Berkeley Group Regulatory News (BKG)

This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) 596/2014 as amended by regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. With the publication of this announcement, this information is now considered to be in the public domain.

15 March 2022

The Berkeley Group Holdings plc

("Berkeley" or the "Company")

St William Acquisition

Berkeley acquires the outstanding 50% interest in its St William joint venture from National Grid plc ("National Grid")

Details of the Transaction

Berkeley announces that it has today acquired National Grid's 50% interest in its St William Homes LLP ("St William") joint venture, which is now a wholly owned subsidiary of the Company, for cash consideration of £412.5 million.

Berkeley grows its land holdings through both direct acquisitions and land-led partnerships and joint ventures. St William formed in 2014 as a 50:50 joint venture to bring forward former gasworks sites owned by National Grid that it no longer required for its own business activities to create mixed-use residential developments. Its formation followed Berkeley's acquisition of the former National Grid gasworks at Southall's Green Quarter where Berkeley has now delivered the first 550 homes on this 86-acre 3,750 home mixed-use regeneration site.

Through the acquisition of National Grid's interest in St William, Berkeley is gaining full control of:

· 19 sites already in its land holdings (12,600 homes),

· Two sites already in its near-term pipeline (2,600 homes), and

· Three new long-term sites that will be included in the near-term pipeline (approximately 5,000 homes).

In total, this represents over 20,000 future homes across 24 sites, which constitute the significant majority of those identified at the inception of St William, which has already delivered approximately 1,100 homes and completed three small sites.

All of these sites are now either owned or unconditionally contracted by St William. There are approximately £500 million of outstanding land payments to make to National Grid in respect of these sites, payable over the next ten years.

The £412.5 million consideration for National Grid's interest in St William and the concurrent refinancing of its bank facility has been funded from Berkeley's existing cash reserves. St William's net debt at the end of February 2022 was approximately £170 million.

Including the already wholly owned Green Quarter site at Southall referred to above, and the three small sites already completed, Berkeley's relationship with National Grid will see some 25,000 new homes delivered across London and the South East that would not otherwise have come forward. The regeneration of these vast, brownfield spaces, once cut off from their local communities, to create new urban neighbourhoods with the right mix of homes, public amenities, parks and open spaces is inherently sustainable.

Berkeley's investment reflects its expertise and long-term commitment to London. This transaction will continue to sustain 28,000 UK jobs directly and indirectly through Berkeley's supply chain. Starts in London have been falling for the last few years as many others refrain from allocating capital to this market.

Impact on Strategy and Shareholder Returns

Through the transaction announced today, Berkeley has achieved its objective of securing at least £7.5 billion of estimated future gross margin in its land holdings well ahead of its 30 April 2025 target, with the gross margin percentage maintained at around 27%. In addition, the near-term pipeline now comprises around 12,000 homes with a potential estimated future gross margin of approximately £1.3 billion across seven sites.

The acquisition further underpins earnings for the next three years, and Berkeley now anticipates achieving the existing pre-tax profit guidance for the financial years ending 30 April 2024 and 2025 a year earlier in each case. Net cash is now expected to be around £250 million at 30 April 2022, with cash due on forward sales increasing to over £2.0 billion following the acquisition.

Following the transaction, Berkeley will now only acquire new land very selectively. Investment over the next two years will therefore be focused on bringing the Group's regeneration sites into delivery, as previously indicated, and Berkeley now anticipates being cash neutral over this period. Once this investment programme is complete, the focus will shift to returning surplus capital over and above the scheduled annual returns of £281 million to shareholders, through either dividends or share buybacks. Return on equity, rather than annual profit will be the principal financial metric for the business. This reflects Berkeley's long-held prioritisation of quality of profit and financial soundness, ahead of annual profit targets, as well as the lumpiness of delivery of profit on regeneration developments.

In respect of the £455 million surplus capital identified in 2020, Berkeley committed to return this to shareholders either through enhanced cash returns or through investment in incremental land interests, or a combination of the two. The first £229 million of this surplus capital was returned to shareholders in September 2021 as part of a B-share return and the remaining £226 million is satisfied by today's transaction.

The next scheduled shareholder return is the £141 million for the six months ended 30 September 2022 which has been approved and is unaffected by this transaction, of which £35 million has been spent on share buy-backs to date.

Rob Perrins, Berkeley's Chief Executive said:

"This is a fantastic transaction for Berkeley and National Grid. The vision of our innovative partnership was to take National Grid's redundant gasholder sites and stitch them back into their local communities; transforming them into well-connected, nature rich, beautiful places with low carbon homes and new amenities. With 24 sites now in St William, this is the natural time for National Grid to realise its investment and for Berkeley to focus on bringing all of these sites into delivery and helping meet the housing need of London and the South East. I would like to thank John and the team at National Grid who have been outstanding partners over the last eight years.

The acquisition continues Berkeley's philosophy of investing at the right time in the cycle for the long-term, securing unrivalled land holdings in London and the South-East."

END

For further information please contact:

The Berkeley Group Holdings plc Novella Communications

R J Stearn Tim Robertson

T: 01932 868 555 T: 020 3151 7008

LEI: 2138009OQSSLVVHQAL78

Notes on The Berkeley Group Holdings plc:

Berkeley has transformed over the last five years by investing in large-scale, complex sites in London and the South East. We are unique in having the capital, resources and expertise to regenerate this number of highly complex large-scale sites, with each one requiring a bespoke and holistic place-making strategy to stitch it back into its surrounding community and unlock its potential in terms of economic, environmental and social value.

Reviving these under-used spaces is vital to re-energising our cities and town centres and creates an increasingly sustainable, socially inclusive and lower carbon model of modern living, in which land, energy, resources and infrastructure are used more efficiently and responsibly.

Berkeley is now the only large UK homebuilder focused on the regeneration of complex large-scale brownfield projects at scale in London as other large house-builders have left the capital over recent years due to its relative complexity and cost.

Notes on St William Homes LLP:

St William's gross assets at 31 March 2021, being the date of the most recently audited financial statements, were £870 million and profit before taxation for the year ended 31 March 2021 was £8 million. The acquisition of National Grid's partnership interest in St William will be accounted for as an asset purchase by Berkeley, rather than a business combination. Accordingly, there is no goodwill and Berkeley anticipates the entire purchase price is deductible for corporation tax purposes.