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Berkeley reassures on long-term returns as interim profits fall


Berkeley Group Holdings PLC (LON:BKG) reported lower half-year sales and profits but reaffirmed its commitment to returning oodles of cash to shareholders over the coming year as it steps up long-term investment and construction activity.

With 66 developments underway at the end of October, including 22 long-term regeneration projects, the FTSE 100-listed housebuilder has over 10% more people working on its building sites than prior to the pandemic.

Chief executive Rob Perrins has also developed a new “ten year vision” for the business to deliver sustainability in terms of shareholder returns and “society, the economy and natural world”.

He said the group remains “on track” to deliver average annual pre-tax profits of GBP500mln out to 2025 and will pass GBP280mln per year back to shareholders, and that GBP455mln of surplus capital will be allocated to “either incremental new land investment or enhanced cash returns to shareholders” or a mix of the two between now and the end of April 2023.

For the six months to end-October 2020, Berkeley Group‘s revenue fell by 4% to GBP895.9mln as 1,104 homes were sold compared to 1,389 a year ago, but at a much higher average selling price of GBP799,000 compared to GBP644,000 amid a change in the mix of properties sold.

Pre-tax profits fell 17% to GBP230.8mln, with net cash down to GBP954mln from GBP1.1bn at the end of April as GBP171.4mln was returned during the half through a combination of dividends and buybacks and further investment was made in long-term sites.

Looking to the second half of the year, the company said new sales reservations were down 15% but cash due on forward sales increased to GBP1.94bn from GBP1.86bn.

On the social and environmental sustainability side, the group said it has set new “science-based targets”, including committing to halving emissions from its direct operations and reducing the carbon intensity of its homes by 40% by 2030, while also flagging that it is the only residential developer undertaking major brownfield regeneration at scale in London and the South East.

Berkeley shares fell 3% to 4,713p in the first hour of trading, still below its pre-coronavirus pandemic peaks.

City broker Peel Hunt said the drop in profits was unsurprising, guidance on medium-term targets and capital returns was unchanged and the balance sheet “remains in great shape”.

“Having outperformed the sector materially in H1, the big value shift in the market has seen the shares left behind in the last couple of months. While a successful Brexit deal could further boost value names, Berkeley’s long-term credentials remain impeccable,” the broker’s analysts said.

– Adds share price, broker comment —

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