Berkeley Group – Capital Gains

Berkeley Group – Capital Gains
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  • Berkeley Group Holdings PLC (LON:BKG), the homebuilder best known for its large-scale, complex brownfield developments in London has issued a trading statement ahead of its AGM later today.

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  • The group reports that reservations are back at their pre-pandemic level and that the group remains confident of earning profits of at least £518m in the year to 30 April 2022.
  • The pace of reservations has left Berkeley expecting forward sales of properties of around £1.7bn by the time the group reaches its half-year end on 31 October.
  • A pending return of capital will see Berkeley pay £451m to shareholders and it intends to allocate a further £228m of surplus capital to increasing its land buying, to capitalise on current, favourable market conditions.
  • With the trading update broadly in-line with earlier guidance, the shares opened just a touch higher at around 4780p.

Berkeley's Strong Cash Generation

Commenting on the results, Steve Clayton, HL Select fund manager said:

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Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for Read More

“We hold Berkeley in our HL Select UK Growth Shares fund because of its strong cash generation. Berkeley takes on the big, complex projects that rivals find daunting. That means it can buy land cheaply, because it can be the only one that turns up to the auction. Their development expertise allows them to turn cheap, brownfield sites into premium developments, making fat margins in the process.

Right now, conditions are good. Yes, there are cost pressures out there, especially for building materials. But selling prices are rising, leaving profitability strong. Reservations are back to pre-pandemic levels, suggesting an increase of around 25% over 2020 levels as the London market comes roaring back to life. The group’s confidence is shown in their comment that the next shareholder return of £141m could be made via share buy-backs.”

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