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FTSE 100: Redrow profits slip as housing market 'finds new level'

A builder works at a Bovis homes housing development near Bolton, northern England, July 9, 2008. Two of Britain's biggest builders Bovis Homes and Redrow are cutting 40 percent of their workforces, 750 jobs in total, to cope with the deepening depression in the housing market.  REUTERS/Phil Noble (BRITAIN)
House builder profits are slipping as house prices fall. Photo: Phil Noble/Reuters (Phil Noble / reuters)

UK housebuilder Redrow has reported a slip in profits after stating the housing market “appears to be finding a new, natural level".

The London listed firm posted a first-half revenue of £1.03bn ($1.25bn), a fall from the same period last year, when the housebuilder reported a revenue of £1.05bn.

In its first half report the company stated that its pretax profit was £198m for the 26 weeks to January, compared to a profit of £203m for the same period a year earlier.

The fall in profit saw the company cut its full-year guidance for revenue to £2.05bn, down from £2.10bn, but raised its operating margin guidance to a range of 18% to 18.5%, up from 18%.

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That fall in profits came after what Redrow called “economic and political uncertainty” led to a decline in private house sales amid former UK prime minister Liz Truss' 'mini-Budget' roiled mortgage markets in September 2022.

Read more: UK house prices drop more than £12k since August

Economic uncertainty saw Redrow's sales rate fall to 0.38 private reservations per outlet per week for the first half. This was down from 0.64 for the same period a year earlier.

However, the Flintshire-based company said it had made an “encouraging start” to the second half of the year, adding that reservation rates for new builds were recovering.

The firm's chief executive Matthew Pratt said: “Whilst 2023 will be a challenging year as the market resets, early indications are better than anticipated and the market appears to be finding a new, natural level.”

The company's report stated that the rate of sales for the five weeks to February 5 had partially recovered to 0.51, and that it enters the second half of its financial year with a total order book of £1.1bn.

Redrow (RDW.L) fell 1.74% in early trading in London on Thursday, to 535.50p.

Watch: Cost of living: Higher mortgage costs 'to exert more significant downward pressure on house prices'

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