Redrow proves that it is not just builders of duck houses that can profit from politics. Like so many in its industry, the FTSE 250 group has also done rather well from delivering the Conservative Party’s only policy for the under 65s: a subsidised deposit for (slightly larger and drier) houses.
In the four years following the introduction of the government’s Help to Buy equity loan scheme, in April 2013, Redrow’s share price nearly tripled as sales volumes and margins grew. And, if a reminder of the political nature of these gains were needed, its shares briefly dipped last month on unfounded rumours of less Help to Buy in the future.
This morning, though, Redrow was able to report the equivalent of a detailed expenses claim for Pimlico pied-a-terre bath plugs: ie, even more growth in volumes and margins.
Redrow’s numbers seem both profitable and believable. In the full-year to July 30, the housebuilder reported a 20 per cent rise in revenue to a record £1.7bn driven by a 15 per cent rise in legal completions and a 7 per cent increase in average selling price to £309,800. Its operating margin rose 50 basis points – not quite as much as Persimmon’s 380bps at the half year stage – to 19.4 per cent.
Earnings per share grew 27 per cent to 70.2p – outstripping a Peel Hunt estimate of 23 per cent.
That ensured the dividend remained so well covered that the company could announce an even bigger 70 per cent jump in the pay-out.
For investors, then, the question is how much longer this can continue. Redrow said that, in the full year, 1,882 of its private reservations relied on Help to Buy, up from 1,521 in 2016 – and it could “look forward to working with government to consider the future of the scheme beyond 2021.”
Before then, it can rely on a record order book of £1.1bn, up 14 per cent on last year, and a strong start to the new financial year. Sales in the first nine weeks are “very encouraging” and already up 8 per cent ahead of last year.
Its shares are up 42 per cent in the year to date, ahead of the sector average of 34 per cent and second only to Persimmon’s. A slower post Brexit economy would appear a risk. But with Jeremy Corbyn’s Labour Party also pledging Help To (First-Time) Buyers, its seems even Redrow has Momentum behind it.
888, the online casinos and bingo group, came through a politically sensitive review of its licence last week – following failures to prevent problem gambling. But this morning it revealed the cost: its half-year results included exceptional charges of $51m, of which $5.5m related to a near £8m settlement with the UK Gambling Commission, and the remainder to potential tax bills from Germany.
However, the hit to revenue appears less than feared. Some analyst forecasts had suggested revenue would edge up just 1 per cent and adjusted earnings before nasties by just 5 per cent – held back by the changes to its UK business necessitated by the licence review and the effect of weak sterling on its US dollar denominated operations.
But, this morning, 888 was able to report a 3 per cent rise in revenue to $270m on a constant currency basis and an 8 per cent uplift to adjusted earnings increase, to $48m. This was achieved despite exiting several markets, including Australia and Poland.
Chief executive Itai Frieberger said:
Whilst the industry will continue to face regulatory headwinds in the second half of the year as further described below, trading in Q3 has started well and in line with the Board’s expectations. Underpinned by this momentum as well as the proven strengths of the group’s business model the Board remains confident that 888 will achieve further progress and deliver its expectations for the full year.
Given that business model includes acquisitions, the question now is whether most of the negatives have washed through the numbers and it can achieve a game changing deal in the second half. 888 thinks so:
888 has a number of significant further growth opportunities available across its existing geographies, platforms and products. In addition, the group will evaluate and explore new avenues for growth, including M&A.
And, finally, a potentially politically difficult takeover of a UK tech group looks like happening – at the third attempt.
Aveva, the engineering software developer, has agreed to an offer from French industrial group Schneider Electric, after two failures to do a deal in the past two years.
Schneider will take a 60 per cent stake in an enlarged London-listed Aveva incorporating Schneider’s software division, with existing Aveva shareholders receiving £650m in cash, equivalent to around 1,014p per Aveva share.
Aveva said “the Schneider Electric software business’ portfolio complements Aveva’s existing product range with little overlap, which will allow the enlarged Aveva group to offer a comprehensive combined product portfolio”, including greater exposure to the US market.
James Kidd, Aveva’s current chief executive, is expected to carry on in his role until the board can appoint a new chief executive, after which point he will become deputy CEO and chief financial officer.
Philip Aiken, Aveva chairman, said:
We are delighted to have reached agreement on the combination with the Schneider Electric software business. The transaction will be transformational to Aveva, creating a global leader in industrial software, which will be able to better compete on a global scale.
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