Redrow cancels divi, keeps building sites open; warns on cancellations

House builder Redrow cancelled its dividend and said it expected its sales rate to be “seriously impaired” over the coming weeks, forecasting labour and materials shortages, as the UK government ordered restrictions on movement to combat the coronavirus.

The company said that while it continued to allow work on its sites there had been a substantial decrease in site visits and cancellations had risen as customers worried about their ability to pay a mortgage in the current economic climate and were limiting social contact.

It warned of lower outlet openings as local councils delayed planning committee meetings and was also cutting back land purchases.

“Given the ongoing uncertainty, we have also decided to cancel our 10.5p interim dividend amounting to £37m which was due to be paid on 9 April 2020,” Redrow said on Tuesday.

“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.

Redrow said it had a strong balance sheet and £250m and was working to protect cash flow. Net debt currently stood at £116m and expected this to reduce substantially over the coming month as a high volume of homes legally complete.

“We have put on hold activity in the land market and we are working to actively reduce our work in progress levels across our sites.”

Russ Mould, investment director at AJ Bell said there was potentially a debate around whether Redrow's should still be building homes "given the scale of the UK’s housing crisis, which will remain an issue after the coronavirus outbreak has abated.

“Initial suggestions from the government seem to be that housebuilding can continue so long as social distancing is observed but it is worth noting that lockdown conditions in other European countries have become progressively stricter over time," he said.

Mould added that potential house buyers may well be reluctant to take 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."