Berkeley Group on track to deliver, in line with guidance, a similar profit to last year

property development

Berkeley Group Holdings plc (LON:BKG) has announced its Trading Update that covers the period from 1 November 2020 to 28 February 2021. 

“Since the half year, Berkeley has continued to trade robustly.  The health, safety and well-being of our people remains uppermost in our minds. As the impact of Covid-19 continues to affect all our daily lives, we have maintained appropriate safe operating procedures across our sites, sales centres and offices to keep our customers, communities and construction teams safe, while continuing to deliver for our customers and stakeholders.

Berkeley remains on track to deliver, in line with guidance, a similar profit to last year (2020: £504 million) and forward sales are anticipated to be above £1.7 billion at the year-end, representing a very strong position from which to enter the next financial year. The estimated future gross margin in the land bank is expected to be in excess of last year’s £6.4 billion and, subject to investment levels and timing in the intervening period, net cash will be around the level reported at the half year (£954 million). 

The market fundamentals remain strong with low interest rates, under-supply in Berkeley’s core markets and the enduring attraction of London and the South East. In addition, Berkeley’s focus on community, nature, connectivity and overall quality of place will resonate with customers as the country emerges from the pandemic.

Sales reservations have been robust where we have had availability of stock.  While enquiry levels have been consistently strong, Berkeley has re-profiled the launch of new developments and phases into the market until the economy opens up post-lockdown and, as a consequence, we anticipate the value of reservations for the current financial year to be around 20% lower than last year. Pricing has been stable over the period and cancellation rates at normal levels.

The current operating environment remains volatile with the period under review including both the second and third national lockdowns and the ending of the Brexit transition period.  Nevertheless, Berkeley has continued to invest in its large, complex, long-term regeneration sites. Onsite labour numbers remain above pre-pandemic levels and, while we are experiencing some materials delays and price increases in specific areas, the overall impact on build costs has been neutral. 

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We continue to invest selectively in new land opportunities, as well as focusing on planning and the myriad of other complexities associated with bringing our sites into production.

Looking forward, Berkeley Group is on track to deliver a similar level of profitability in its next financial year and to achieve its long-term 15% pre-tax return on equity guidance. This underpins Berkeley’s ongoing commitment to return £280 million per annum to shareholders through either dividends or share buy-backs; a level it has delivered consistently since 2016, including over the last 12 months.”

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