(Alliance News) - The brownfield building sites that Berkeley Group PLC develops into homes can hold many unpleasant surprises for its engineers, but the company's willingness to take on "large-scale, complex" sites in London and the south east of England means there are fewer such surprises for investors.
In releasing interim results on Wednesday, the Cobham, Surrey-based company noted it has in place a long-term plan to return GBP282 million per year to shareholders through to September 2025 through dividend or share buybacks.
Berkeley also has identified GBP455 million of surplus capital to be returned by the end of April 2023 through either extra cash returns to shareholders or incremental land investment.
Berkeley shares were up 3.3% at 4,789.00 pence Wednesday in London. The stock is down 6.7% so far in 2021, however.
For the six months to October 31, revenue rose 36% to GBP1.22 billion from GBP895.9 million last year, and pretax profit increased 26% to GBP290.7 million from GBP230.8 million.
Looking ahead, Berkeley raised its earnings expectation for the current financial year by 5% from the current guidance, which was for pretax profit to be at a similar level to last financial year of GBP518.1 million.
Further, as a result of a resilient sales market, its delivery pipeline and the recovery of sales to pre-pandemic levels, Berkeley said pretax profit growth is expected to be around 5% per annum for the next three financial years. This sees Berkeley on a path to delivering GBP625 million of pretax profit for the year ending April 30, 2025, it said.
"The performance reflects Berkeley's conviction and investment in its strategy over the last 18 months, which is focused on London and the South East, the country's most under-supplied housing markets, in spite of the challenges presented by the pandemic, supply chain constraints, and regulatory environment," said Chief Executive Officer Rob Perrins.
"Over this time, we have continued to deliver in line with our uniquely long-term operating model, progressing construction across our portfolio of 64 live projects. These include 30 long-term, highly complex regeneration sites, of which 25 are now in delivery."
Berkeley said its work in the capital also gives it strong environment credentials, with 83% of its site under construction located on brownfield land.
"The group's ability to redevelop complex sites in and around the capital, taking land that others fear to touch and transforming it into premium properties is their key attraction for investors," commented Steve Clayton, manager of the HL Select UK Growth Shares fund at Hargreaves Lansdown. "Berkeley lock significant future margin into their development plans and so far, the cost pressures seen across the industry have not impacted upon the group."
Clayton added: "Historic investment into land acquisition, at times when others have been wary or unable to commit, has left the group with a clear growth runway ahead."
By Tom Waite; thomaslwaite@alliancenews.com
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Berkeley Group (BKG)