February 6, 2019 / 7:43 AM / 9 months ago

UK homebuilder Redrow says cost pressures easing

(Reuters) - British homebuilder Redrow Plc said on Wednesday it was seeing an easing of the Brexit and commodity-driven cost pressures that have plagued the UK housing market over the past year.

The company logo of construction company Redrow is pictured on a flag at a new housing development near Manchester northern England, April 7, 2016. REUTERS/Phil Noble

Redrow’s comments contrast with those of other housebuilders, who have said a squeeze on the availability of skilled labour and rises in the costs of materials was putting pressure on their businesses.

“In our experience it is easing,” Chief Executive John Tutte told a call with journalists.

“There has been a bit of a slowdown in the market and that’s especially the case in London, where output has reduced and that’s made the subcontractor market a bit more competitive.”

Tutte said that sub-contractors were not pushing up prices as much as they would have in the past, as they want continuity of work in an uncertain macroeconomic environment.

The company expects underlying cost inflation to be near 3 percent, compared to rates of between 3 and 4 percent it said it had seen over the past six months.

Redrow, which builds houses across England and Wales, also added to the chorus of voices pointed to a dip in the market towards the end of 2018 due to the uncertainty surrounding Brexit and higher property taxes.

“The market, in the run up to the festive period and the first two weeks of 2019, was subdued by macroeconomic and political uncertainties,” Chairman and founder Steve Morgan said in the last set of results before he steps down at the end of March.

However, the company also said sales had bounced back over the past three weeks, with reservations running at similar levels to last year’s strong market activity.

Private sales dipped to 156 million pounds for the first 5 weeks of 2019, from 166 million pounds a year ago. The company’s order book was up 11 percent at 1.16 billion pounds at the end of December.

The FTSE-250 company’s pre-tax profit rose 5 percent to 185 million pounds in the six months to Dec. 31, while revenue rose 9 percent.

Redrow also said it would look to return 111 million pound, or 30 pence per share, to shareholders, on top of a 10 pence per share interim dividend.

Shares of the company were up 1.8 percent at 602.5 pence at 0958 GMT.

Reporting by Arathy S Nair and Adil Bhat in Bengaluru; Additional reporting by Tanishaa Nadkar; Editing by Arun Koyyur

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