Including pounds 50m of new money, the flotation will value Britain's biggest private housebuilder at pounds 325m compared with earlier expectations of pounds 350m. The new caution reflects the poor performance of recent market debuts.
Beazer Homes was sold by Hanson last month at 165p and has only just recovered its flotation price. Wainhomes, which started trading at 160p, is still 1p below its starting price.
Redrow forecast full-year pre-tax profits of pounds 21m in the year to June. According to the pathfinder prospectus issued yesterday, legal completions this year will be achieved on 2,000 houses. Last year Redrow sold 1,262 houses, producing turnover of pounds 111m, from which it made operating profits of pounds 13.3m at a margin of 12 per cent. In the half-year to December, profits of pounds 11.9m were struck from sales of pounds 93m, representing a return on sales of 12.8 per cent.
Steve Morgan, chairman and chief executive, said that the issue price to be announced on 28 April would reflect market conditions at the time. He said the company was more comparable with highly rated builders such as Wilson Bowden and Bryant than with Beazer or Wainhomes.
Wilson Bowden, which like Redrow has a relatively long and cheap land bank, stands on a prospective p/e of 22. On the basis of Redrow's profit forecast, and a sustainable tax charge of 30 per cent, the company is hoping to come to the market on a similar rating.
Redrow, which was founded by Mr Morgan in 1974 with a pounds 5,000 loan from his father, did not expand into housebuilding until the early 1980s. It pulled out of the overheated South-east market in 1988 but returned last year with the acquisition of Costain's housebuilding division.
Mr Morgan plans to reduce his 98 per cent stake in the company to just over 50 per cent. He is expected to be worth almost pounds 300m after the flotation, including the proceeds of selling his shares and the value of the remaining equity.Reuse content