Berkeley Group Holdings (BKG) announced that it expects full year earnings to be at the top end of analyst expectations, having completed 149 of the 185 properties at the Grosvenor Waterside development which were previously planned to be delivered over the next three years. The housebuilder noted that prices in London have remained strong despite the economic downturn, due to high demand and limited supply of high end properties. Berkeley shares edged up by 8p to 1,498p.
House builder Berkeley Group has its annual general meeting (AGM) on Wednesday, and although things have gone quiet of late in terms of shareholders grumbling about excessive executive remuneration, broker Northland Capital Partners thinks there may be some questions asked about the long-term incentive plan (LTIP) agreed at last year's AGM.
"Whilst the rewards to shareholders are clear with the £13 per share capital return by September 2021, there have been negative comments on the maximum potential LTIP that would confer £280m worth of shares to the directors at the current share price on completion of the £1.7bn capital return and full compliance with the LTIP terms. More importantly, the group has achieved further sales success during the summer with several new sites and phases on existing sites being marketed. These achievements should be a feature of the trading statement expected with the AGM," Northland said.
Broker Peel Hunt's £16.35p price target implies 12% possible upside. A prospective price/earnings (PE) ratio of 11.9 falling to 10.5 looks undemanding given Berkeley’s track record, profits potential and compelling yield attractions
An unrivalled land bank and powerful London presence provide the scope for further earnings forecasts upgrades at Berkeley (BKG). Since the £1.9 billion cap refined its strategy in early 2009 the Cobham-headquartered residential homes developer has invested heavily in new land in London and the South East to drive both growth and prodigious cash generation.
Final results for the year to April (29 June) highlighted a 30% increase in the order book to over £1 billion as the London market remained buoyant. The company repeated its view it could increase pre-tax profits by 20% to £220 million in the year to April 2013 and the backlog suggests that target is beatable.
The next round of profit estimate increases could begin with next week's annual general meeting update (5 September). On a longer-term basis the firm's plan to return £13 a share in cash to shareholders by September 2021 is a key reason to own its shares. Management intends to dish out £4.34 by September 2015 alone.
House-builder Berkeley Group saw both revenues and profits surge in the 2011/2012 fiscal year and said it would hit its medium-term profit targets quicker than first thought.
Revenue jumped by 40.2% from £742.6m to £1,041.1m in the year to April 30th. The group sold 3,656 homes, up from 2,544 the year before, while the average selling price rose from £271,000 to £280,000.
Meanwhile, pre-tax profit climbed by 57.5% from £136.2m to £214.8m. Overheads jumped by £26.1m to £99.6m but reduced as a percentage of revenue.
The group said it is well-positioned to meet its previous target of doubling its pre-tax profit from £110m to £220m by April 30th 2013, two years earlier than planned. Its first targeted dividend repayment is expected in September 2015.
"I am delighted to report a strong performance again this year," said Chairman Tony Pidgley.
Good news abounds in the property sector, which makes house builder Berkeley very interesting for Tempus in the Times. The group invested heavily when land values were heading south between 2008-2009 and has a very generous dividend policy (£1.7bn to be returned by 2021). It dropped yesterday despite saying it would double pre-tax profits by next year. Tempus says buy.
Northland Capital retained its "buy" stance on The Berkeley Group (BKG), with a 1,600p target price. The broker said that strong trends in the London housing market should support a solid trading update from the housebuilder on 19th March. Northland is impressed that the firm believes it will be able to double its operating profit within three years, instead of the previously expected five, adding that this could lead to an early start to the proposed 13 pounds per share dividend payment scheme over ten years. The shares crept down 5p to 1,378p.
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