Deeside’s Redrow expects lower-end revenues and profits for 2024 amid housing market slowdown

Deeside-based housebuilder Redrow has issued a trading update in anticipation of lower revenues and profits for the year 2024.

During of the company’s annual general meeting held at St David’s Park Hotel on Friday, Chairman Richard Akers addressed shareholders and provided insights into the challenging trading environment.

Akers stated, “Following the usual summer slowdown we reported in our 2023 results announcement, the housing market has remained subdued through the autumn.

The business has had to adapt to this more difficult trading environment in terms of build rate and operating costs. However, we continue with our strategy of delivering our high-quality, award-winning Heritage homes to our target customers.”

The trading update for the 18 weeks leading up to November 3, 2023, revealed several key indicators of the current market conditions.

Redrow reported that the value of net private reservations during this period was 25% lower than the previous year, amounting to £384 million, compared to £515 million in 2023.

Gross private reservations per outlet per week dropped from 0.63 to 0.49 year-on-year, with no bulk sales recorded in either period.

Despite the majority of Redrow’s private customers being financially resilient, with 35% being cash buyers, many of them are situated at the top of the house purchase chain.

Challenges in obtaining mortgages further down the chain have led to an elevated rate of chain breakdowns. As a result, the cancellation rate for the year-to-date has increased to 25%, compared to 22% in 2023, impacting the net weekly reservation rate, which now stands at 0.36.

The average selling price of private reservations during the period also saw a decrease, with prices 2.5% lower at £471,000, compared to £483,000 in the previous year.

Redrow operated from an average of 125 outlets during the period, up from 120 in 2023. However, the company now expects the average number of outlets for the full financial year to be around 113, rather than the 117 originally forecasted in September.

While build cost inflation is gradually diminishing, Redrow anticipates an overall build cost inflation of around seven percent for the current financial year, considering the inflation associated with the opening work in progress.

Homes turnover for the period plummeted by 30% compared to the previous year, standing at £456 million, as opposed to £650 million in 2023.

The total order book as of November 3, 2023, amounts to £864 million, with 66% of it exchanged, in contrast to £1.36 billion at the same time the previous year, with 74% exchanged.

Redrow has already legally completed or exchanged approximately 58% of revenue for the current financial year, down from 72% in 2023.

Due to improved timing in affordable legal completions, Redrow now expects the revenue profile for the current financial year to be more evenly distributed, with 45% in the first half and 55% in the second half.

In response to the current economic uncertainty, Redrow is adopting a cautious approach to land acquisition, being highly selective and focusing on strategic land options.

Looking ahead, the company expects its results to fall within the guidance range provided in September 2023, with revenue expected to be between £1.65 billion and £1.7 billion and pre-tax profits between £180 million and £200 million.

However, given the subdued autumn housing market, the company is more likely to be towards the lower end of these ranges.

Redrow emphasises that its balance sheet remains strong, with net cash of £125 million as of November 3, 2023.