Berkeley Group profits climb to £551.5m, higher prices absorb cost inflation

Berkeley Group shares dipped 1.7% to 3,724p in early morning trading on Wednesday after the housing company announced a pre-tax profit climb of 6.4% to £551.5 million in FY 2022 against £518.1 million in FY 2021.

Berkeley Group highlighted a revenue growth of 6.6% to £2.3 billion from £2.2 billion, alongside a gross profit increase of 4.6% to £664.8 million compared to £635.3 million.

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The company also mentioned an operating profit uptick of 1.1% to £507.9 million from £502.3 million.

The firm reported a strong year of results, including a value of underlying reservations increase of 25% year-on-year, representing a slight rise compared to pre-pandemic levels.

Berkeley Group added that costs inflation had been successfully absorbed by higher sales prices, with cash due on forward sales up to £2.2 billion compared to £1.7 billion in the last year.

Houses Delivered

The company confirmed the delivery of 3,760 new houses, along with 872 in joint-ventures, representing a 42% increase against the year before.

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The housebuilder currently has £8.3 billion of estimated future gross margin in its unrivalled land holdings following the £412.5 million St William transaction to acquire the remaining 50% of the land, exceeding its £7.5 billion target from three years ago.

The St William transaction provided Berkeley Group with full control of 24 sites with the potential to deliver over 20,000 new homes.

However, the company said it planned to slow its new land deals, and would only acquire new land under a highly selective process going forward.

The housebuilding firm announced the acquisition of four new sites covering approximately 6,000 homes, alongside four major new planning consents obtained on long-term developments to build 1,000 houses at Milton Keynes and St William’s Bow Common, 570 homes at Leyton and 550 homes at Bethnal Green.

Berkeley Group further noted seven sites had moved into production with the capacity to deliver 5,000 new houses, with 26 of its 32 long-term complex regeneration developments in production and 8,000 plots on six sites that constitute its pipeline.

Cautious optimism in FY 2023

The company reported a basic EPS of 417.8p from an EPS of 339.4p last year and declined to declare a dividend for the financial year.

“The big thing that was left out of these results was news of a dividend and we expect that’s got something to do with the continued assessment of cladding costs the firm might have to cough up,” said Freetrade senior analyst Emilie Stevens.

The housing group appears to be in good shape for the coming term, although consumers might be less forgiving of higher prices as the cost of living crisis bites and mortgage rates yank the property ladder even higher out of reach.

“Then there’s the case of cost inflation, which Berkeley expects to stay. The group absorbed the increases in costs this year in full, but the coming year’s market might not be so susceptible to 10% price rises,” said Stevens.

“All in, Berkeley is in good shape. While there are certainly choppier waters ahead, the great developer sell-off still feels a touch overplayed.”

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