9th Dec 2005 07:01
Berkeley Group Holdings (The) PLC09 December 2005 The Berkeley Group Holdings plc PRESS RELEASE 9th DECEMBER 2005 INTERIM RESULTS ANNOUNCEMENT BERKELEY GENERATES £326.4 MILLION OF CASH - £229.7 MILLION FROM CROSBY (DISCONTINUED OPERATIONS) AND £96.7 MILLION IN THE CONTINUING GROUP ON TARGET TO RETURN £2 PER SHARE IN DECEMBER 2006 NET ASSET VALUE PER SHARE UP 23.6% TO 640 PENCE The Berkeley Group Holdings plc ("Berkeley" or the "Group") - the urbanregenerator and residential property developer - announces its interim resultsfor the six months ended 31st October 2005. These are the first results to bepublished under International Financial Reporting Standards ("IFRS"). Highlightsof the results include: • Return of Capital On target to meet next B share payment (£2 per share in December 2006). Further payments scheduled for December 2008 (£2 per share) and December 2010 (£3 per share) • Net Cash £71.3 million net cash from £255.1 million net debt at year -end (30th April 2005) • NAVPS Up 23.6% to 640 pence from 518 pence at the year-end • Land Holdings 24,197 plots in the continuing Group; up from 23,123 at the year-end • Forward Order Book £622.6 million compared to £574.9 million at last half-year for the continuing Group Oct 2005 Oct 2004 £'million £'million Group Revenue 503.1 419.5 +19.9% Operating Profit 89.2 90.2 -1.1%Net Finance Costs (5.8) 1.9Joint Ventures 2.6 7.1 -63.4% Profit Before Tax 86.0 99.2 -13.3%Tax (24.4) (27.1) Profit After Tax 61.6 72.1 -14.6%Profit from Discontinued 80.8 6.4Operations Profit for the Financial 142.4 78.5 +81.4%Period EPS - Basic 118.7p 65.8p +80.4%EPS - Continuing 51.4p 60.3p -14.8%ROCE (excluding profit on 24.0% 23.3%disposal) Commenting on the results, Managing Director, A W Pidgley said: "Berkeley has, for a number of years, set a strategic course which concentratesrelentlessly on its strengths, centred on our unrivalled land bank. Theseresults demonstrate the continuing benefit of this approach. We recognise themanagement commitment and experience required to stay at the forefront of therenaissance of our cities and that this creates a natural size for our business. I am therefore especially proud that our scheme at Gunwharf Quays in Portsmouthhas received one of the six BURA Crystal Awards. BURA (the British UrbanRegeneration Association) marked its fifteenth anniversary by giving theseawards to the best of the best of its previous winners. Berkeley has put in place an unambiguous long-term operating model that alsoallows the business to maximise short-term opportunities. This flexible approachis, I believe, best suited to a cyclical business and continues to serveBerkeley well. Berkeley has generated £326.4 million of cash in the six months to 31st October2005, of which £229.7 million was generated from the disposal of Crosby. I ampleased to say that Berkeley is on target to meet the remaining payments underthe Scheme of Arrangement. Our business is complex, requiring both vision and a relentless attention todetail. We are fortunate to have the management and teams able to meet thisunique combination of challenges. During the year Berkeley has continued itsexcellent track record, blending imagination with total commitment and aformidable understanding of the land and property market. The flair brought tobear by the team in taking advantage of new opportunities is central toBerkeley's continuing success. Our business demands both talent and resolution. These are qualities that ouremployees possess in abundance throughout the Group. I would like to take thisopportunity to recognise their vital and unremitting effort and to thank them,on behalf of both the Board and shareholders, for the very real difference thatthey make to our business." Roger Lewis, Chairman, said: "The housing market has remained stable over the last six months with a returnto normal market conditions after a period of moderation. This in turn followedthe boom period, which was clearly unsustainable. Berkeley has secured sales ata similar level to the corresponding period last year, in line with our businessplan following the Scheme of Arrangement. This has enabled Berkeley to maintainits strong forward sales position at above £600 million. Berkeley continues to acquire new sites, albeit very selectively, and to submitplanning applications on our development sites. The planning regime remains slowand challenging in places, but we accept this as a consequence of the localdemocratic processes involved and welcome the growing understanding of thebenefits urban regeneration can bring to existing communities. I am heartened bythe renewed commitment of central Government, the Greater London Authority andmany local planning authorities to bringing old redundant brownfield sites backto life. Scheme of Arrangement The Scheme of Arrangement and The Berkeley Group Holdings plc reduction ofcapital were approved by shareholders on 17th September 2004 and by the Court atthe end of October 2004. The Scheme of Arrangement created a Berkeley Unitcomprising one ordinary share and four redeemable B shares. The 2004 B shareswere redeemed on 3rd December 2004 for £5 a share at a cost to Berkeley of£604.1 million. The redemption of the three remaining B shares is planned and ontarget for December 2006, December 2008 and December 2010 for amounts of £2, £2and £3 a share respectively. Housing Market The housing market in London and the South East has remained stable over the sixmonths ended 31st October 2005 - underpinned as it is by historically lowinterest rates, strong employment and forecast economic growth in the UK. Thisafter the boom of recent years and the subsequent fall in demand brought on byuncertainties as to world events and five sequential increases in interestrates. Today's market is a good one to operate in for the right product in theright location, priced correctly. The investment market continues to be active and to account for over 50% of ourreservations. Under the Group's definition, an investor can range from acustomer purchasing a second home to a large institution. Land prices remain extremely competitive and Berkeley, in accordance with itsstrategy, has bought only very selectively. During the period terms were