15th Mar 2024 14:57
(Alliance News) - Berkeley Group Holdings PLC kept investors happy on Friday, after it shook off "wobbles" in the wider housing market.
The housebuilder highlighted good enquiry levels and a strong forward sales position as it backed profit guidance for the next three years.
Aarin Chiekrie at Hargreaves Lansdown said: "Berkeley’s sitting on solid ground, despite some wobbles in the wider housing market. Many of its peers have posted large revenue and profit declines in recent months. But Berkeley’s London focus and higher-end product, with an average selling price of GBP624,000 at the last count, means it offers something different to other large builders."
In a trading update, covering the period from November 1 to February 29, the Cobham, England-based housebuilder said it was on track to deliver at least GBP1.5 billion of pretax profit across the three years ending April 30, 2026, including pretax profit for the current financial year in line with consensus of GBP550 million.
Chiekrie said: "Given that the UK housing supply shortage doesn’t look to be going away anytime soon, and demand in the key London area is likely to remain more robust than in other parts of the country, that target looks achievable."
Meanwhile, Richard Hunter at interactive investor, commented “Berkeley Group has made some difficult choices in what has been a tough environment, and with some glimmers of light at the end of the tunnel now appearing those choices are poised to be rewarded."
"The group reports that enquiry levels are good, as customers begin to renew their interest in anticipation of falling interest rates later in the year, and with mortgage availability improving given an increasingly competitive range of offers. There will still be vestiges of weakness which will take some time to wash through, such as sales rates, which are down by a third compared to the previous year."
Berkeley also said all sales for the current financial year ending April 30 are secured, with more than 70% of sales secured for the next financial year, which it described as a "strong position".
Sales rates during the period have been consistent with the first half of the financial year, remaining around a third lower than the comparative year, the company said.
But Berkeley noted enquiry levels are good, with customers looking for the "prevailing political and economic uncertainty to recede and interest rates to begin to fall."
Pricing has been stable across our sites during the period and above business plan levels, while build cost inflation is negligible across most trades, Berkeley said.
Cash due on private forward sales, which was GBP1.96 billion at the half year has continued to moderate over the second half through a combination of strong delivery and the prevailing sales rates.
Net cash at the year end is forecast to be above the half year position of GBP422 million.
Berkeley said it remains on track to GBP227 million in shareholder returns by the end of September, via dividends or share buybacks.
Shares in Berkeley Group were up 0.7% to 4,708.00 pence each on Friday afternoon.
By Sophie Rose, Alliance News senior reporter
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