Berkeley Group comforts investors with trading update

British housing developer, Berkeley Group, shares were up 1.7% to 3,825p after reconfirming annual earnings are on track.

Berkeley Group provided a trading update from November 2021 to 28 February 2022, which confirmed the firm is ‘trading robustly’.

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The developer stated cancellations rates are normal and sales are just better than pre-pandemic levels.

The group mentioned that inflationary costs associated with the developments are being curbed by the gains from higher selling prices.

The group is on track to meet their earning goals for April 2022 with the results so far.

Net cash is expected to increase from £846m in October ’21 to £900m in April ’22 due to land payments, however, cash due from exchanged private sales will see a marginal increase from £1.7bn for this period.

The group is supplying around 28,000 jobs in the UK and continues to develop the plans regarding their long-term brownfield sites.

The company has increased their total gross debt facilities to £1.2 billion due to refinancing new bank facilities giving them £800m expiring in February 2027 with the option of two one-year extensions.

Additional £226m of capital returns expected in April 2023 will be used for further development projects like finishing near-term pipeline sites into the land holdings.

Steve Clayton, fund manager at HL Select said, “All looks under control at Berkeley for now. The group’s cash position, projected to be some £900m by financial year end and newly renegotiated bank facilities leave Berkeley in a comfortable position.”

“Berkeley say that the environment is volatile, with the inflationary pressures currently being felt perhaps the greatest of these.”

“For now selling prices are going up faster than Berkeley’s budgeted predictions, so all is working out in the wash. But the group will be well aware that if home prices stutter whilst costs keep surging, the current “Goldilocks” scenario could come to an abrupt end.”

“Will the events in Ukraine deter Berkeley’s overseas buyers, or will London’s safe haven reputation work in the group’s favour?”

“The situation surrounding the group has become more uncertain in recent weeks, but Berkeley is financially strong and on top of its game.”

“Its ability to turn complex, often challenging brownfield sites into premium developments that earn the group strong margins and cash flow has stood it in good stead in the past, as Berkeley’s own confidence in the future is evidenced by their upping of the pace of land buying,” said Clayton.

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