Berkeley hits home

Chairman Tony Pidgley reports the market has “stabilised”, albeit at lower transaction levels, with sales reservations still 40 per cent below what he considers a “normal market”.

Revenues and profits fell even though a greater number of homes were sold in the period, with 2,201 completions compared to 1,501 last year. However, the average selling price fell by a third to £263,000, from £395,000, due to fewer high-value central London schemes being delivered in the period, and higher numbers of lower-value units being sold. That saw the operating margin slip 50 basis points to 17.3 per cent.

The disposal of commercial elements of mixed-use housing schemes, such as shops, restaurants and crèches contributed a further £19.6m to revenues. The builder ended the year with forward sales of £648m, marginally up on £620m a year previously.

Berkeley has also been selectively acquiring land, purchasing 2,200 plots on 20 sites in the period. That quantum has disappointed some analysts, though Mr Pidgley notes the market is now “beginning to yield some attractive opportunities”, and has pledged to increase both its landbank and earnings per share by 10 per cent over the next 12 months.

Of the £57.5m cash generated in the period, £25.4m was used to acquire its own shares, and settle company share schemes. Berkeley has also secured new or revised planning consents on 38 separate sites, which it says will underpin supply for the next three years.

It chose not to declare a dividend, believing greater value will be achieved by investing in land and work in progress.

Broker KBC Peel Hunt forecasts adjusted EPS of 49.9p and pre-tax profits of £96.4m in 2011 (from 53p and £102m last year).

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