Berkeley Group Holdings Plc - Half-Year Report
Berkeley is the country's leading place-maker, operating principally in London and the South East. We are a proud UK business and tax payer. We create beautiful, successful places where communities thrive and where people of all ages and backgrounds enjoy a great quality of life.
DELIVERING FOR ALL STAKEHOLDERS
· 2,027 homes delivered - includes more than 10% of London's new private and affordable homes
· Over £300 million of subsidies provided to deliver affordable housing and committed to wider community and infrastructure benefits in the period
· Over 11,000 people working across our sites, including over 350 apprenticeships, with the launch of a second construction academy in the six months
· Maintained Industry leading Net Promoter Score and Customer Service Ratings
· Berkeley's pioneering approach to enhancing nature and biodiversity, adopted in 2016, has been recognised by Government, with DEFRA now consulting on plans to make net biodiversity gain a national policy requirement
· Unique operating model with 21 experienced, autonomous management teams
· £401.2 million of pre-tax profit (2017: £539.9 million)
· Pre-tax profit guidance for the current financial year increased by more than 5%, with full year split between first and second half anticipated to be similar to last year, reflecting resilient trading in the period
· Guidance for next two years unchanged with pre-tax ROE normalising thereafter towards 15%, based on current market conditions
FINANCIAL POSITION *
· Net cash of £859.7 million (April 2018: £687.3 million)
· Net asset value per share up 7.0% to £20.74 (April 2018: £19.38)
· Cash due on forward sales of £1.9 billion (April 2018: £2.2 billion)
· £6.0 billion of estimated future gross margin in land holdings (April 2018: £6.0 billion)
STRATEGY FOR INVESTMENT AND SHAREHOLDER RETURNS
· New investment phase beginning as Berkeley invests for the long-term, bringing forward the next wave of regeneration sites, coupled with new opportunities, adding 11 new sites in the period
· 5.4 million shares acquired in the six month period for £193.7 million and dividends paid of £43.8 million
· Annual Shareholder Return to be extended at current amount of £280 million per annum to 2025
* The results for the six months ended 31 October 2017 and the year ended 30 April 2018 have been restated following the adoption of IFRS 15, "Revenue from Contracts with Customers". Accordingly, all references to comparable period performance throughout this press release have been restated. Details regarding the financial impact of IFRS 15 are included in note 8 of the condensed consolidated financial statements attached to this press release.
Today's results reflect the strengths of Berkeley's unique long-term operating model, that is responsive to the cyclical nature of the housing market, and our expertise in transforming the most challenging and complex sites into exceptional places where communities thrive. We have a holistic approach to place-making which goes beyond the conventional role of a housing developer. Berkeley places the strength and wellbeing of the local community at the heart of every plan and works in partnership with local people and councils to unlock lasting value. This people-centered approach makes Berkeley a partner of choice and is reflected in the industry leading satisfaction scores we receive from our customers.
Our capacity to successfully manage higher risk, capital intensive developments continues to set us apart and delivers strong social, economic and commercial value. In London, we have again delivered more than 10% of all new homes and our contributions to affordable housing and wider community infrastructure benefits have exceeded £300 million in the six months. Berkeley has built 19,500 new homes of all types and tenures in the last five years whilst generating £12.0 billion in economic output, contributing £3.3 billion to the Treasury through direct and wider taxation and supported an average of 27,750 jobs each year. Meanwhile, the Berkeley Foundation is supporting some 50 charities to improve the lives of young people, targeted at homelessness, skills, jobs and health and well-being.
Berkeley's pioneering approach to creating a measurable increase in biodiversity on all new sites has been recognised by Government and is on course to become a national policy requirement. Working in partnership with West London College, the exceptional West London Construction Academy was opened in October on our Southall Waterside development, which will help tackle the UK's construction skills crisis and address the exodus of talent from the industry. We have also continued construction on our Berkeley Modular manufacturing facility in Kent and begun working with North Kent College to create a unique apprenticeship scheme that will enable candidates to gain valuable experience of volumetric modular manufacturing. Over 350 apprentices have worked on Berkeley's sites in the last six months.
Much is documented on the challenges facing the housing market in the UK. We firmly believe that the key to increasing housing supply is a renewed focus on partnership and collaboration between the public and private sectors. We need to make homebuilding a shared agenda and create an environment which actively encourages good quality developments to come forward, and then supports them all the way through to completion.
Berkeley is determined to be at the forefront of this and is delighted that, we are today announcing the next phase of our long-term strategy. We are seeing opportunities to invest in today's market, with 11 sites added to the land holdings in the period. Two of these sites are in Birmingham, where we are delighted to be part of the renaissance of this great city, based on a progressive and refreshing partnership with the local authority. In addition we have made good progress over this and recent periods in bringing the next wave of regeneration sites through the complex path to commencement. This additional investment in land and construction underpins our objective to maintain annual Shareholder Returns at the current level of £280 million through to 2025.
£130.5 million of the previously announced six month return to be paid by 31 March 2019 has already been made through share-buy-backs. The remaining £9.2 million will be paid as a dividend of 7.12 pence per share on 16 January 2019 to shareholders on the register on 21 December 2018.
Last year we announced changes to the Board, introducing four new Directors, including two new Executive Directors, ensuring we have the right team in place to deliver the value created in Berkeley as we enter this next strategic phase. This succession planning, bringing talent through the business, is critical to the long-term sustainability of a business such as Berkeley, and I am delighted with how well the Board is operating.
We were recently honoured that our partnership with Hackney Council at Woodberry Down was named UK Project of the Year at the 2018 RICS Awards in recognition for its benefits to the local community.
None of these achievements would be possible without our exceptional staff, supply chain, joint venture partners, customers and investors. I also want to thank our valued local government and community partners who play such a vital role in shaping the places we create and bringing them to life for everyone to enjoy.
Tony Pidgley CBE