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Housebuilders boosted by Brexit 'breakthrough' and well-received Berkeley interims

Published: 12:02 08 Dec 2017 GMT

House
Shares in housebuilders have charged higher

Shares in UK housebuilders jumped following a “breakthrough” on Brexit talks and after Berkeley Group Holdings PLC (LON:BKG) posted well-received first half results.

Prime Minister Theresa May has secured a deal with European Union to move Brexit talks onto the next phase.

Britain and the EU have agreed there will be "no hard border" between Northern Ireland and the Republic, and EU citizens living in the UK and vice versa will have their rights to live work and study protected.

The so-called divorce bill will amount to between £35bn and £40bn, the BBC reported.

European Commission president Jean-Claude Juncker said it was a "breakthrough" and was confident EU leaders will approve the deal, paving the way for post-Brexit trade talks to begin.

The progress on talks boosted shares in housebuilders, including Berkeley, Persimmon PLC (LON:PSN) and Barratt Developments PLC (LON:BDEV), as well as domestic banks Lloyds Banking Group PLC (LON:LLOY), Royal Bank of Scotland Group PLC (LON:RBS), Barclays PLC (LON:BARC) and HSBC Holdings PLC (LON:HSBA).

“The agreement reached by Prime Minister Theresa May and European Commission President Jean-Claude Juncker may be soothing fears that the UK economy could take a leg down after Brexit, as domestic stocks are charging higher today,” said Russ Mould, AJ Bell investment director.

Berkeley lifts sector higher

Housebuilders were also boosted by a positive read-across of Berkeley’s upwardly revised profit forecast for the five years to April 2021. The company raised its guidance for pre-tax profit to £3.3bn from £3bn for the period, assuming current market conditions continue.

It also posted a 35.8% gain in pre-tax profit to £533.3mln for the first half and a 13.7% rise in revenue to £1.6bn as it sold more homes at a higher average price.

READ: Berkeley upgrades five-year profit guidance but points to Brexit-driven slowdown

“Besides the Brexit talks, the shares will also be drawing support from the ongoing cash-return programme, which will see Berkeley use its net cash balance sheet to reward shareholders for their support,” said Mould.

“The builder plans to return a further 800p a share to investors over the next four years. At 200p a year and that’s a return of 4.8% every 12 months, a figure which means the FTSE 100 builder could appeal to income-seekers, although it will be interesting to see the mix between dividends and share buybacks.”

In the first half, Berkeley paid £70.4mln in dividends and bought back 2.7 million shares at a cost of £92.8mln.

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