Berkeley Group on track to meet FY 2023 profit guidance on strong housing market

Berkeley Group shares soared 5.5% to 3,639p in early morning trading on Tuesday, after the company announced it was on track to meet its FY 2023 profit guidance of £600 million and £625 million for FY 2024.

The housing firm said it expected profits for the current financial year to be 55% weighted to HY2, in line with production scheduling.

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“Berkeley has continued to trade well during the first four months of the new financial year, with the value of underlying sales ahead of the financial year ended 30 April 2022,” said Berkeley Group in a statement.

Berkeley Group reported strong demand continued to support pricing above business plan levels, providing sufficient cover of cost increases on a blended basis across the company’s developments.

The properties group noted forward sales were anticipated at marginally over the £2.1 billion held at 30 April 2022, with net cash expected to result in a level similar to the £269 million held at the most recent financial year end.

The company confirmed it was still aiming to become working capital neutral over the current and next financial year, in line with year-end guidance.

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Berkeley Group highlighted the volatile market environment and cost inflation of 5% to 10% per year, and mentioned new land would only be added to land holdings on a very selective basis.

“Berkeley Group has put in a resilient showing, despite soaring cost inflation which is marring the entire sector. The reason profits have been left without too much bruising is because sale prices are high enough to offset the housebuilder’s fatter bills,” said Hargreaves Lansdown lead equity analyst Sophie Lund-Yates.

“This is a dynamic being seen almost across the board, but the longevity of the pattern is a question mark for Berkeley. It’s south-east focus, and more premium product, means starting prices for a Berkeley home are significantly more than for run of the mill developers.”

“On one hand, this makes the group more vulnerable to a prolonged recession, as a £700,000 family home in the commuter belt is precisely the sort of thing people put off committing to when things are rocky. At the same time, these higher earners are less likely to feel the worst of the affects of a crisis, so may well prove to be a more reliable customer base. There should be cautious optimism in the latter scenario, but the market is clearly concerned, with the shares changing hands for a bit less than the longer-term average.”

Shareholder returns

The housing firm reiterated a dividend of £23.3 million, representing 21.25p per share, to be paid to shareholders on 9 September 2022.

The group reported the remaining £141.1 million for the six months to 30 September 2022 have already been satisfied via share buybacks.

Berkeley Group added the next £141.1 million shareholder return would be issued by 31 March 2023 through a combination of dividends and share buybacks.

The scheduled annual shareholder return of £282 million represents £2.59 per share.

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