Redrow has asked the Government for more clarity on the future of Help to Buy as it is worried the tax-payer funded loan scheme that has consistently helped it grow profits will be discontinued.
The housebuilder said 1,794 of its sales to private buyers were secured through Help to Buy, a similar level to the previous year. That is a 40 per cent of the total 4,500 private sales in the year to the end of June.
The loan scheme, which was introduced in 2013, contributed to lift demand, helping group revenues 16 per cent higher to £1.9billion and pre-tax profits 21 per cent to a record £380million in the year to the end of June.
Record profits: Redrow said it made a record £380million profit in the year to the end of June
It comes after reports surfaced over the weekend that Help to Buy will be scrapped in 2021.
Critics say the scheme is failing to help people who need it most while pushing up house prices and boosting profits and pay at Britain’s builders.
Recent official figures showed thousands of wealthy families were taking advantage of Help to Buy, even though it is aimed at struggling first-time buyers.
Redrow chief executive John Tutte asked the Government for more clarity on the future of the profitable scheme, as well as on Brexit.
‘Redrow is committed to growing our output to help the country’s requirement to increase the number of new homes built.
‘We have a very strong forward order book, first class land holdings, an excellent balance sheet and we are able to react quickly to changing circumstances.
‘However, there is no doubt that clarity over Brexit and the future of Help to Buy would improve market sentiment. Given that clarity, we will continue to deliver.’
Redrow said it completed 5,913 new homes, including its Croydon Joint Venture, an increase of 9 per cent on the previous year.
The average selling price of its homes rose 7 per cent to hit £332,300.
That’s despite the housing market, particularly in London and the South East, having slowed markedly since the Brexit vote.
Redrow also said it has entered the current year with a strong order book of £1.14billion, an increase of £110million.
And it proposed a final dividend of 19p per share, leading to a total payout of 28p, a 65 per cent hike from the year before.
But despite the solid results and the dividend increase, Redrow shares fell by 1 per cent to 551p in morning trading, after having opened about 2 per cent higher.
Russ Mould, AJ Bell investment director, said: ‘Redrow, like the house builders’ sector as a whole, comes with a net cash balance sheet, a decent yield and a low earnings multiple. All three suggest the stock – and the sector – looks cheap.
‘But when an earnings multiple is low and the dividend yield is high, this is often a two-fold message from investors. First, they do not believe the earnings numbers and therefore are of the view that the shares are not as cheap as they look. Second, to compensate themselves for this perceived risk of earnings disappointment, they are demanding a high dividend yield.
‘This scepticism is understandable at a time when UK mortgage approvals have fallen year-on-year for ten consecutive months, the unknown of Brexit is looming, consumer confidence remains soggy – and the builders are starting to press for another extension to the Government’s Help to Buy scheme, which is due to expire in 2021.