Redrow Share Price Rallied 15% on Half-Year Results Merger Deal

The Redrow plc (LON: RDW) share price surged 15% after releasing its half-year results for the 26 weeks to 31 December 2023. The homebuilder reported a revenue of £756 million, experiencing a decline of £275 million from the previous year's figure of £1,031 million. This decrease is primarily attributed to the challenges faced within the housing market. 

The profit before tax for the period stood at £84 million, a significant reduction from the £198 million recorded in 2023. Despite the lower earnings, the company maintained its interim dividend at 5p, adhering to its distribution policy, though this is half of the 10p dividend issued in 2023.

The macroeconomic environment presented several challenges, leading to a sales rate of 0.36 private reservations per outlet per week during the first half of the year, slightly below the 0.38 rate observed in the same period in 2023. The average number of outlets remained relatively stable, with 119 in the current period compared to 120 in the first half of 2023.

The report also highlights an optimistic beginning to the year's second half. There has been a notable uptick in the number of visitors, positively impacting the rate of private reservations per outlet per week. 

The downturn in revenue underscores the subdued nature of the housing market, reflecting broader economic uncertainties that have impacted consumer purchasing behaviour. 

The rally witnessed in Redrow’s share price could also be attributed to the £2.52 billion merger deal with Barratt Developments announced earlier today. Barratt intends to acquire all of Redrow’s outstanding shares for 600p each, marking a 27.2% premium to yesterday’s closing price. 

Investors were pleased with the price offered to Redrow shareholders, as evidenced by the company’s share price rally. 

Matthew Pratt, Group Chief Executive, said: “Despite numerous macroeconomic headwinds, we have produced a resilient set of results. We continue to deliver on our proven strategy of creating aspirational homes from our award-winning Heritage Collection, all situated in beautiful, well-designed places. In recent weeks the housing market has shown signs of improvement, with increasing mortgage approvals and reduced mortgage rates with greater competition amongst lenders. This, in turn, has improved homebuyer confidence and raised the prospects of a return to a more stable sales market.”

Redrow share price. 

The Redrow share price surged 14.96% to trade at 693.8p from Tuesday’s closing price of 603.5p.