In the Times, Tempus ponders the “paradox” of the lack of demand for housing and the high dividends that Persimmon, Galliford Try and Berkeley Group are handing investors. The answer is all three have a large part of their future developments sited in the prosperous south east of England and Berkeley and Persimmon have enough land to last them for up to eight and a half years. Berkeley in particular has seven significant London developments in the pipeline and trades at an industry leading 1.5 times net assets. Tempus thinks that’s about right: "hold".
Market conditions continue to remain resilient with London benefitting from its World Class status which has been enhanced by the Queen's Diamond Jubilee and the Olympics. Limited supply of quality new housing, particularly in the best locations in London and the South East, continues to provide strong support for house prices despite the underlying economic conditions and lack of feelgood factor.
Housing has to become a national priority, not just for Government but for the whole country. This does require the presumption in favour of sustainable development within the NPPF to be enforced. Housing can also be part of the economic recovery as every home built by Berkeley creates some 3.5 jobs alongside the associated benefits of affordable housing, infrastructure improvements, creating fantastic new homes and vibrant places. The Government has a vital role to play in stimulating investment by creating a stable, consistent and transparent platform to allow housing to be developed, however the changes in planning and the consultation on the taxation of residential properties have introduced uncertainties for businesses such as Berkeley.
Consequently, this is expected to lead to lower levels of investment in housebuilding generally. This means for Berkeley that we will maintain a strong and flexible balance sheet while investing more selectively in land and construction and therefore expect to be cash generative in the first half.
As previously announced, Victoria Mitchell, the Non-Executive Deputy Chairman is today stepping down from the Board after ten years of continuous service and I would like to thank Victoria for her significant contribution to the Group over this time."
Interim Management Statement Period from 1 May 2012 to 31 August 2012 5 September 2012
At The Berkeley Group Holdings plc ("Berkeley's") Annual General Meeting being held today, the Chairman, Tony Pidgley, will make the following Interim Management Statement which covers the period from 1 May 2012 to 31 August 2012.
"Berkeley has set a clear long term operational strategy to return £13 per share to shareholders by 2021 and to maintain the balance sheet at a similar level as at 30 April 2011. Berkeley remains on target to achieve this.
Trading for the period has been in line with the Board's expectations. In addition, the completion of 149 properties at Grosvenor Waterside in the period, out of the 185 remaining properties which had previously been forecast to be delivered over the next three years, has benefitted earnings in the current year which are currently anticipated to be at the top end of analysts' expectations. All these properties were paid for in full at the year end and no additional cash will be generated by the business from the acceleration of these sales.
Berkeley has acquired three sites since the beginning of the year, predominantly on deferred terms, in Wapping, Hammersmith and Chiswick, and is on target to achieve its aim of growing the value of the potential gross margin in its land holdings to £3 billion by April 2014.
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
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