The Berkeley Group Holdings plc (LON:BKG) today announced its audited results for the financial year ended 30 April 2018.
Berkeley Group is the country’s leading place-maker, operating principally in London and the South East, balancing strong operational performance with a desire to produce homes of a high quality, creating fantastic communities for all our customers across all tenures; be they home owners or affordable housing residents.
OPERATIONAL HIGHLIGHTS
· 3,536 homes delivered – includes more than 10% of London’s new private and affordable homes
· £0.42 billion of subsidies provided to deliver affordable housing and committed to wider community and infrastructure benefits in the period
· Over 12,000 people working across our sites in the year and with 850 apprentices over the last two years
· The Berkeley Foundation won the Better Society Award for Best Partnership with a National Children’s Charity for its partnership with The Lord’s Taverners and continues its aim to improve the lives of young people and their communities across London and the South of England
EARNINGS
· £934.9 million of pre-tax profit, up 15.1% from £812.4 million
· Pre-tax profit guidance increased by £75 million to at least £1.575 billion for the two years ending 30 April 2019 and by a similar amount to at least £3.375 billion for the five year period which began on 1 May 2016
FINANCIAL POSITION
· Net cash of £687.3 million (April 2017: £285.5 million)
· Net asset value per share up 25.9% to £19.59 (April 2017: £15.56)
· Cash due on forward sales of £2.2 billion (April 2017: £2.7 billion)
· £6.0 billion of estimated future gross margin in the land bank (April 2017: £6.4 billion)
SHAREHOLDER RETURNS
· £9.34 per share already returned and a further £1.00 per share to be returned by 30 September 2018
· Remaining £6.00 (£0.84 billion) on target to be delivered evenly over the next 3 years to September 2021
· 4.0 million shares acquired in the year for £140.4 million and dividends paid of £146.7 million
These results reflect Berkeley’s operating model, which places financial strength and sustainability at its heart, and the sites this enabled Berkeley to acquire in the period from 2010 to 2013. They represent a peak for Berkeley with profitability returning to more normal levels from 2018/19, when profits are anticipated to be around 30% lower. Thereafter Berkeley will target a 20% pre-tax return on equity over the cycle, depending upon the level of cash, which currently includes around £400 million excess due to macro uncertainty.
CHAIRMAN’S STATEMENT
Berkeley’s unique operating model is focused on developing complex sites, which others are not willing or able to take on, creating fantastic, sustainable places with homes built to a high quality in which our customers want to live, and enriching the wider community by bringing homes, jobs and amenities for all.
There has been a significant increase in housing supply across England over the past year. Completions have grown by 16% and starts by 5% during 2017. This national picture reflects positive decisions and fresh investment by Government and the private sector. However, it masks a complex picture at a local level, with London starts approximately 30% lower than two years ago. It is telling that some funders and builders are choosing to exit the market when faced with the degree of risk and regulation that now confronts development in the capital where macro and political uncertainty, including Brexit, are leading to this caution. This is a great shame as London is a fantastic world-class city with unique attributes that will last long beyond the current hiatus which is only exacerbating the well documented under-supply.
In this environment, Berkeley has itself invested cautiously, focusing as always on the quality of the homes and communities we build. We are growing the business in Birmingham through our newest brand, St Joseph and we have broken ground on our first modular factory in Ebbsfleet, which, once operational, will help us deliver a significant portion of construction value through off-site assembly. The number of apprentices on our sites and in our offices has reached 850 across the business over the last two years, an increase of 30%.
Significantly, Berkeley is now a carbon positive company, fulfilling a commitment we made in May 2016. This relates specifically to the operation of our business and we will now match this with a commitment to enable all our homes to operate at net zero carbon by 2030. This will help us cut costs, reduce risk and support the environment.
One year ago, we shared the horror everybody felt at the Grenfell Tower fire. Since then, Berkeley has reviewed its high-rise buildings, engaging with local fire authorities, residents, fire safety experts and MHCLG to ensure our buildings are safe while the future regulatory approach is clarified, following the Hackitt review.
Berkeley has now returned £9.34 of £16.34 to be returned to shareholders by 30 September 2021 and announced the next £1 per share which will be returned by 30 September 2018; £10.34 paid or committed in total. Total Shareholder Returns in the year were £287.1 million, with £146.7 million returned through dividends and £140.4 million through the purchase of 4.0 million shares. Of the £139.2 million to be returned in the six months to 30 September 2018, £32.2 million has already been returned through share buy-backs. The amount that will be returned as a dividend will be announced on 16 August 2018 and paid on 14 September 2018 to shareholders on the register on 24 August 2018, taking account of any further share buy-backs in the intervening period.
In closing, I would like to thank all our people for the quality of their work and their commitment and integrity and I am delighted that their efforts, in conjunction with our partners in the public and private sector, have been recognised through a number of industry awards. In particular, Woodberry Down, which we are developing in partnership with the London Borough of Hackney, has won numerous accolades including WhatHouse? Best Partnership Award, Planning Magazine’s Best Community-led Placemaking Award and the RICS Regeneration and Project of the Year Awards. Berkeley itself won the Best Large Housebuilder and Housebuilder of the Year Awards from Building Magazine and WhatHouse? respectively, and Riverlight won RIBA’s London Award for 2018. These are all testament to our people and partners working together to deliver fantastic new communities and homes. I am also immensely proud of the Queen’s Award for Enterprise (Sustainable Development) that Berkeley has held since 2014. This is the UK’s highest business accolade, recognising economic, social and environmental achievements.
I am delighted to welcome Rachel Downey and Peter Vernon to the Board as Non-executive Directors and warmly congratulate Justin Tibaldi and Paul Vallone on their appointment as Executive Directors. I would also like to recognise the significant contribution Sir John Armitt has made to Berkeley as he steps down from his roles as Deputy Chairman and Senior Independent Director after six years. I am delighted that Sir John is remaining on the Board and that we have such a capable replacement as Glyn Barker. We have a strong Board and I would like to thank them all as we look to the future for which we are well placed.
Our Vision
Berkeley aspires to be a world-class business, defined by the quality of the places we create, generating long term value and having a positive impact on society. Through the framework of ‘Our Vision’ we articulate our strategy across our five areas of strategic focus: Customers, Homes, Places, Operations and Our People and we are proud to hold a Queen’s Award for Enterprise for Sustainable Development, which is recognition of the Group’s economic, social and environmental achievements. Berkeley has also been included on the FTSE4Good Index since 2003, reflecting strong social, environmental and governance (ESG) practices.
In May we launched a new set of commitments to achieve over the next two years. This follows extensive research to understand the views of our stakeholders as well as key industry issues. We have also aligned our strategy to the UN’s Sustainable Development Goals, in recognition of the role business must play in achieving these global aims.
Outlook
Berkeley is a business set up for the long term. We have an operating model that allows us to invest at the right time in the cycle and deliver robust risk-adjusted returns, and the expertise to transform complex sites into thriving, sustainable communities, while having a positive impact on our stakeholders and society.
We have chosen to focus our operations around one of the world’s pre-eminent cities. London’s attributes are unique and well known and will endure well into the future. They are founded on openness, respect, tolerance and diversity. It is an environment in which, when the right conditions are present, growth, innovation and prosperity for all, will flourish. At present, political and economic uncertainty, in part due to the uncertainty around Brexit, weigh on sentiment but do present opportunities for customers who can look beyond this short-term volatility.
Berkeley, with its unrivalled financial strength, land position and expertise, is able to look past this prevailing uncertainty with measured confidence but, like all responsible businesses, is cautious in its investment in this environment and this will determine the speed with which it delivers the value from its assets in the medium term.
