Berkeley – Profits Forecast To Keep Growing Despite Several Headwinds

Berkeley Group Holdings PLC (LON:BKG) posted revenue of £2.3bn, up 6.6%, as the group sold 33% more homes. Higher operating costs and a lower average selling price, due to the type of property sold, meant operating margin declined 1.2 percentage points. However, driven by higher profit from joint ventures, pre-tax profit rose 6.4% to £551.5m.

Pre-tax profit is expected to come in at £600m next year, and £625m for the two years thereafter.

Berkeley continues to target £282m in shareholder returns per year, in either dividends or buybacks. £63.7m has been returned so far this year, with more information on the dividend coming on 11 August.

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The group warned on volatility in the housing market, but sees prices continuing to offset cost inflation.

The shares were broadly flat following the announcement.

Matt Britzman, Equity Analyst at Hargreaves Lansdown

“Berkeley’s results showed that despite higher build costs, rising interest rates, and a cost-of-living crisis, buyers seem somewhat undeterred from splashing out on new homes. Sales up 6.4% reflects a decent jump in the number of homes sold. The average selling price came down, but the result is revenue rising enough to offset higher build costs. The London focus and higher value homes mean the target audience is arguably more sheltered from the cost-of-living crisis than others and forward reservation and sales both look to be steady. That’s led management to forecast an extra c.£50m in pre-tax profit to come through next year.

Berkeley will be acutely aware though that buyers’ appetite can quickly shift, and that’s likely to be a driving force behind the big land buying spree we’ve seen this year as the group pushes to take full advantage of current conditions.”

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