Redrow : Half Yearly Report

ABOUT DIRECTORS' FINANCIAL RISK c

REDROW REPORTS STATEMENTS MANAGEMENT

HALF-YEARLY REPORT‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌

2017

A BETTER WAY TO LIVE‌‌

ABOUT REDROW

£739m

DIRECTORS' REPORTS

£140m

FINANCIAL STATEMENTS

RISK 01

MANAGEMENT

31.0p

14

£560m

15

£603m

16

£91m

15

£104m

16

19.9p

16

15

22.9p

14

14

REVENUE

£739m

+23%

PROFIT BEFORE TAX

£140m

+35%

EARNINGS PER SHARE

31.0p

+35%

6.0p

2,459

£897m

4.0p

16

1,850

2,178

16

16

£655m

15

15

15

14

£435m

14

2.0p

14

INTERIM DIVIDEND PER SHARE

6.0p

+50%

LEGAL COMPLETIONS*

2,459

+13%

* including joint venture

PRIVATE ORDER BOOK

£897m

+37%

CONTENTS

ABOUT REDROW

IFC Contents

1. Highlights

2. Growing our business

DIRECTORS' REPORTS

04 Chairman's statement

1. Responsibility statement

   FINANCIAL STATEMENTS

2. Independent review report to Redrow plc

3. Consolidated income statement

   08 Consolidated statement of comprehensive income

4. Consolidated balance sheet

5. Consolidated statement of changes in equity

6. Consolidated statement of cash flows

7. Notes to the half-yearly financial statements

RISK MANAGEMENT

18 Risks and risk management

Take a look at our website for the most up-to-date investor information

www.redrowplc.co.uk

GROWING OUR BUSINESS, OUR TEAM, OUR COMMUNITY CONTRIBUTION

AND RETURNS FOR OUR SHAREHOLDERS

ABOUT REDROW

DIRECTORS' REPORTS

FINANCIAL STATEMENTS

RISK 03

MANAGEMENT

HALF-YE ARLY REPORT

We're expanding our business by building more homes in great locations and we're increasing our community contribution to enable them to prosper in a socially and environmentally responsible way.

Redrow creates a better way to live and we're growing

our business, building an organisation that all stakeholders can be proud to be part of, from homebuyers and suppliers to employees and shareholders.

Redrow is increasing productivity and also expanding the team across all disciplines. We are recruiting the best in the business, from experienced industry professionals

to top business and civil engineering graduates and we're developing our existing team to help them achieve their full potential. Every function plays a key role, from land and planning, through commercial, construction and sales and marketing, to customer service. Every colleague, both internal and external, is encouraged and supported to develop their capabilities. Work is a huge part of our lives and working in a creative, committed and conscientious team is an important part of our philosophy.

Redrow is increasing choice to offer our customers a wider selection of quality homes. We have broadened our range of homes to include everything from affordable flats for

young first time buyers, through to our many family homes in the Heritage and Regent collections, to entire Garden Villages. Redrow has something for every family size and every stage of life, all built responsibly to the same high standards, so that everyone can enjoy a better way to live.

In designing our developments, we never lose sight of

our responsibilities to the local people, their environment and their local economy and we take those responsibilities very seriously. That's why at Redrow, we don't just build homes, we build communities, contributing to local schools, doctors surgeries and transport, as well as setting aside green spaces, cycleways and creating sustainable

environments. We also provide around 1,000 social homes each year.

We're delighted with our growth as a brand and as a company, but we know that now, more than ever, growth has to be sustainable. We are clearly focused on moving our business forward responsibly, working to the best

of our ability at every stage of our value chain, so that together we can create a better way to do business for our staff, a better way to deliver value for our

shareholders and a better way to live for our customers.

ABOUT REDROW

DIRECTORS' REPORTS

FINANCIAL STATEMENTS

RISK 05

MANAGEMENT

CHAIRMAN'S STATEMENT

DIRECTORS' REPORTS

Chairman

Redrow delivered a robust performance in

the first half of the year, delivering yet another set of record results. In the last six months legal completions increased by 13% to 2,459 adding to the country's much needed supply of new homes.

