Berkeley reaffirms guidance despite stagnant market

Shareholders in The Berkeley Group Holdings were told on Wednesday morning how market conditions in the first four months of the new financial year in London and the South East had remained consistent with those reported with the full year results in June, as they gathered for the company’s annual general meeting.

The FTSE 100 housebuilder said pricing in the period from 1 May to 31 August had remained “robust” as there was demand for good quality, well located homes that enhanced communities and met the local housing need.

However, the firm said it was a market that lacked urgency, with London remaining constrained by high transaction costs, restrictive income multiple limits on mortgage borrowing and prevailing economic uncertainty, accentuated by Brexit.

“These headwinds affect all segments of the market from home movers to downsizers and investors alike,” the Berkeley board said in its statement.

“A functioning housing market, where good new development can deliver much needed additionality across all tenures, requires conditions for growth and low barriers to entry which are currently absent from the housing market in London and the South East.”

Berkeley said that in the current operating environment, it was finding opportunities to invest in and had acquired five new sites in the period.

Subject to any large land transactions that could arise before 31 October, the company said it anticipates that net cash at the half-year would be above the year-end position of £687.3m.

“Taken together with trading in the first four months of the year, this strong financial position, coupled with the visibility provided by its forward sales and land bank, enables the board to reaffirm its guidance to deliver at least £3.375bn of pre-tax profits for the five year period from 1 May 2016 to 30 April 2021, with at least £1.575bn pre-tax profit to be delivered in the two years ending 30 April 2019.”

As it announced on 16 August, a dividend of £44m, or 33.3p per share, would be paid to shareholders on 14 September with the remainder of the £139.2m return for the six months ending 30 September having already been satisfied through share buy-backs of £95.2m.

“The company also announced that the next six-monthly return of £139.2m - £1.06 per share - will be made by 31 March 2019, with the amount to be paid as dividend to be announced in February 2019, taking account of any share buy-backs in the intervening period,” the board added.