Berkeley's solid foundations

A £30.7m profit booked on a 51 per cent share of a post-graduate accommodation project in Clapham inflated these latest figures, but Berkeley still boosted its pre-exceptional operating profit by 30 per cent to £76.4m, leaving chairman Tony Pidgley confident about hitting the group's targets. For instance, the return on shareholder capital increased over 6 percentage points year-on-year to 20.8 per cent during the first half, which easily surpassed the 18.5 per cent minimum level required for shareholders to benefit from a planned return of capital worth 1,300p a share over the next decade.

The London residential market for prime property helped sustain Berkeley's underlying growth with forward sales up by 15 per cent to £937m, compared with £813m at this stage last year. Sterling's weakness has attracted foreign buyers, which has played to Berkeley's strengths in the fashionable areas of the capital. In contrast, the market outside London is much weaker, with owner-occupiers buying property closer to completion; enquiry levels here are broadly stable, but are down 40 per cent from their 2007 peak. Overall, Berkeley sold 1,506 homes at an average sale price of £254,000, compared with 1,249 units in the first half last year at an average price of £262,000. The decline is due to a change in sales mix rather than any fall in actual selling prices.

Management revised its estimated value of gross margin in the landbank by 6.9 per cent to £2.46bn, which also supports the planned return of capital and the target to double earnings between 2010 and 2013. Berkeley currently holds 26,404 plots, including 1,271 plots acquired in the half, although this was offset by 1,606 completed homes.

Broker Evolution forecasts full-year EPS of 96p, rising to 120p in 2012-13 (71.1p in 2011).