Berkeley Group delivers a strong set of results, including enhanced returns for shareholders

Dividend

Berkeley Group Holdings plc (LON:BKG) has announced its unaudited interim results for the six months ended 31 October 2021. 

Berkeley has transformed over the last five years by investing in large-scale, complex sites in London and the South East to create a unique and unrivalled business. It has a passion to create new neighbourhoods which truly add to existing local communities, and is leading on creating social value, enhancing nature and tackling the climate and skills challenges.

Rob Perrins, Chief Executive, said:

“This is a strong set of results, including enhanced returns for our shareholders.  High standards of design and place-making continue to differentiate our homes and neighbourhoods, excite customers and deliver a range of positive outcomes for our stakeholders.

The performance reflects Berkeley Group’s conviction and investment in its strategy over the last 18 months, which is focused on London and the South East, the country’s most under-supplied housing markets, in spite of the challenges presented by the pandemic, supply chain constraints and regulatory environment.  Over this time, we have continued to deliver in line with our uniquely long-term operating model, progressing construction across our portfolio of 64 live projects. These include 30 long-term, highly complex regeneration sites, of which 25 are now in delivery.

The visibility this provides, coupled with a resilient sales market, now enables Berkeley to increase its earnings guidance for the current financial year by 5%.  Thereafter, we anticipate 5% annual pre-tax profit growth for the next three years which will see Berkeley deliver approximately £625 million profit in 2024/25, by when we will have increased our volumes by 50% from pre-pandemic levels.

Berkeley is unique in having the capital, resources and expertise to regenerate this number of highly complex large-scale sites, with each one requiring a bespoke and holistic place-making strategy to stitch it back into its surrounding community and unlock its potential in terms of economic, environmental and social value.

The significant majority of our sites under construction (83%) are located on brownfield land and we warmly welcome the Government’s renewed focus on supporting brownfield regeneration through its anticipated planning reforms. To be successful, these will need to address the regulatory barriers to brownfield regeneration. 

I am delighted to report on our progress against our industry leading sustainable business strategy, Our Vision 2030, including important early steps towards our 1.5⁰C aligned science-based carbon reduction targets.  Highlights include expanding our use of low carbon biofuels and hybrid machinery, embedding heat pump solutions within development design and completing our first site-specific embodied carbon studies to help us identify and mitigate carbon intensive processes and materials within the full life cycle of our developments. 

The period also saw the Environment Bill pass into law, confirming the welcome news that all new developments will be required to deliver a net biodiversity gain (NBG) of at least 10%.  Berkeley is very proud to have laid the path for this hugely positive change, having put NBG into practice on 43 sites and proved that homebuilding can be a powerful driver for nature’s recovery.  Our first 43 NBG strategies will create around 500 acres of new or measurably improved natural habitats, an area larger than Hyde Park.

I would like to take this opportunity to thank all of our people for their tremendous efforts and commitment to achieve these results in what remains such a difficult time for all.”

INCREASING INVESTMENT AND DELIVERY

·    Investment in Berkeley’s unique operating model, delivering large, complex regeneration sites that few others have the requisite resources, expertise and risk appetite to undertake at scale. In the period:

o  Two new regeneration sites acquired in Peckham and Woolwich covering 1,500 homes.

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o  One new major planning consent obtained at St William’s site in Leyton (570 homes).

o  Four sites moved into production, including two long-term regeneration developments; Bermondsey Place in Southwark (1,300 homes) and The Eight Gardens in Watford (1,200 homes).

·      Berkeley now has 25 of its 30 long-term complex regeneration developments in production at 31 October 2021, supporting its anticipated 50% increase in housing delivery by 2024/25 from 2018/19 levels (around 4,000 homes, including joint ventures).

·      In addition, Berkeley has some 7,000 plots on sites it is currently advancing that it anticipates will come into the land holdings by the end of next financial year, providing good visibility on achieving the long-term ambition of increasing estimated future gross profit in the land holdings to £7.5 billion.

·      Berkeley issued £400 million of unsecured Green Bonds maturing in 10 years in August 2031 at a coupon of 2.5% per annum, specifically in connection with the transformation of our complex large-scale regeneration sites and development of green buildings (energy efficient homes). 

·      In support of this issuance, Fitch Ratings Ltd published a Long-term Issuer Default Rating and senior unsecured rating of BBB- with a Stable Outlook, along with a BBB- rating for the Green Bonds.

DELIVERING FOR ALL STAKEHOLDERS

·      1,828 homes delivered (plus 395 in joint ventures) – Berkeley is delivering some 10% of London’s new private and affordable homes – supporting approximately 28,000 UK jobs per annum directly and indirectly throughout its supply chain over the last five years.

·   Approximately £90 million of subsidies provided to deliver affordable housing and committed to wider community and infrastructure benefits in the period.

·      Maintained industry leading Net Promoter Score (+76.2) and customer satisfaction ratings.

·    43 developments have committed net biodiversity gain strategies that will deliver around 500 acres of new or measurably improved natural habitats. 

·     Berkeley is rated “A-” by CDP for its carbon climate action and transparency and has recently once again been AAA rated in the MSCI global ESG index. 

·      More than 60 construction management apprentices and 30 graduates joined the business in the period, bringing Berkeley’s employed trainees to 298 (approximately 10%).

·    Berkeley currently has over 11,000 people working on its construction sites, consistent with year-end and more than pre-pandemic levels.

SHAREHOLDER RETURNS

·     Earnings expectations for the current financial year ending 30 April 2022 raised by around 5% from the current guidance which is for pre-tax profits to be at a similar level to last financial year (2020/21: £518.1 million).  

·    Earnings guidance thereafter raised with pre-tax profits to increase by 5% per annum for the next three financial years.  Berkeley to deliver approximately £625 million of pre-tax profit for the year ending 30 April 2025.

·     Commitment to £282 million (£2.52 per share) per annum ongoing Shareholder Returns up to 30 September 2025 re-affirmed, with next £141 million due for the six months ending 30 September 2022.

·     Cash payment of £229 million, representing the first half of £455 million surplus capital, made to shareholders in September 2021.  The remaining £226 million is expected to be allocated to expenditure on new, including pipeline, sites and existing land interests.

·     This £229 million was combined with the remaining £222 million of the ongoing scheduled annual return for 2021/22 to create a £451 million B-share return of capital in September 2021, which was followed by a share consolidation. 

·      Since September,  £35 million of the £141 million to be returned to shareholders by 30 September 2022 has been spent on share buy-backs.

A pre-recorded presentation by the Directors of Berkeley Group on the interim results will be made available on the Company’s website at 11:00 today – https://www.berkeleygroup.co.uk/about-us/investor-information/results-and-announcements.

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