Berkeley Group Holdings Plc – Trading Statement

Berkeley is London's leading place-maker, delivering over 10% of the capital's new Affordable and Private homes, renowned for the quality, design and distinctiveness of the homes and communities it creates.

“Since its half year, Berkeley has continued to trade in line with its business plan requirements, with sales prices achieved remaining above business plan levels.  The market conditions in London and the South East are unchanged from the first half with home movers and downsizers continuing to be constrained by high transaction costs, the 4.5x income multiple limit on mortgage borrowing and prevailing economic uncertainty.  In addition, domestic buy-to-let investors, who buy early in the cycle and provide security of cash flow to enable complex, capital intensive developments to be brought forward, are further impacted by additional transaction costs and the removal of interest deductibility.  These factors, together with the changing planning environment and the time and complexity of getting on site following planning approval, mean that Berkeley is currently unable to increase production beyond the business plan levels.

Notwithstanding a period of heightened revenue delivery, Berkeley expects forward sales above £2.0 billion at 30 April 2018 and this resilient position, coupled with its well-located sites and strong balance sheet, enables the Board to reaffirm its guidance to deliver at least £3.3 billion of pre-tax profits for the five year period from 1 May 2016 to 30 April 2021, with £1.5 billion pre-tax profit to be delivered in the two years ending 30 April 2019, weighted approximately 60% towards the current financial year.

Berkeley remains cautious in its investment strategy, acquiring land selectively in the trading period, and anticipates cash flow will be broadly working capital neutral over the course of the year as a whole, subject to any large land transactions that might arise before 30 April 2018.  On this basis, net cash at the year-end will be above the half year position of £632.8 million.

As announced on 22 February 2018 a dividend of £76.3 million, or 56.75 pence per share, will be paid to shareholders on 23 March 2018 with the remainder of the £139.2 million return for the six months ending 31 March 2018 having been satisfied through share buy-backs of £62.9 million.  The Company also announced that the next six-monthly return of £139.2 million will be made by 30 September 2018, with the amount to be paid as dividend to be announced in August 2018, taking account of any share buy-backs in the intervening period.  In total, by 30 September 2018, Berkeley will have returned £10.34 of the £16.34 target.

The fundamentals of the market in London and the South East remain compelling, but the operating environment and its impact on transaction volumes, whilst sufficient for the business plan and five year profit guidance period that ends at 30 April 2021, do not support the step-up in Berkeley's production levels that these markets so badly need.  Our focus is on ensuring we achieve the right planning consents on our long-term regeneration sites, and then working with our partners and stakeholders to bring these through into production.”

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