In the first half of the 2017 financial year Group Revenue increased by 23% to £739m. Legal completions, including our Croydon Joint Venture, increased by 281 homes from 2,178 to 2,459 and for wholly-owned sites the increase was 238. The average selling price of our private homes increased by 12% from

£306,000 to £344,000 mainly due to geographical mix, with 47% of turnover being generated in the South of England, compared to 38% in the first half of last year.

As a consequence of the mix change, a reduction in impaired sites and net house price inflation, gross margin increased from 24.2% to 25%.

Overheads rose from £36m to £41m, given the further growth in the business. However, due to efficiency of scale, they reduced as a percentage of turnover from 6% to 5.5%.

Operating profit increased by 31% to £144m (2016: £110m) and pre-tax profits were 35% higher at £140m (2016: £104m). Earnings per share at 31p were 35% up on the previous year (2016: 22.9p).

The half year Return on Capital Employed improved to 24% (2016: 21%) and Return on

Equity improved to 25.4% (2016: 23.7%).

Net debt at the end of December 2016 was

£56m (June 2016: £139m), giving gearing of 5%. We expect a modest rise in our net debt position in the second half, as a result of the recent Radleigh Homes acquisition and our ongoing investment in the business.

As a result of the strong earnings and cash performance of the business, the Board has decided to pay an interim dividend of 6p per share (2016: 4p). The interim dividend will be paid on 5 May 2017 to holders of ordinary shares on the register at the close of business on 24 March 2017.

Demand for new homes remains strong throughout the country, on the back of improved mortgage availability and competitive mortgage rates in the last six months. The strong demand, together with the Government's commitment to increasing housing supply, gives us every confidence in the pursuit of our growth strategy. In the first half of the financial year 865 of our private reservations utilised Help to Buy, up from 746 in the same period last year.

The value of private reservations in the first half increased by 13% on a like-for-like basis (27 weeks) to £777m (2016: £688m) resulting in a record closing order book of £897m, up 35% on a like-for-like basis from December 2015.

Our sales rate per outlet per week over the 27 week period was 0.66, up 5% on the 0.63 for the same period last year. The consequence of the faster sales rate was that a number of sites sold out earlier than expected. As a result, and despite opening more outlets than forecast, we were operating on 122 outlets at the end of December 2016 (2015: 121) rather than the 127 planned. The number of outlets should increase notably in the second half. As always, however, this is subject to progressing a considerable number of sites through the planning process, which unfortunately remains as ponderous as ever.

As a result of the substantial increase in our owned and contracted land in the last financial year, together with the timing of land purchases this year, we secured 1,760 plots for our current land holdings in the last six months. Of these, 1,352 were converted from our forward land pipeline. Over the same period our forward land pipeline has remained unchanged with the potential for 25,600 plots, with the land transferred to current land holdings being replaced by new additions.

In February 2017 we acquired Radleigh Homes, a regional housebuilder based in Derby. Radleigh Homes completed 188 homes in the year to December 2016 and has a pipeline of over 1,300 plots with planning, and a further 1,200 plots controlled under options in its strategic land pipeline. Radleigh Homes is an excellent fit given its geographical location and its high quality market position, similar to Redrow. This acquisition will form the basis of a new regional division for the Group: Redrow East Midlands.

The ongoing growth in the business has resulted in our directly employed workforce exceeding 2,200 people, including over

300 apprentices and trainees. Despite our commitment to develop our own talent, there continues to be a shortage of skilled labour in the industry. Redrow is at the forefront of actively encouraging young people to enter the industry and develop successful careers across all disciplines. It is essential that our example is followed industry-wide if we are to resolve this issue.

Our committed team continue to support the business as it grows, for which I thank them and I would also like to take the opportunity to welcome the Radleigh employees to Redrow.

We are pleased to update our medium term guidance as a result of the strength of our order book and sales rate, the recent acquisition of Radleigh Homes and lower net debt expectations. In 2019 we expect to deliver turnover of £1.9bn, an operating margin of 19.5% and earnings per share of 77p.

We entered the second half of the current year with a record order book, with many of our sites sold five to six months in advance. The strong advance sales have the effect of limiting availability; nevertheless customer traffic and sales remain robust and the sales rate since the beginning of 2017 at 0.73 is in line with last year. Our growth strategy is firmly on track, giving me every confidence this will be another year of significant progress for Redrow.

Chairman