viewThe Berkeley Group Holdings PLC

Berkeley Group profits to flatline as London misses out on housing boom

The momentum that other homebuilders have enjoyed is currently not present in London, says UBS

Berkeley Group -
No mention of cladding in today's update

Berkeley Group Holdings PLC (LON:BKG) said it expects profits to be flat both this financial year and next with current trading described as volatile by the housebuilder.

Sales reservations have been robust where it has had stock, it said, but some new developments and phases have been put on hold until the economy opens up post-lockdown.

As a result, the value of reservations for the current financial year will be around 20% lower than last year.

In the trading update, the London and south-east focused builder added it expects to report an annual profit similar to the previous year's £504mln in the twelve months to April 2021 with forward sales of £1.7bn.

Net cash at the year-end will be in line with the £954mln reported at the half-year, it added. 

Market fundamentals remain strong with low-interest rates, under-supply in its core markets and the enduring attraction of London and the South East, Berkeley said.

Pricing has been stable over the period and cancellation rates at normal levels said the statement with build costs steady even with materials delays and price increases in specific areas.

“Looking forward, Berkeley 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,” it said.

London misses out on mini-housing boom

UBS said the delays to some developments reflect a larger exposure to international buyers, which have been more difficult to market to owing to travel restrictions.

"Berkeley's business has always been to time the cycle to maximise value and currently thinks it is better to wait until travel restrictions lift."

The broker added there was no specific mention of further cladding related provisions and it thinks the company is covered with the existing post-completion provisions of £110-120m.

Land buying in H2 has been more subdued with no specific sites called out for the period, UBS added.

"However, the momentum that other homebuilders have enjoyed is currently not present in London although this could change going forward as conditions normalise."

Buy is the broker's rating with a price target of 5,475p.

Shares fell 6.3% to 4,284p.


-- amends year-end, adds share price, comment -- 


Quick facts: The Berkeley Group Holdings PLC


Price: 4495 GBX

Market Cap: £5.05 billion

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