Join our community of smart investors

Berkeley Group increases full-year guidance

But most shareholder returns have gone in share buybacks
December 7, 2018

A sharp drop in profits in the six months to October 2018 had already been well signposted, as Berkeley Group (BKG) warned back in June that profits had peaked. Still, it’s not all bad news because the housebuilder has upped its guidance on full-year profits by 5 per cent, and has extended planned returns to shareholders of £280m a year from 2021 to 2025. It’s also sitting on £860m in cash, while cash due on forward sales amounts to £1.9bn, albeit down from £2.2bn in April, but healthy enough.

IC TIP: Hold at 3423p

New homes sold eased from 2,190 to 2,027, although a change in the mix lifted average selling prices from £721,000 to £740,000. Operating margins fell from 30.9 per cent to 24.3 per cent as profits dropped, while overheads were marginally higher. Trading conditions in London and the south east remained tough, with high transaction costs and mortgage restrictions adding to the macro uncertainty. So, all of the 11 sites acquired in the first half were outside London, although there has also been good progress in bringing forward new regeneration sites in London.

Analysts at Peel Hunt are forecasting adjusted pre-tax profits for the year to April 2019 of £674m and EPS of 395.2p (down from £934.9m and 550.3p in FY2018).

BERKELEY GROUP (BKG)  
ORD PRICE:3,423pMARKET VALUE:£4.42bn
TOUCH:3,417-3,423p12-MONTH HIGH:4,338pLOW: 3,170p
DIVIDEND YIELD:1.2%PE RATIO:7
NET ASSET VALUE:2,067pNET CASH:£860m
Half-year to 31 OctTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20171.6654032156.75
20181.654012467.12
% change-1-26-23-87
Ex-div:20 Dec   
Payment:16 Jan