Redrow scraps interim dividend as coronavirus restrictions tighten
Housebuilder Redrow is cancelling its interim dividend, anticipating a sharp drop in sales as the government tightens restrictions amid the coronavirus outbreak.
The FTSE 250 company said it is cancelling its 10.5p interim dividend, amounting to £37m, which was due to be paid next month. Shares in Redrow are up five per cent.
Redrow said: “It is inevitable our sales rate will be seriously impaired over the coming weeks and build output will be significantly affected by labour and material shortages.” It also anticipates outlet openings slipping as local authorities delay planning committee meetings.
On Monday night, Prime Minister Boris Johnson tightened restrictions to curb the spread of infection in the UK. He ordered Brits to stay at home, allowing only key workers to travel to and from work.
However, this morning Michael Gove confirmed construction sites would still be open. Redrow said its sites will remain open “with strict precautions in place including enhanced levels of cleaning, additional hygiene facilities and social distancing.”
The housebuilder said it has a “strong balance sheet together with £250m of committed facilities”. Net debt currently stands at £116m which the housebuilder expects to reduce over the coming month as a number of homes legally complete. It has put activity in the land market on hold and are reducing work across sites.
“Once we have more certainty over the impact on the industry and our business we will make an announcement over future dividend distributions together with an update on trading.”
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However, trading in the first 12 weeks of the second half to 20 March remained resilient. The value of net reservations was up £121m at £525m compared to last year, and Redrow’s order book currently stands at over £1.4bn.
Russ Mould, investment director at AJ Bell, said: “In the case of the builders, would-be house buyers may well be reluctant to make the biggest financial commitment they will ever make – taking on a mortgage – while the economic outlook is so uncertain, even if the government is doing its best to try and support them when it comes to their income and meeting expenses.”
“Moreover, it will be very difficult for consumers to check out their potential new home if they (and the sales staff they would have met) are confined to their current one.”
Redrow’s peer Taylor Wimpey also announced the cancellation of its dividend as it said it felt the effect of government shutdowns in the past few days.
The housebuilder has drawn down £550m in credit facilities to protect its balance sheet against the impact of coronavirus.