Berkeley Group Holdings plc (LON:BKG) is holding its Annual General Meeting today (which will be a closed meeting in accordance with recent Government legislation and related restrictions in response to COVID-19, and to minimise public health risks), at which it will provide the following Trading Update covering the period from 1 May 2020 to 31 August 2020.
Berkeley is the country’s leading place-maker, operating principally in London, Birmingham and the South of England. We create beautiful, successful places where communities thrive and where people of all ages and backgrounds enjoy a great quality of life. This is the first trading update since the tragic and untimely passing of Berkeley’s founder and previous Chairman, Tony Pidgley, CBE. Berkeley’s strategy remains unchanged as does its clear purpose to build quality homes, strengthen communities and improve people’s lives.
The start of this new financial year coincided with the evolving COVID-19 pandemic and the nationwide lockdown measures introduced to manage its impact upon the whole country. This has set unprecedented challenges for businesses to manage. First among these is the health, safety and well-being of all our stakeholders, followed by the detailed preparation and implementation of plans to return business operations to the optimum achievable levels of productivity, efficiency, collaboration and creativity.
We remain very mindful of the current volatility and the risks this presents to the UK and global economies as they come to terms with the longer term impact of COVID-19, including once current Government support tapers and in the event of a severe second wave of the virus. We are also conscious of the risks around the UK’s departure from the European Union at the end of 2020.
Berkeley’s trading has been resilient over this period and supports our existing guidance of £500 million of pre-tax profit for the full year and our commitment to our shareholder returns programme of £280 million per annum.
We now anticipate a more even split of profit between the first and second halves of the year, reflecting levels of production that have been better than initially anticipated and our decision not to furlough staff. Production continues to be impacted by the need for modified working practices and increased supervision, with the health, safety and well-being of our people remaining uppermost in our minds at all times. However, the experience and expertise of our construction teams and subcontractors, supported by our Health and Safety professionals, means that disruption has been minimised and efficiency levels are now at around 90% of normal.
In overall terms, this has been offset by the continued investment in bringing forward our portfolio of over 25 large regeneration developments accumulated over recent years. In the period, construction activity has started at a number of these, including Twelve Trees Park in East London and the site of the old Horlicks factory in Slough where we have consent for 3,800 and 1,300 homes, respectively. We are also progressing a number of new land opportunities on which we anticipate being in a position to update at the half year.
Sales pricing has been robust in the period and above our business plan levels. This has been supported by the demand for Berkeley properties in under-supplied markets, good mortgage availability and the welcome support from Government for the sector, including the temporary removal of SDLT for the first £500,000 of sales value and the announcement of a brief extension to the current Help to Buy scheme.
The value of underlying sales reservations for the first four months of the year is around 20% below the annualised run rate for last year, which is supportive of forward sales remaining around the year-end position of above £1.8 billion. This is a strong position, providing good visibility over the next two years of earnings.
Reflecting the ongoing investment in our sites, Berkeley currently has net cash in excess of £1 billion, ahead of next week’s dividend payment.
As announced on 13 August 2020, a dividend of £134.3 million, or 107.0 pence per share, will be paid to shareholders on 11 September 2020 with the remainder of the £140.1 million return for the six months ending 30 September 2020 having already been satisfied through share buy-backs. Berkeley Group also announced that the next £140.1 million shareholder return will be provided by 31 March 2021 through a combination of dividends and share buy-backs. The amount to be paid as a dividend will be announced prior to the end of February 2021, taking account of any share buy-backs made in the intervening period.