House builder Redrow has embarked on a major expansion drive as housing sales soared over the year by 27% to 3,597.
The boom in completions in the year to June saw Redrow hire more than 230 directly employed staff, boosting its overall headcount by 21% to 1,346.
A 13% rise in average selling price to £239,500, also helped to lift turnover 43% to a record £864.5m and deliver record pre-tax profits for the group, nearly double that of the previous year at £132.6m.
As a result operating margin soared from 12% last time to 16% in 2014. In November, Redrow celebrates 40 years since chairman Steve Morgan founded the business.
Since coming back from retirement five years ago he has presided over a 186% rise in turnover while large losses have become record profits.
The workforce has doubled and Redrow has regained its reputation as a 'premium' homebuilder with the Heritage Collection.
Morgan said: “While this is clear evidence of the success of our strategy it also shows the positive impact of the Government’s Help to Buy Scheme.
During the year 1,023 of Redrow’s private legal completions were under the Help to Buy scheme, most to first-time buyers and over half in the north of England.
Morgan added that new Mortgage Market Review rules had undoubtedly moderated the market, which has returned to a more seasonal pattern of activity.
“We have substantially increased our land bank, which should see a good growth in the number of outlets during the year. This, combined with our strong order book, leaves me confident that the group will see another year of significant progress.” He added that material and trade shortages drove like-for-like build cost increases of around 5% over the year.
Redrow’s London division made its first significant contribution, generating £124m of revenue in the year from 293 completions.
To further expand its presence in the south, Redrow opened a new West Country division in July operating from an office in Exeter to capitalise on the exceptional growth achieved in the South West.
This builds on the new Southern Counties division base in Camberley opened at the start of the financial year.
Net debt increased to £173m from £91m in 2013, due to running investment in land and work in progress.
As a result, Redrow's owned and contracted land bank at year-end stood at 16,724 plots, up 18% on last year.
The average plot cost has risen to £63,000 from £57,000 last year, primarily as a result of a higher percentage of land being in the south. This figure represents 23% of our current average selling price, still broadly in line with previous years.
Berkeley Group chairman Tony Pidgley said today that demand remained resilient in and around London after hitting peak last year.
He said the house builder continued to see high demand for well-designed homes in good locations in the capital despite reports of cooling in the market.
In a trading update covering May to August he said Berkeley continued to invest in new land and had bought two new sites and achieved planning on two others to maintain its project pipeline.
“A strong market in the last financial year, in which cash due on forward sales rose to over £2.2bn, left Berkeley well positioned at the start of this year to maintain its investment and contribution to the UK's economic recovery,” said Pidgley.
“Since the start of the current financial year, the market has reverted to normal transaction levels from the high point in 2013, providing a stable operating environment.
He added: “Demand for the right product with good design in the best locations has remained resilient.”
Pidgley said Berkeley was focused on unlocking planning and gaining access to the land currently held, which comprised over 11,000 plots with a gross margin of some £1.5bn.
He said Berkeley had bought two new sites since the beginning of May and won planning for major former News International site in Wapping and another in Chiswick.
Pidgley said the group had delivered some 15,750 new homes in London and the South East over the last five years, supporting over 21,000 jobs directly and in the supply chain in the last year alone.
Scottish house builders are warning that housing activity will start to slow unless more cash is injected into the Help to Buy scheme.
Help to Buy was introduced north of the border in April and has enthusiastically been taken up by buyers boosting housing activity.
But the government only set aside enough money to fund 2,000 deals, and this was exhausted by July.
Philip Hogg, chief executive of industry body Homes for Scotland, said:“The Help to Buy (Scotland) scheme has proved an unqualified success, generating over 4,300 sales and reservations since launch.
He said the scheme had made a major contribution to latest Council for Mortgage Lending figures, which showed loans in Scotland up 39% to first time buyers in the second quarter of the year to the highest level since the credit crunch.
“Frustratingly, however, given the very clear demand that exists, funding for this year has already run out.“
He warned: “This has significantly impacted sales, removing the confidence and certainty builders need to invest in much needed housing development.
“Rather than building on the momentum of last week’s housing figures showing the first increase in supply in six years, looking ahead we fear a move backwards. “
"And for an industry where every new home built supports four jobs, this is a serious concern.
"It is therefore imperative that the Scottish Government work with the industry to achieve a quick resolution to this budget gap.”
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