TOP NEWS: Berkeley Unable To Increase Production Above Business Plan

16th Mar 2018 07:56

LONDON (Alliance News) - Berkeley Group Holdings said on Friday that it has continued to trade in line with its business plan requirements since the first half of its financial year, despite constrained market conditions.

The FTSE 100-listed housebuilder said that it expects forward sales at the end of the year ending April 30 over GBP2.00 billion, compared to GBP2.74 billion the year before, which allows the group to reaffirm its guidance for GBP3.3 billion in pretax profit over the five year period from May 1, 2016 to April 30, 2021.

However, Berkeley did state that it is currently unable to increase production beyond its business plan levels, as market conditions in London and the South East region of England remain constrained as home movers and downsizers are constrained by high transaction costs and economic uncertainty.

Also, domestic buy-to-let investors, which buy early in the cycle and provide security of cash flow to allow for more complex developments to be brought forward are affected by added transaction costs and the removal of interest deductibility.

Berkeley said it remains cautious in its investment strategy, selectively acquire land in the trading period, expecting cash flow to be working capital neutral over the year as a whole.

Net cash at the year-end is expected to be above the interim position of GBP632.8 million.

"The fundamentals of the market in London and the South East remain compelling, but the operating environment and its impact on transaction volumes, whilst sufficient for the business plan and five year profit guidance period that ends at April 30, 2021, do not support the step-up in Berkeley's production levels that these markets so badly need," Berkeley said in a statement.

"Our focus is on ensuring we achieve the right planning consents on our long-term regeneration sites, and then working with our partners and stakeholders to bring these through into production," Berkeley added.

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