8th Dec 2023 10:49
(Alliance News) - Analysts were pleased with Berkeley Group Holdings PLC's interim results on Friday, as its profit edged higher despite headwinds.
"High-end housebuilder Berkeley is on track to meet guidance for the next two years despite a difficult market backdrop. However, news it is not investing in new developments thanks to the 'volatile' planning and regulatory environment felt quite telling, with sales volumes also falling in the six months to 31 October," said AJ Bell's Russ Mould.
"A key bugbear of UK housing developers, even in better times, is that under-resourced local planning departments are unable to approve projects in a timely fashion. However, an increase in profit from Berkeley, during tough times, shows it continues to be near the top of the class in the sector."
The Cobham, Surrey-based housebuilder said in the six months to October 31, pretax profit climbed 4.6% year-on-year to GBP298.0 million from GBP284.8 million, as net operating expenses fell 11% to GBP79.7 million from GBP89.9 million the year before.
Revenue slipped 0.8% to GBP1.19 billion from GBP1.20 billion.
Berkeley more than doubled its interim dividend to 59 pence per share from 21p per share a year ago.
On the back of the results, Hargreaves Lansdown's Aarin Chiekrie said Berkeley "is sitting on some solid foundations, allowing it to weather the cyclical nature of the housing market."
Looking ahead, the company said it is targeting at least GBP1.5 billion in pretax profit over the current and next two financial years.
"In the six months, we have delivered 1,785 new private and affordable homes, of which 87% are on brownfield land, and provided over GBP250 million in subsidies to deliver affordable housing and commitments to wider community and infrastructure benefits, more than 100% of the post-tax profit generated in the period," said Chief Executive Rob Perrins.
However, he added that uncertainty caused by planning, tax, and regulatory regimes is making urban regeneration increasingly difficult to progress.
The firm will remain focused on cutting costs and investing in work in progress. "We are ready and able to deploy capital into new opportunities once the market and regulatory cycles inflect and returns can be earned commensurate with the level of upfront investment and operational risk we undertake," Perrins explained.
Richard Hunter, head of markets at interactive investor, commented "Berkeley is making some tough choices in a tough environment and the strategy is currently keeping the group in resilient shape.
"Against the parlous backdrop which the sector is facing, ranging from rising interest rates to doubts over mortgage availability and affordability, the current sales climate is inevitably on the wane. Berkeley has added to this list, citing the planning and regulatory environment as another reason why it is not currently investing in new developments."
Shares in Berkeley were down 1.9% to 4,845.00 pence each in London on Friday morning.
By Sophie Rose, Alliance News senior reporter
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