At The Berkeley Group Holdings plc's ("Berkeley's") Annual General Meeting ("AGM") being held today, the Chairman, Tony Pidgley, will make the following Interim Management Statement, which covers the period from 1st May 2011 to 31st August 2011.
Berkeley embarked on a five year plan in May 2010 to achieve the following near term operating targets during a period of recovery in the wider market.
· Firstly, to achieve a compound return on equity, broadly equivalent to doubling profit before tax over 5 years;
· Secondly, to grow the future gross margin in the land bank from £2 billion to some £3 billion in the same period;
· Thirdly, to be the market leader in place making using the Building for Life criteria.
With the full year results announced in June, the Board indicated its confidence that the business would maintain the reported rate of earnings growth and increase the value of the land bank in the current year. Additionally, the Board provided shareholders with long term visibility on both the timing and amount of potential returns, announcing its intention to return £13 per share (some £1.7 billion in total) over the next 10 years in a series of dividends payable on milestone dates in September 2015, 2018 and 2021.
Since the original plan was announced in May 2010, trading has been ahead of management expectations and Berkeley has achieved a significant number of planning consents and invested in work in progress in line with its strategy. Together with the performance in the period since 1st May 2011, the Board believes that it is now positioned to achieve the profit target set in the five year plan at least 2 years earlier than originally anticipated, to the extent that market conditions prevail. Market conditions in the four months ended 31st August 2011 have enabled further growth in forward sales which are currently in excess of £850 million.
Commenting on the results for the year, Managing Director, Rob Perrins said:
"I am pleased to report that Berkeley has performed strongly during the year, exceeding the targets set for both return on equity and land bank growth. The 20.2% growth in earnings per share reflects the depth of demand for well located property in London and the South East where supply is constrained and Berkeley has the land and expertise to deliver quality homes and places. In addition, Berkeley has acquired some 3,600 plots across 24 sites in excellent locations during the year, and has increased the number of active sites in line with our strategy to invest at this point in the cycle.
The increase in forward sales of 25.5%, land bank growth of 13.1% and our planning successes contribute to an improvement in operational visibility. This provides us with confidence that Berkeley can maintain the rate of earnings growth in the current year and increase the value of the land bank over the next two years, through a combination of optimisation and land acquisition, before commencing the return in cash to shareholders envisaged in the long term plan."
Commenting on the strategic review, Chairman, Tony Pidgley said:
"I am delighted that in the two years since shareholders supported the Board's proposal to invest at the right point in the cycle, Berkeley has made great progress and acquired a number of excellent sites in London and the South East, committing in excess of £500 million to the land bank in the process and laying the foundation for the next phase of the Group's strategy.
The Board's recommendation to return £13 in cash over the next ten years is the result of these achievements. The long term plan announced today puts in place an exciting and challenging proposition that builds on the strengths of Berkeley's unique business model to realise significant value in cash for existing shareholders, yet retains sufficient working capital to invest in the continuing business and provides a real incentive for management to maximise its long term value. This strategic framework provides clarity over the corporate strategy and fully aligns the interests of management and shareholders for an extended period - an alignment that has been so important to Berkeley's success in the past."
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