Developer Berkeley Group pocketed a pre-tax profit of just over £518million, as its average home sale price climbed almost £100,000, its bosses revealed today.
The housebuilder, which calls itself a ‘place-maker’, sold 2,825 homes in London and the South East of England last year and said that it had the capacity to build 63,000 on its current land holdings.
Despite the property market narrative of an escape to the country driving house prices, suburban and city-focussed Berkeley’s average selling price of £770,000 was £93,000 more than the £677,000 average the year before.
That represents a 14 per cent rise in the year to the end of April, outpacing official ONS house price inflation of 8.9 per cent over the same period.
Desirable: Berkeley Group ended the year in ‘great shape’, pocketing a pre-tax profit of just over £518m
Revenue at the business stood at £2.2billion for the year, up from £1.9billion the year before. ‘Help to Buy reservations accounted for a net 403 sales in the year’, it added.
But, the value of Berkeley’s private sales was in fact 20 per cent lower than in the previous financial year.
Berkeley, which last year built 10 per cent of new homes in London, said the capital would thrive again once all pandemic-driven restrictions were scrapped. It said it remained ‘committed’ to the city.
Anthony Codling, chief executive of property site Twindig, said: ‘Very few companies could deliver the results Berkeley Group has in the year ending 30 April 2021.
‘In a period covering lockdowns one, two and three, Berkeley Group has grown revenue, grown profits and increased the number of homes it sold.
‘We may have embraced working from home, but it appears that not all are leaving London and the South East in search of a rural idyll.
‘Looking ahead, Berkeley has a very strong Balance Sheet, a strong order book and more than £1 billion of cash in the bank. If Berkeley were playing in Euro’s it would be Berkeley 1 Pandemic nil.’
The company has ploughed ahead with a shareholder returns programme which has risen by 19 per cent, through both share buybacks and a dividend which currently yields 2.5 per cent.
In early morning trading, Berkeley shares slipped 1.19 per cent or 55p to 4,524.00p. A year ago the group’s share price was 4,585p.
The Berkeley ended the year with net cash of £1.1billion, cash due on forward sales of £1.7billion, and the estimated future gross margin in its land holdings having risen to £6.9billion.
Boss Rob Perrins said: ‘Today’s strong results reflect the consistent and focused application of Berkeley’s uniquely long-term business model, the quality of the homes and places we create and our proficiency in adapting to the challenges of the pandemic, sustaining production throughout.’
The group added 10 new brownfield sites to its land holdings in the last year, the equivalent to 6,650 new homes for the future, and advanced a further 7,000 homes in its immediate pipeline.
Looking ahead, it said it had ‘capacity to deliver over 63,000 homes, of which over 70 per cent are on our 29 large complex regeneration sites.’
It added: ’23 of these are now in production, underpinning the business plan for the next ten years. The next three years will see further investment in work in progress as more of these sites approach the point of delivery and we now have over 11,000 people working on our construction sites, more than prior to the pandemic.’
Coming to an end: The full stamp duty holiday will end this month and will then be tapered until the end of September
Berkeley saw profit before tax of £518.1million, up slightly from £503.7million in its last financial year.
On the climate change and global warming front, Berkeley has pledged to cut emissions from its sites, offices and sales venues by a further 50 per cent between 2019 and 2030.
Richard Hunter, head of markets at Interactive Investor, said: ‘Berkeley’s heavy exposure to London has been both a blessing and a curse, although the company remains convinced of recovery in the capital.’
The average house price has rocketed over the past year,with Nationwide’s index showing the typical home up 10.9 per cent in the year to May
He added: ‘The fly in the ointment for Berkeley from an investment perspective has been the heavy reliance on London. While the share price has added 5 per cent over the last year, this is a shadow of the rally which many other housebuilders have enjoyed given the generally supportive environment, and compares with a hike of 12 per centover the period for the wider FTSE100.
‘However, given the company’s upbeat outlook, particularly over the longer term as future gross margins are set to show strong improvement and alongside increasing shareholder returns, the current market consensus of the shares as a hold, albeit a strong one, could well be subject to upgrades.’
Shares in rivals Barratt Developments and Persimmon are both down more than 1 per cent today after news that the latter and Aviva had struck a deal on historic leaseholds.
The property market has been buoyed by strong demand and the Government’s stamp duty holiday during the pandemic, prompting a surge in prices in many parts of the country. The most recent data from the Nationwide index showed the average house price up 10.9 per cent in the year to May to £242,832.
The full stamp duty holiday will end this month and will then be tapered until the end of September in order to smooth the transition back to normality.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.