19th Jun 2024 08:52
(Alliance News) - Berkeley Group Holdings PLC on Wednesday raised its guidance for the current financial year but cautioned that UK planning restrictions could hinder growth thereafter.
The Cobham, England-based housebuilder upped its pretax profit guidance for the current financial year ending April 2025 by 5% to GBP525 million. Its outlook for the following year was re-affirmed at GBP450 million.
Operating margins are expected to be within the long-term historical range, 17.5% to 19%, following a 7.7% reduction in operating costs in financial 2024.
But looking further ahead to financial 2027 to 2029, Berkeley cautioned that until the planning and regulatory environments unlock, alongside an inflection in the sales market, pre-tax profitability is anticipated to remain around the level to be delivered in financial 2026.
Shares in Berkeley were down 2.2% to 4,900.00 pence in London on Wednesday. The wider FTSE 100 index was down just 0.2%.
Berkeley said it was "heartened" by the strong political consensus behind increasing the delivery of new homes across the UK.
But for this to happen, planning policy and public funding needs to prioritise the provision of affordable homes over the other significant financial demands placed upon the development industry through the planning, taxation and regulatory regimes, the firm stated.
"The industry has absorbed many regulatory changes over recent years and, while all well-intended, when taken together they have stifled investment, housing delivery and growth," the company said.
In the 2024 financial year that ended April 30, Berkeley said revenue fell 3.4% to GBP2.46 billion from GBP2.55 billion, and pretax profit declined 7.7% to GBP557.3 million from GBP604.0 million.
"This is a strong performance in a challenging and volatile operating environment, demonstrating the resilience of Berkeley's business model with its focus on the country's most undersupplied markets," Chief Executive Rob Perrins said.
"We continue to see good levels of enquiry for well-located homes built to a high standard of design and quality but recognise that the current lack of urgency in the market is likely to remain until the long-anticipated reduction in interest rates commences. Berkeley continues to benefit from a strong order book and has already secured 80% of its sales for next year."
The firm added: "The last 12 months has seen a continuation of the volatile and uncertain operating environment for Berkeley. However, while interest rates have stayed at elevated levels for longer than the market had anticipated, there are signs that the outlook is improving with inflation greatly reduced, the first interest rate cut expected later this year and a return to growth."
Berkeley said the value of net reservations has been consistent through the year at levels around one third lower than the prior year, reflecting the ongoing elevated political and macro volatility.
In addition, Berkeley intends to establish its own build-to-rent platform and has identified 4,000 homes in London and the South east as an initial portfolio for this.
The portfolio will be financed by a combination of internally generated funds, debt secured against rental properties once income generating, and the introduction of third-party capital. Berkeley said this fully supported its long-term corporate 15% pre-tax return on equity target.
The dividend per share for the year was raised slightly to GBP0.92 from GBP0.91.
Berkeley said it is on track to deliver GBP283 million, GBP2.67 per share, in shareholder returns by September. It explained GBP34.9 million of that will come through a 33.00 pence per share interim dividend and GBP184.0 million, 174p per share, will be through a special dividend accompanied by a share consolidation.
By Jeremy Cutler, Alliance News reporter
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