Redrow has given a lift to the whole housebuilding sector after reporting record half year profits.
The company said profits had jumped 92% to £91.2m, with a 14% rise in the average selling price to £300,000, with demand boosted by continuing low interest rates and stamp duty changes. Chairman Steve Morgan said:
Whilst we are only at the beginning of the spring selling season, demand for new homes is strong and the welcomed changes to stamp duty will undoubtedly help home buyers within our market segment.
But he warned about the uncertainties surrounding the forthcoming general election and hit out at the “slow and tedious process” of obtaining planning approvals which “is the biggest single obstacle to the industry increasing the volume of new houses that the country needs.”
Clyde Lewis at Peel Hunt issued a buy note with a target price lifted from 420p to 440p:
There is plenty more growth to come from Redrow and we have made material increases to our profit forecasts for the next few years.
We are upping our 2015 pretax profit forecast by 17% to £190m. This is being driven by a mixture of higher revenue and higher margin assumptions. For 2016 the increase is 12% with a revised pretax profit estimate of £220m. Operating margins are expected to be 17.3% and 18.2% respectively.
Redrow is currently the cheapest stock amongst the housebuilders, and we have moved our target price to 440p.
With the interim dividend doubling to 2p, Redrow’s shares have climbed 33.9p or 11% to 330.7p.
The strong performance from Redrow has also lifted Persimmon by 44p to £16.57, Barratt Developments by 8.4p to 468.1p and Taylor Wimpey by 1.9p to 138.8p.
