Berkeley Group reports strong FY24 results, increases FY25 guidance

Berkeley Group Holdings plc (LON:BKG) has announced its audited results for the year ended 30 April 2024. 

Strong performance in continued challenging operating conditions and

ready to increase investment once the conditions for growth are re-established

£283 million Annual Shareholder return to be completed by 33 pence per share ordinary dividend in July and 174 pence per share special dividend to be paid in September and accompanied by a share consolidation

 FY25 guidance increased by 5% to £525 million

87% of homes delivered by Berkeley in FY24 were on brownfield land with some £370 million investment in socio-economic benefits

Berkeley is establishing its own Build to Rent platform, alongside its core trading business, adopting a strategic approach to maximising returns from its long-term regeneration sites

Rob Perrins, Chief Executive, said:

“Berkeley has delivered pre-tax profits of £557 million in line with the guidance provided at the start of the year and increased its net cash position to over £500 million. This is a strong performance in a challenging and volatile operating environment, demonstrating the resilience of Berkeley’s business model with its focus on the country’s most undersupplied markets.

We continue to see good levels of enquiry for well-located homes built to a high standard of design and quality but recognise that the current lack of urgency in the market is likely to remain until the long-anticipated reduction in interest rates commences. Berkeley continues to benefit from a strong order book and has already secured 80% of its sales for next year, underpinning today’s 5% increase in guidance for FY25’s pre-tax profit to £525 million, with guidance for FY26 re-affirmed at £450 million.

In the year, we have delivered 3,500 new private and affordable homes, of which 87% are on regenerated brownfield land, and provided over £370 million in subsidies to deliver affordable housing and commitments to wider community and infrastructure benefits.

Recognising the strong occupational and institutional investment demand for high quality, well-managed rental homes in London and the South East, Berkeley is establishing its own Build to Rent (“BTR”) platform to maximise returns in today’s market conditions. 

Berkeley has identified some 4,000 homes across 17 of its sustainable and well-connected brownfield regeneration sites as an initial portfolio for this platform.

Developed over the next ten years, and broadly representing a 10% increase in delivery, the portfolio will be financed by a combination of internally generated funds (over and above annual scheduled shareholder returns), debt secured against rental properties once income generating, and the introduction of third-party capital at the appropriate time, thereby fully supporting Berkeley’s long-term corporate 15% pre-tax ROE target.

Berkeley’s passion and purpose is to build quality homes, strengthen communities and make a positive difference to people’s lives.  We stand out as the only large-scale UK homebuilder focussed on brownfield regeneration, which is a vital driver for growth and a powerful force for good in our towns and cities. 

We are heartened by the strong political consensus behind increasing the delivery of new homes across the country and the recognition that regenerating brownfield land is the most sustainable and popular way to deliver this vital goal. The next step is to ensure that brownfield sites can come forward at real scale and pace.

For this to happen, planning policy and public funding needs to prioritise the provision of affordable homes over the other significant financial demands placed upon the development industry through the planning, taxation and regulatory regimes. The industry has absorbed many regulatory changes over recent years and, while all well-intended, when taken together they have stifled investment, housing delivery and growth. In terms of corporation tax alone, the industry’s rate has increased by 10% (from 19% to 29%) over the last two years, including the 4% RPDT.

We are supportive of the initiatives being discussed to provide customers with greater access to higher loan to value mortgages and to reduce stamp duty. We believe that all surcharges on stamp duty should be removed as, ultimately, these constrain supply.

I would like to thank all of Berkeley’s people for their hard work, resilience and steadfast focus on our customers and communities to achieve the best possible outcomes for all stakeholders in this exceptionally challenging environment.”

SUMMARY OF FINANCIAL POSITION, EARNINGS AND SHAREHOLDER RETURNS

·     The value of net reservations has been consistent through the year at levels around one third lower than the prior year, reflecting 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 is stable at 19.5%, with net operating costs reduced by £14 million to £165 million.

·      Net cash increased to £532 million, with £1.2 billion of borrowing capacity providing total liquidity of £1.7 billion.

·      Net asset value per share has increased to £33.63 and reflects historic cost.

·    Pre-tax earnings guidance met for FY24 and increased by 5% for FY25 to £525 million, with FY26 unchanged. Berkeley Group is therefore targeting to deliver at least £975 million of pre-tax profit in the next two years combined.

·      On target to deliver £283 million (£2.67 per share) of Shareholder Returns by 30 September 2024.

·     Unrivalled land holdings with £6.9 billion of future gross margin – two sites added in the period, including one transfer from the pipeline.

CAPITAL ALLOCATION

·    Underpinned by balance sheet strength, our capital allocation policy provides the flexibility to pursue attractive opportunities as market conditions evolve, as demonstrated by intention to establish our own BTR platform.

·      No change to previously announced annual scheduled shareholder returns programme.

·      We remain ready to invest in new opportunities once the conditions for growth are re-established.

DELIVERING FOR ALL STAKEHOLDERS

·   3,521 homes delivered, plus 406 in joint ventures (2023: 4,043, plus 594), 87% of which are on regenerated brownfield land.

·     Approximately £370 million of subsidies provided to deliver affordable housing and committed to wider community and infrastructure benefits in the year.

·   Berkeley is delivering some 10% of London’s new private and affordable homes – supporting an average of approximately 26,000 UK jobs per annum directly and indirectly through its supply chain over the last five years.

·      Industry leading Net Promoter Score (+80.2) and customer satisfaction ratings maintained.

·     Since 2017/18 all new planning applications have committed to biodiversity net gain ahead of it becoming mandatory in February 2024.  In total 56 developments are now committed, which together will create more than 580 acres of new or measurably improved natural habitats.

·   Awarded a place on CDP’s “A List” for climate transparency and performance. 48 embodied carbon studies completed as we progress our Climate Action programme. Awarded CDP’s Supplier Engagement Award for our work with our supply chain to reduce carbon impacts.

·   Gold membership of The 5% Club, with 9.5% of direct employees in ‘earn and learn’ positions as graduates, apprentices or sponsored students within the year. 

Investor and Analyst Presentation:

A pre-recorded presentation by the Directors of Berkeley Group 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.