Berkeley Group shares crumbled on Friday as the housebuilder released year-end results littered with reasons for investors to be concerned.
Profit before tax fell 5.1% to £529m and the builder’s net cash position fell to £337m, raising questions about the outlook for shareholder distributions.
Cash due on forward sales dropped to £1.4bn, underscoring a shaky medium-term outlook for the group.
“The departure of its chair and a warning that returns will be below targeted levels in the medium term put housebuilder Berkeley on the back foot,” explained AJ Bell investment analyst Dan Coatsworth.
“The company is guiding for a substantial drop in pre-tax profit for the current year and for profit to remain flat in the year afterwards, with the relatively downbeat outlook reflecting a volatile operating environment.
“Berkeley previously earned a reputation for shrewdly calling the housing market cycle, so the company’s conservative guidance in its latest results announcement has made investors sit up and take notice. That’s caused shares across the housebuilding sector to fall.”
Berkeley isn’t alone in having to deal with problems in the wider economy, but its outlook for financial performance is at odds with other housebuilders. While Berkeley sees profit before falling over the next year, peers such as Taylor Wimpey have guided for profits in the year ahead to be higher than those recorded last year.
Berkeley’s pessimistic guidance is playing a big part in the 8% decline in shares today.
“Higher interest rates, shaky consumer confidence, overriding macroeconomic uncertainty as well as tougher regulations have all contributed to potential issues facing house builders at the moment,” said eToro Market Analyst Adam Vettese.
“The consensus beat appears to support the resilience of Berkeley’s brownfield regeneration model in the high demand London and South East area. Over 75% of 2026 sales are already secured, supporting guidance for £450m in pre-tax profit, although this reflects a decline from this year.”