Berkeley Group is no ordinary housebuilder - after all, it makes a profit and has no debt. Under normal circumstances this would not be that unusual or particularly impressive. But in today's trading environment it elevates Berkeley into a league of its own. What's more, unlike other housebuilders, it has not seen the need to write down the value of its land bank.
Berkeley has done well to shield itself from economic effects that are largely beyond its control, namely rising unemployment, the mortgage drought and planning restrictions. True, sales were down in the first half of the year from 1,630 to 968, but a change in the sales mix boosted average selling prices from £245,000 to £399,000. Average prices are expected to stay around this level in the second half, boosted by some properties sold in excess of £1m, before falling back. But management has been successful in generating and holding onto cash, and the group is now in a position to pick up cheap distressed assets at knock down prices should it choose to do so.
Meanwhile, Berkeley's strong balance sheet will help to steer the group through what is expected to be another tough year. Sales reservations in the first half were down 55 per cent on the previous year, and 60 per cent lower for the period since the collapse of Lehman Brothers in September. And cash held in respect of forward sales fell from £1.21bn in April, to £807.9m as of 31 October. The trend is likely to continue, and the group expects this to result in a lower level of production to match falling demand. As a result, Berkeley is also holding off on fresh land purchases, with just four new site agreements in the first half.
Broker Numis expects full-year pre-tax profits of £180m and EPS of 105p.
| BERKELEY GROUP(BKG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 815p | MARKET VALUE: | £984.7m | |
| TOUCH: | 808-815p | 12-MONTH HIGH: | 1,196p | LOW: 613p |
| DIVIDEND YIELD: | Nil | PE RATIO: | 7 | |
| NET ASSET VALUE: | 591p | NET CASH: | £138m | |
| Half-year to 31 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 441 | 90.6 | 52.6 | nil |
| 2008 | 453 | 79.6 | 47.8 | nil |
| % change | +3 | -12 | -9 | - |
