Berkeley Group Holdings plc (LON:BKG) has announced its unaudited interim results for the six months ended 31 October 2023.
Rob Perrins, Chief Executive, said:
“Berkeley has demonstrated the resilience of its uniquely long-term business model with today’s strong results and is extending its guidance a further year to cover the period to 30 April 2026. Over the current and the next two financial years, Berkeley is targeting the delivery of at least £1.5 billion of pre-tax profit and the maintenance of net cash above £400 million.
Berkeley is a purpose-driven business, building quality homes, strengthening communities and making a positive difference to people’s lives through our development activities, underpinned by our industry-leading Vision 2030 strategy. Berkeley stands out as the only large-scale UK homebuilder focussed on brownfield regeneration, which is a vital driver for economic growth and a powerful force for good in our towns and cities.
In the six months, we have delivered 1,785 new private and affordable homes, of which 87% are on brownfield land, and provided over £250 million in subsidies to deliver affordable housing and commitments to wider community and infrastructure benefits, more than 100% of the post-tax profit generated in the period.
Despite urban regeneration being a clear national priority, it has become increasingly difficult to progress this form of development as changes to planning, tax and regulatory regimes have created an increasingly uncertain, unpredictable and burdensome environment. This is driving investment away from urban areas, restricting growth and preventing homes and other tangible benefits being delivered. It will lead to lower productivity, fewer jobs being created and net zero being harder to achieve, as the efficient re-use of land in urban settings to deliver, well-connected, nature-rich new communities, near existing infrastructure is the most sustainable form of development.
In today’s environment, Berkeley will intensify its disciplined approach to operating cost control and work in progress investment, while continually looking to identify the best development solution on each of its sites for the benefit of all its stakeholders. We are ready and able to deploy capital into new opportunities once the market and regulatory cycles inflect and returns can be earned commensurate with the level of upfront investment and operational risk we undertake.
While the need is clear, the challenges to new development are complex, but we are encouraged by the level of engagement that Berkeley and other urban regeneration specialists are now receiving to address the specific barriers to brownfield development. We also fully support the Mayor’s ambition for good and fair outcomes for Londoners, including high levels of affordable housing. This requires an increase in density, higher levels of grant funding and a reduction in other tariffs, such as the Community Infrastructure Levy, if it is to translate into a sustainable increase in delivery.
I would like to thank all Berkeley’s people for their contribution to these results and their unerring focus on the customer and the fantastic places we create in this exceptionally challenging operating environment in which Berkeley’s core values of attention to detail, creativity and resilience really come to the fore.”
SUMMARY OF FINANCIAL POSITION, EARNINGS AND SHAREHOLDER RETURNS
| As at | As at | Change | ||||
| Financial Position | 31-Oct-23 | 30-Apr-23 | absolute | |||
| Net cash | £422m | £410m | +£12m | |||
| Net asset value per share | £32.19 | £31.01 | +£1.18 | |||
| Cash due on forward sales (1) | £1,964m | £2,136m | -£172m | |||
| Land holdings – future gross margin | £7,245m | £7,629m | -£384m | |||
| Pipeline sites / (plots (approx.)) | 13 (13,500) | 14 (14,000) | -1 (-500) | |||
| HY to | HY to | Change | ||||
| Earnings | 31-Oct-23 | 31-Oct-22 | % | |||
| Operating margin | 19.5% | 19.5% | – | |||
| Profit before tax | £298.0m | £284.8m | +4.6% | |||
| Earnings per share – basic | 198.3p | 200.4p | -1.0% | |||
| Pre-tax return on equity | 17.7% | 18.0% | -0.3% | |||
| HY to | HY to | |||||
| Shareholder Returns | 31-Oct-23 | 31-Oct-22 | ||||
| Share buy-backs undertaken | £64.5m | £110.5m | ||||
| Dividends paid | £63.1m | £23.3m | ||||
| Shareholder returns | £127.6m | £133.8m | ||||
| Share buy-backs – volume | 1.7m | 2.9m | ||||
| Average price paid for share buy-backs | £39.01 | £37.61 | ||||
| Dividends per share | £0.59 | £0.21 | ||||
| (1) Cash due on private exchanged forward sales completing within the next three years | ||||||
| See Note 8 of the Condensed Consolidated Financial Information for a reconciliation of alternative performance measures | ||||||
· The value of net reservations during the period is one third lower than the comparative financial year, reflecting the sharp increase in interest rates and the ongoing elevated political and macro volatility.
· Sales pricing is firm and above business plan levels, with build cost inflation across most trades at negligible levels.
· Operating margin stable at 19.5%, with net operating costs reduced by £10 million to £79.7 million.
· Net cash increased to £422 million, with £1.2 billion of borrowing capacity providing total liquidity of £1.6 billion.
· Net asset value per share has increased to £32.19 and reflects historic cost.
· Earnings guidance extended by a year to cover the three years ending 30 April 2026, over which period Berkeley is targeting to deliver at least £1.5 billion of pre-tax profit (previously £1.05 billion in two years to 30 April 2025).
· On target to deliver next £283 million (£2.67 per share) of Shareholder Returns by 30 September 2024.
· Unrivalled land holdings with £7.2 billion of future gross margin – two sites added in the period, including one transfer from the pipeline.
CAPITAL ALLOCATION
· Agile and ready to switch capital allocation emphasis to new investment should the conditions for growth present themselves.
· If Berkeley does not recommence deployment of capital into new investment opportunities by 30 April 2027, we anticipate returning around 100% of the profit after tax earned over this period to shareholders, while maintaining financial strength and ensuring we can deliver our cross-cycle 15% pre-tax ROE target.
DELIVERING FOR ALL STAKEHOLDERS
· 1,785 homes delivered, plus 204 in joint ventures (2022: 2,080, plus 251) – 87% of which are on brownfield land.
· Approximately £254 million of subsidies provided to deliver affordable housing and committed to wider community and infrastructure benefits in the six month period.
· Berkeley is delivering some 10% of London’s new private and affordable homes – supporting an average of approximately 27,000 UK jobs per annum directly and indirectly through its supply chain over the last five years.
· Industry leading Net Promoter Score (+79.9) and customer satisfaction ratings maintained.
· Since 2017/18 all new planning applications have committed to biodiversity net gain, in total 54 developments which together will create more than 550 acres of new or measurably improved natural habitats.
· 23 embodied carbon studies completed and more than 20 underway as we progress our Climate Action programme.
· Rated “A-” by CDP for climate action and transparency and AAA rated in the MSCI global ESG index.
· Gold membership of The 5% Club maintained, with 9% of direct employees in ‘earn and learn’ positions as graduates, apprentices or sponsored students within the six month period.
Investor and Analyst Presentation:
A pre-recorded presentation by the Directors of Berkeley on the results will be made available on the Company’s website at 11:00 today – https://www.berkeleygroup.co.uk/investors/results-and-announcements.
