Berkeley Group Holdings Plc – Interim Results

Berkeley's objective is to be London's leading place-maker, balancing strong operational performance with a desire to produce homes of a high quality in fantastic places for all Londoners, playing a key role in delivering the 300,000 new homes this country needs each year. 

 

These results are the consequence of Berkeley's operating model, which places financial strength and sustainability at its heart, and the sites this enabled Berkeley to acquire in the period from 2010 to 2013. The 2017/18 full year results will represent a peak for Berkeley, before returning to more normal returns in 2018/19.  Our guidance of £1.5 billion of pre-tax profit for these two years will be approximately 60% weighted towards the current year.

 

 

OPERATIONAL HIGHLIGHTS

·      2,117 homes delivered – includes more than 10% of London's new private and affordable homes

·      £300 million of subsidies provided to deliver affordable housing and committed to wider community and infrastructure benefits in the period

·      Over 12,000 people working across our sites, including over 850 apprenticeships in the six months

·      The Berkeley Foundation has added three new strategic partners to its four enduring partnerships, with over £12 million committed to more than 100 charities since the Foundation's inception in 2011

 

EARNINGS

·      £533.3 million of pre-tax profit, up 35.8% from £392.7 million

·      Five year pre-tax profit guidance starting 1 May 2016 updated to £3.3 billion from £3.0 billion

·      £1.5 billion pre-tax profit to be delivered in two years ending 30 April 2019

 

FINANCIAL POSITION

·      Net cash of £632.8 million (April 2017: £285.5 million)

·      Net asset value per share up 14.7% to £17.85  (April 2017: £15.56)

·      Cash due on forward sales of £2.45 billion (April 2017: £2.74 billion)

·      £6.0 billion of estimated future gross margin in the land bank (April 2017: £6.4 billion)

 

SHAREHOLDER RETURNS

·      £8.34 per share already returned and a further £1.00 per share to be returned by 31 March 2018

·      Remaining £7.00 (£1.0 billion) on target to be delivered evenly over the next 3.5 years to September 2021

·      2.7 million shares acquired in the period for £92.8 million and dividends paid of £70.4 million

 

 

 

CHAIRMAN'S STATEMENT

 

Today's strong results reflect Berkeley's disciplined execution of its unique operating model which places product quality and financial strength at its heart, allowing for investment at the right time in the cycle.

 

Most major development opportunities today involve complex brownfield sites that require a huge amount of time, expertise and capital to bring them forward and a commitment on all sides to share the risks and rewards, often over one or more decades. Berkeley has the requisite expertise and capital to undertake these complex developments that carry high operational risk, which others are usually not willing or able to take on. It is from this foundation that we can create beautiful, sustainable places where people love to live.

 

While the political context for housebuilding is turbulent, where there is stability, the potential for growth and delivery remains strong. The London Mayor, Sadiq Khan, has set out his priorities very clearly. We support the increased target in the draft London Plan of 66,000 new homes a year. In our experience, the Mayor is open for business and prepared to fast-track sites that achieve the threshold of 35% affordable housing.

 

We are also pleased with progress in our newest business, St Joseph, which acquired two sites in the period. The new West Midlands Mayor and Birmingham City Council are showing real leadership and a willingness to make decisions and enable developers to get on with building more good homes.

 

We welcome the focus on housing in last month's Budget; particularly the help for small developers and measures to get more land into development. It was good to see action on Stamp Duty in respect of First Time Buyers. However, other changes to SDLT and mortgage interest deductibility in recent years remain a constraint on transaction levels and social mobility.  This is felt most keenly in London where all housing transactions are down 18% since last year and new starts remain more than 30% down on 2015.

 

It is crucial that new housing policies support the London market, not least because the capital is so important to prosperity throughout the rest of the country. In this respect, the decision to invest in Crossrail 1 is now paying off handsomely and so too would a strong, unambiguous commitment to Crossrail 2. We also remain of the view that the Community Infrastructure Levy ('CIL') is not well suited to large developments, and urge the Government to adopt an approach where the infrastructure and affordable housing for sites with more than 100 homes are funded through Section 106 agreements, with the sites exempt from CIL. Furthermore, while continuing to protect the Greenbelt, we must be prepared to develop the urban fringe where this has little amenity or community value in its existing use.

 

We should remember, above all, that housing is not a numbers game. Fundamentally, it is about people and community. I believe it is perfectly possible to deliver for our shareholders and for society. Indeed, the only way we will win public trust and sustained political support for housebuilding is by delivering fantastic outcomes for society. This is why I was so delighted that Woodberry Down won the Best Partnership category at this year's What House? Award. We collected this award with our partners – London Borough of Hackney, Woodberry Down Community Organisation (WDCO), Manor House Development Trust and Genesis Housing Association – a testament to the successful, vibrant and cohesive community that we have created together.

 

That is why Berkeley is developing community plans, investing in skills and training, and delivering a net biodiversity gain on every site. Innovations like these have seen us win Housebuilder of the Year at both the Building and WhatHouse? Awards and ranked second across all industries and sectors in the list of Britain's Most Admired Companies 2017.

 

Berkeley has now returned, or announced to be returned, £9.34 per share of £16.34 to be returned to shareholders by 30 September 2021. Of the £139.2 million to be returned in the six months to 31 March 2018, £47.5 million has already been returned through share buy-backs. The amount that will be returned as a dividend will be announced on 22 February 2018 and paid on 23 March 2018 to shareholders on the register on 2 March 2018, taking account of any further share buy-backs in the intervening period.

 

Berkeley itself remains well placed to deliver our current plan, creating exceptional value for our customers, shareholders and society. We remain indebted to our staff for all the talent and sheer hard work they contribute to this business and I would like to extend my thanks to them all.

 

Tony Pidgley CBE

Chairman

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