers who are struggling to get mortgages.

The strategy helped the Flintshire-based company make pre-tax profits of £8.5 million in the six months to the end of December, compared to a loss of £8.7 million a year ago. The last time the company made a profit in the first half of its financial year was in 2007, before the credit crisis began.

Sales lifted 15% to £216.1 million as the average selling price of a Redrow home rose to £170,500, compared to £147,300 in the same period the previous year, an increase of 16%.

Mr Morgan said: “Redrow has been transformed over the last two years – the New Heritage Collection is proving to be an aspirational product for our customers and it has undoubtedly played a major part in repositioning the Redrow brand and lifting the group’s margins.

“Redrow continued to make good progress in the first half of the financial year against the backdrop of a housing market overshadowed by economic uncertainties, tax rises and government cutbacks.”

The improved demand so far in 2011 could prove temporary and may be the result of the market “catching up” following the disruption caused by the Arctic weather in December, he cautioned.

But Mr Morgan does not expect major falls in house prices over the next year despite the Government’s austerity measures and the sluggish economic recovery.

He said: “Looking ahead, house prices have been stable for some considerable time now and we do not share the pessimism of some commentators that there will be a major fall in house prices during the coming year.”