Redrow in the red to the tune of £190m

Redrow has dived into the red to the tune of more than £190m as a result of the deteriorating conditions in the UK housebuilding sector.

The pre-tax loss for the financial year, ending 30 June 2008, was the consequence of a massive £260m exceptional charge, the result of a downward adjustment in Redrow’s carrying value of land and work-in-progress.

Redrow would otherwise have managed a profit of £66m on turnover of £650m.

The main statistics from the latest year’s trading were:

• 500 job losses – representing 40% of the workforce.
• Net debt of £220m – up from £180m at the start of the year.
• Turnover down by £180m.
• 3,900 new homes built – a fall of 19%.
• Average price of houses £157,000 – a fall of £2,000.
• Owned landbank with planning permission 17,700 plots – down by 2,800 plots.
• Gearing of 55% - up from 31% at the start of the period.

Chairman Alan Bowkett said: “In these unprecedented market conditions we have moved quickly to prioritise cash flow and the reduction of cost. The land market has fallen significantly during the last 12 months. We have reviewed all our land holdings.

“We have secured new debt facilities of £450m that provide for an extended maturity date and covenants appropriate to the prevailing trading conditions.”

Bowkett pointed to the lack of funding for first-time buyers and those without substantial deposits. However he added: “In due course the long-term structural shortage in housing supply relative to demand can be expected to return.”

Having made a provision against the group’s land and work-in-progress, the value of the business was cut from £760m to £630m. Given that the level of debt rose, there was a major jump in gearing (i.e. the ratio of debt to assets) to 55%.

Redrow’s cost base has been slashed with Bowkett reporting: “During the past six months, as a result of our strength in procurement of materials together with our policy of engaging constructively with our sub-contractor base, we estimate that build costs decreased by 3%.

“We also took action on headcount to reduce site expenses as we pulled back our build output.

“In the second half of the financial year the number of employees reduced by 12% to 1,154. We have implemented further substantial cost reduction measures since the financial year-end.”

Redrow offered no detail as to what the latest move involved.