Berkeley Group Share News (BKG)

(Alliance News) - Berkeley Group Holdings PLC divides opinion now it has started to suffer from industry trends which it had mostly been immune from.

Housebuilder Berkeley on Friday reported a slight contraction in half-year profit and revenue as operating expenses and net finance costs widened.

In the six months to October 31, pretax profit fell 2.0% to GBP284.8 million from GBP290.7 million a year ago. Revenue was 1.6% lower at GBP1.20 billion from GBP1.22 billion.

During the period, Berkeley delivered 2,080 homes and 251 joint ventures, compared to 1,818 homes and 395 joint ventures a year prior.

UBS said that Berkeley's interim results "demonstrate why Berkeley is different to other housebuilders" as it maintained its 'buy' rating and a price target of 4,275 pence.

"Reservation rates were up 2% in H1 but since the end of September dropped -25% (in value terms), which we think is decent considering industry sales rate drops of 40-50%," the investment bank continued.

Davy Research however said that "this is similar to the deterioration in sales that we have seen in the rest of the sector" as it suggested the housebuilder was starting to see the same weakness as others in demand. It adjusted its rating to 'underperform'.

Berkeley forecasts full year profit of GBP600 million, unchanged from previous guidance and supported by forward sales, UBS noted.

However, over the longer term, Davy Research pointed out its guidance has reduced "materially".

"The recent weakness in demand has led the company to reduce forward guidance, with pre-tax profit for the two years FY24 and FY25 now expected to be GBP1.05bn – down 16% compared to the previous guide of GBP1.25bn," the research firm said.

Net finance costs more than doubled to GBP10.6 million from GBP5.0 million. Berkeley's net cash increased by 28% to GBP343 million from GBP269 million.

UBS said "given the size of the land bank (>10 years), we believe Berkeley can afford to not buy land for a period of time (no land acquisitions in H1) which should lead to cash generation."

Looking ahead, Chief Executive Officer Rob Perrins said: "In these uncertain times, Berkeley has a very clear strategy; realising its forward sales, matching supply to demand, adding value to its existing land holdings and pipeline sites, protecting operating margins and focusing on cash generation ahead of the income statement."

Shares in Berkeley finished 0.3% higher on Friday in London. In the year-to-date, the stock is down 22%.

By Chris Dorrell, Alliance News reporter

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