The Berkeley Group Holdings plc (“Berkeley” or the “Company”) today announces its Trading Update which covers the period from 1 November 2016 to 28 February 2017.
The housing market in London and the South East has now stabilised. Overall, underlying reservations in the seven months since the immediate Brexit referendum effect (August to February) are down 16 per cent on the comparable period last year, with the last two months ahead of last year. Enquiry levels remain robust, cancellation rates are at normal levels and pricing continues to be resilient and above business plan levels.
The reduction in reservations is across all price points and reflects the ongoing impact of both Brexit uncertainty and the changes in recent years to SDLT and mortgage interest deductibility. This has been partly offset by the continued availability of mortgage finance at low interest rates, favourable currency exchange rates and the quality of Berkeley’s well-presented and well-located homes.
When coupled with the planning environment and increased demands from the combination of affordable housing, CIL, Section 106 obligations and review mechanisms, this has resulted in new starts in London falling by some 30 per cent.
Berkeley is concerned by this under-supply and the knock-on effect it has on the provision of housing of all tenures which, if not addressed, represents a threat to London remaining the inclusive and open global city which is so important to London and the UK’s growth and prosperity. We therefore welcome the Government’s White Paper and the Mayor’s continued focus on housing but note that these will take time to effect change, given the competing priorities.
Berkeley is uniquely placed to maintain its high levels of production in London and the South East and we are onsite in production on 58 sites. There are a further 22 sites that are either in the planning process or we are unable to start on-site due to the number of pre-commencement conditions to be cleared or other enabling issues, such as access or utilities; the resolution of which is key to delivering the much-needed additional new homes required.
Berkeley is in a strong position and remains on target to meet its ambition to deliver at least £3.0 billion of pre-tax profit over the five years ending 30 April 2021. Forward sales are expected to be in excess of £2.6 billion at 30 April 2017 at the prevailing sales rate and Berkeley remains ungeared. We continue to make selective acquisitions to our well bought land bank from which we can add value, delivering homes of all tenures in balanced and vibrant new communities that include shops, schools, new open spaces and other community facilities.
Pre-tax profits for the year ended 30 April 2017 are expected to be at the top end of analysts’ expectations, with the actual outturn dependent upon completion timing on Berkeley’s larger developments. A similar level of profitability is anticipated for the year ending 30 April 2018.
As announced on 23 February 2017, a dividend of 85.24 pence per share will be paid on 24 March to shareholders on the register on 3 March. The £117.7 million cost of this dividend (based on the number of shares entitled to receive a dividend at the time of the announcement), when combined with the £21.1 million cost of the 747,367 share buy-backs in the relevant period up to 23 February, will complete the scheduled £138.8 million of returns to be completed by 31 March 2017. This reflects the changes to the Shareholder Returns programme announced with the Company’s interim results on 2 December 2016. In total, up to the date of this announcement (and including the 747,367 shares noted above), the Company has now acquired 1,342,181 shares at a cost of £38.5 million since the 2 December 2016. The next £138.8 million of shareholder returns are scheduled to be made by 30 September 2017 through a combination of share buy-backs and dividends; the amount of the dividend component will be announced in August, taking account of share buy-backs made in the period from 24 February 2017.