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Berkeley Group shares fall as profits plunge 16%

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Shares in Berkeley Group Holdings (LON: BKG) opened 4% lower after the group shared unaudited interim results for the six months ended 31 October 2020.

The group saw pre-tax profits plunge 16.6% from £276.7m to £230.8m and net cash fell from £1,113m to £954m.

Revenue was down 3.8% to £895.9m.

Highlights over the period included the development of four new sites acquired covering over 2,800 homes, two new planning consents, and 1,104 homes delivered.

“At the start of the financial year, in the midst of the first lockdown, Berkeley anticipated full year pre-tax profits of around GBP500 million; to be split broadly one third in the first half and two thirds in the second half. With our production recovering quickly, aided by our decision not to furlough any employees, we have delivered pre-tax profits of GBP230.8 million and therefore now anticipate a more even distribution of profits over the year,” said the group in the trading update.

“Our long-term guidance remains unchanged which is for a 15% cumulative pre-tax ROE for the six years ending 30 April 2025, equating to an average annual pre-tax profit of approximately GBP500 million, which we remain firmly on track to deliver this year.”

Berkeley Group has said it has financial strength and that resilient trading and a long-term view has seen it invest in four new sites and in construction work in progress.

Commenting on the update, chief executive Rob Perrins, said: “Berkeley’s performance over the last six months is characterised by four features. First, the resolve and expertise of our people and supply chain who have adapted their working practices to ensure they could continue serving our customers and meeting our commitments to all stakeholders safely and securely within the unprecedented constraints placed upon us all by Covid-19. I would like to express my thanks and admiration to them all.

Secondly, today’s resilient results which are in line with Berkeley’s guidance of achieving a 15% pre-tax return on equity and maintaining our GBP280 million annual cash return to shareholders across the cycle, are underpinned by Berkeley’s uniquely long-term operating model.

Thirdly, we have continued to invest in the business; adding four new sites covering 2,800 homes to our land holdings that now includes 28 large, complex, long-term regeneration sites; and increasing our investment in build work-in-progress ahead of the growth in annual completions forecast for the next five years. At 11,000, we now have over 10% more people working on our construction sites than prior to the pandemic.

Finally, we have developed a new ten year vision for the business to ensure Berkeley continues to deliver a positive and lasting contribution to society, the economy and natural world, alongside sustainable, risk-adjusted returns for our shareholders. This includes new science-based targets for climate change which ensure Berkeley is fully aligned to the international effort to limit global warming to 1.5degC above pre-industrial levels.”

Berkely shares (LON: BKG) are trading -2.58% at 4.728,00 (0824GMT).