The Government’s Help to Buy scheme has propelled housebuilder Redrow to record profits – and another payday for its multimillionaire founder Steve Morgan.
Redrow is leaning more heavily on the initiative to subsidise the deposits of new buyers, introduced in March 2013. The company sold 1,374 homes through Help To Buy in the year to June 2015, accounting for 40 per cent of its sales to private buyers, against 35 per cent the previous year.
Redrow’s turnover rose by 33 per cent to £1.15bn in the year to June, boosted both by Help to Buy and a 13 per cent increase in the average selling price to £269,800 as the company grows its presence in the much more expensive London market. Pre-tax profits also jumped 53 per cent to a record £213m.
The strong numbers prompted Redrow to double the final dividend to 4p, meaning a £6m payout for Mr Morgan, who owns 40 per cent of the shares.
He founded the business more than 40 years ago and returned to the helm in the wake of the financial crisis in 2009. He is worth an estimated £740m.
The company ploughed more than £1bn into land deals last year as it shifts its attention south; more than half of its plots now are in southern England, compared with 44 per cent in June 2014.
However, the business has turned its back on the capital’s “super-prime” housing to concentrate on the suburban “London for the Londoners” market, where it said that demand is booming. London now accounts for 20 per cent of the housebuilder’s sales.
Mr Morgan said the threat of a Labour mansion tax, as well as last December’s stamp duty hike for more expensive homes, had prompted it to curb its land buying in super-prime areas.
He explained: “You can divide London into two areas really. Central London has quite definitely softened since the stamp duty announcement, so high-price properties have come off. But in the markets which I class ‘London for the Londoners’ – where people actually live – demand continues to be very, very strong.”
The shares rose 6.6p to 488.6p on the results, which beat City hopes. Peel Hunt’s Clyde Lewis said: “While the shares have been the best performers in the sector – up 63 per cent in the year to date – we continue to believe they look good value.”
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