The shares of the FTSE 250-listed British housebuilder Redrow PLC (GB:RDW) surged yesterday after the company reported higher pre-tax profits for FY23 but issued a weak outlook. The company reduced its revenue and profit forecast for FY24, reflecting the challenges faced by the UK housing sector due to elevated mortgage rates.
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Nonetheless, investors reacted positively to the current year’s numbers, which pushed the Redrow share price up by 6.54% on Wednesday. Despite the sluggish housing market, the company’s stock has maintained stability and managed to secure a modest gain of 10% YTD.
Redrow PLC is a real estate company focused mainly on developing residential properties across the UK. The company is known for its premium and high-quality projects.
Let’s take a look at some of the numbers.
FY23 Earnings: Resilient Performance
Redrow’s revenue growth was almost flat at £2.13 billion compared to £2.14 billion in 2022. The company finished 5,436 homes in FY23, representing a 5% decrease compared to 5,715 homes completed in FY22. However, revenue remained steady, thanks to the increase in the average selling price. The statutory profit before tax grew by 61% to £395 million, as last year’s numbers were impacted by fire safety provisions. The underlying profit before tax fell 4% to £395 million in FY23, hit by higher costs.
Moving onto shareholders’ returns, the company has declared a final dividend of 20p per share, bringing the total dividend for the year to 30p per share. This was 9% below the dividends paid last year.
FY24 Guidance: Painting a Weak Outlook
Redrow’s order book of £850 million is 41% down from the previous year, highlighting the challenging business conditions. The company expects its FY24 revenue to be between £1.65 billion and £1.7 billion. Profit before tax is expected in the range of £180 million to £200 million, marking a decline compared to the previous year’s figure of £395 million.
In a setback to shareholders, the company also mentioned its intentions to cut its dividend to 14p per share.
On a positive note, the market slowdown has also impacted building cost inflation. Redrow expects building costs to rise by 4% in FY24, which is a significant reduction compared to the 8% increase in the previous period.
What is the Target Price for Redrow Share?
On TipRanks, RDW stock has been assigned a Hold rating based on two Buy, two Hold, and two Sell recommendations. The Redrow share price target of 513.7p offers a modest upside potential of 2%.
It’s worth mentioning that these ratings were assigned in the previous month and may be subject to changes following the company’s cautious outlook.
