Berkeley – Strong Results But Shares Wobble

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Berkeley – Strong Results But Shares Wobble
skeeze / Pixabay

Berkeley Group Holdings PLC (LON:BKG)’s full year revenue rose 14.7% to £2.2bn, and operating profits rose 6.9% to £502.3m, reflecting an increase in both the number of homes sold and average selling prices. However, both private sales reservations and forward sales declined.

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The group’s on track to deliver a15% pre-tax return on equity, and annual pre-tax profits of roughly £500m, in the years 2019 – 2025.

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This year the group bought back 4.4m shares worth £189m and paid £145.5m in dividends.

The shares fell 2.4% following the announcement.

A Bumper Year For Berkeley

Laura Hoy, Equity Analyst at Hargreaves Lansdown:

“It’s been a bumper year for housebuilders like Berkeley as pent-up demand following lockdowns flooded the market with eager buyers. It was no surprise to see that both the number of houses and the average selling price both ticked higher over the past 12 months.

But shares wobbled following the announcement as investors started to question whether the housebuilders’ run would slow to a walk now that the market is cooling. Data from the HRMC this week showed the pace of purchases has decreased, with the number of homes sold in May roughly 40% lower than March levels.

Some of the figures from Berkeley seemed to confirm this trend. Private reservations were down 20% and forward sales also declined slightly. Some of that can be attributed to the fact that the group hit pause on some launches of its developments during lockdown, and management confirmed that despite this, it was still on track to hit its long-term goal to deliver £500 million in annual profits each year to 2025, but it is still unnerving for the market.

Berkeley isn’t your average housebuilder—the group caters to London’s higher-end property market with an average selling price well above £700k. This may provide some insulation from the wider market’s undulations because these buyers may not be quite as sensitive to the end of the stamp duty holiday. We won’t know whether the group’s stunted reservations are fully attributable to leftover lockdown issues until the group updates us on progress so far this year.”


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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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