Berkeley Group Holdings (The) PLC Trading Statement (0073J)
September 06 2016 - 2:00AM
UK Regulatory
TIDMBKG
RNS Number : 0073J
Berkeley Group Holdings (The) PLC
06 September 2016
The Berkeley Group Holdings plc
Interim Management Statement
Period from 1 May 2016 to 31 August 2016
6 September 2016
The Berkeley Group Holdings plc ("Berkeley" or the "Company") is
holding its Annual General Meeting (AGM) today, at which it will
give the following trading update, covering the period from 1 May
2016 to 31 August 2016.
Berkeley entered 2016/17 with record cash due on forward sales
of GBP3.25 billion and future estimated land bank gross margin of
GBP6.15 billion, respectively. This is a consequence of Berkeley
operating its added value strategy which manages risk through the
cycle. In particular, this involves selling properties early in the
development cycle where possible and ensuring land with
implementable planning consent is in place to underpin production.
The forward sales provide good visibility over the next two years
and Berkeley re-iterates its guidance for the delivery of GBP2.0
billion of pre-tax profit over the three year period ending on 30
April 2018, having delivered the first GBP0.5 billion of this in
the year ended 30 April 2016.
This visibility of cash flow and earnings also underpins the
Company's dividend plan, of which the next GBP1.00 interim dividend
per share is payable to shareholders on 15 September 2016 (GBP137
million), bringing the total returns paid to shareholders since
2011 to GBP6.34, with a further GBP10 per share to be paid evenly
over the remaining 5 years to September 2021. Following the
dividend payment and taking into account the GBP20 million spent on
acquiring the Company's shares on 24 June, Berkeley expects to
remain ungeared at the 31 October 2016 half year, with the actual
level of cash dependent on the extent and timing of land and build
investment.
Berkeley reported in its full year results in June that
reservations were some 20% lower in the first five calendar months
of the year, compared to the same period in 2015, as customers
adjusted to higher property taxes and the uncertainty surrounding
the UK Referendum, with Berkeley deferring the release of new
product to the market. After an hiatus either side of the
Referendum, the market in August, traditionally a quiet month, has
returned to the relative levels reported for the first five months
of the year; approximately 20% down on August 2015, reflecting the
lower levels of available product, as well as the broader market
conditions. Importantly, throughout 2016, site visitor numbers and
enquiries have been at similar levels to the same period last year
demonstrating the strength of underlying demand, although customers
are taking longer to commit. Pricing has remained resilient and
above business plan levels with reservation cancellation rates at
normal levels, following a temporary and expected increase after
the UK Referendum result.
The focus for Berkeley is on delivering the high quality homes
and places for our customers during this financial year and
2017/18, whilst closely matching its capital investment into new
phases and developments, which are for delivery from 2018/19
onwards, to the market demand, as it has always done.
Berkeley has been selective in the land market, acquiring just
two sites in the period, both unconditionally, with planning
advanced on a number of existing sites.
What is increasingly clear is that Government policy, which has
been helpful outside London, has had a negative effect on the
capital. Transaction taxes are now too high and this is restricting
both mobility in the second hand market and the pace of supply and
delivery of new homes in London and the South East. There is also a
tension between the national policy on Starter Homes and the London
Mayor's ambition to build more affordable housing, while the very
high rates of the Community Infrastructure Levy adopted by local
authorities now pose a significant threat to development
viability.
While these challenges persist, and the barriers to entry for
small builders remain high, London will fall well short of its
targets for new homes. This is not just a problem for business and
ordinary people in the capital but for the country as a whole.
London is the engine of our national economy and the principal
driver of fiscal revenues. So this is not just a question of
housing Londoners - important though that is. It poses a risk to
deficit reduction and the prosperity of the whole country.
With its strong balance sheet, forward sales, high quality land
bank and leading brand and customer service, Berkeley is well
positioned to deliver its earnings and dividend guidance and
optimise shareholder returns in the current market conditions,
whilst retaining sufficient capital to be flexible should suitable
new investment opportunities arise.
END
For further information please contact:
The Berkeley Group Holdings plc Novella Communications
R C Perrins / R J Stearn Tim Robertson
T: 01932 868555 T: 020 3151 7008
This information is provided by RNS
The company news service from the London Stock Exchange
END
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