Redrow margins fall 5% as average sales price drops by £23,000

Redrow reports that its profit margins have run 5% lower than expected in the six months to 31 December, a result of the difficult times in the house building sector.

Other than that, Redrow is relatively better placed than some its rivals in that the on-going cash-flow leaves it on target to achieve its target net debt of £225m by June.

Redrow is free from the hassle of covenant-busting worries as its bank facilities were re-negotiated as long ago as September.

In a trading update this morning, Redrow states that “our short-term focus remains on the management of our cost base and cash flow.”

Over the last six months, Redrow has:

• cut employees from 1,200 to 730
• closed two offices

By reducing stock levels to generate income, net debt at the end of December was £270m which was below anticipated levels. 

The debt target of £225m by June is on the cards “with further reductions in debt anticipated in 2009/10”.

The trading update reveals:

• the inventory of unsold Signature and Debut properties down 50% in the last six months to 350 units
• 1,000 new homes in the latest interim period (figure in previous first half: 2,100)
• Average selling price £140,000 (previous figure: £163,000)
•  Forward sales of 1,000 homes (currently) is 40% lower than a year ago

There is the possibility of the carrying value of land and work-in-progress being cut when the full interim results are announced next month.