agreedon only eight sites, three of which were in the St James business. This equatesto 2,349 plots. The overall effect of these market conditions - a competitive land market,stable sales prices and increases in both build and planning costs - is areduction of 0.7% in the forward gross margin. We expect this trend to continue. For the Group to achieve its full year targets for 2005/06, 58% of the salesrequired are on units with a selling price under £300,000 and 91% under£500,000. This puts Berkeley in a strong position to achieve our full yearforecast in the current market conditions. For 2006/07, 63% of required salesare for units under £300,000 and 92% under £500,000. Results These results have been prepared in accordance with the International FinancialReporting Standards (IFRS), expected to be effective at 30th April 2006.Accordingly, The Group published its restatement of financial information forthe year ended 30th April 2005 on 26th October 2005. In that statement wereported that net assets at 30th April 2005 would be reduced by £48.1 millionfrom £669.5 million (558 pence per share) to £621.4 million (518 pence pershare). The reasons for the reduction were: revenue recognition (IAS 18),accounting for £35.3 million of the reduction; employee retirement benefits (IAS19) - £7.0 million; and the imputing of interest on deferred land creditors (IAS2) - £5.7 million. At the same time, we reported that earnings per share for theyear ended 30th April 2005 would be reduced by 4.0% from 121.0 pence to 116.2pence. The one significant area of change for Berkeley concerns the recognition ofrevenue and profit (IAS 18). Berkeley's previous policy reflected the twodifferent types of scheme the Group develops. For traditional house-building,revenue and profit on exchanged sales contracts was recognised on physicalcompletion. This policy has not changed and is now also the policy adopted forour urban regeneration business where revenue and profit were previouslyrecognised on a phased basis, reflecting the stage of completion of the relevantexchanged unit. The change is one of timing and does not affect cash or theunderlying business. Berkeley is delighted to announce a pre-tax profit of £86.0 million for itscontinuing business for the six months ended 31st October 2005. This is £13.2million less than the £99.2 million reported for the same period last year, areduction of 13.3%. For the full year ended 30th April 2005, Berkeley reported63.8% of its pre-tax profits in the first half of the year. In 2005/06 we expecta more evenly balanced trading profile over the course of the year, althoughstill with the weighting towards the first half. Profit from discontinued operations totals £80.8 million and relates to Crosbywhich was sold to Lend Lease on 8th July 2005. The profit comprises two elements- Crosby's post-tax trading profit prior to disposal which was £1.1 million andthe £79.7 million profit from the disposal itself. In the six months to 31stOctober 2004, Crosby's post-tax trading profit was £6.4 million. Basic earnings per share totals 118.7 pence, an increase of 80.4% on the 65.8pence reported for the same period last year. Basic earnings per share forcontinuing operations are 51.4 pence compared to 60.3 pence last time - areduction of 14.8% - and discontinued earnings per share has increased to 67.3pence from 5.5 pence last time. There are five factors behind the 14.8% fall inbasic earnings per share for continuing operations - reduced operating profitfor the continuing Group (-1.1%); reduced profit from joint ventures (-5.0%);increased interest charge (-8.4%); reduced tax charge (+0.3%); and shares issued(-0.6%). Since the year-end, total equity has increased by £147.0 million to £768.4million (April 2005 - £621.4 million) and net assets per share by 23.6% from 518pence to 640 pence. Return on Capital Employed for the period, excluding the profit on disposal ofCrosby, was 24.0% compared to 23.3% last time. At 31st October 2005, Berkeley had net cash balances of £71.3 million (April2005 - net debt of £255.1 million) after generating £326.4 million of cash flowin the six months; £229.7 million from Crosby and £96.7 million from thecontinuing Group. Trading Analysis Revenue for the continuing Group was £503.1 million (2004 - £419.5 million).This comprises £495.8 million (2004 - £381.5 million) of residential turnover,of which £0.5 million was from land sales (2004 - £3.8 million), and £7.3million (2004 - £38.0 million) of commercial turnover. During the period, the continuing Group sold 1,656 units at an average sellingprice of £292,000. This compares with 1,276 units at an average selling price of£290,000 in the same period last year. At £7.3 million (2004 - £38.0 million), the continuing Group's turnover fromcommercial activities represents the disposal of commercial units on ninemixed-use sites. The continuing Group's share of post-tax results from joint ventures was £2.6million compared to £7.1 million in the same period last year. This arises fromthe sale of 254 residential units (2004 - 426) at an average selling price of£520,000 (2004 - £312,000) by St James, our joint venture with Thames Water. Theincrease in average selling price is mainly due to Wycombe Square in Londonwhere 7 units were taken to sales at an average sales price of £5.5 million.Most of this scheme is now sold and the average selling price in joint venturesis expected to fall back to more normal levels in the second half. Excluding joint ventures and land sales, the house-building operating margin forthe continuing Group was 17.6% compared to 19.3% for the full year ended 30thApril 2005. This is within the 17.5% - 19.5% range (depending on mix) reportedby the Group over recent reporting periods and which we expect to continue aslong as current market conditions prevail. Joint Ventures Berkeley currently has £65.2 million of capital employed in joint ventures, anincrease of £0.7 million from the year-end figure of £64.5 million. The Group'sshare of joint venture bank borrowings has fallen by £11.8 million to £45.8million. Berkeley currently has four joint ventures of which the largest is St James,jointly owned with Thames Water. St James is currently developing 3,992 units,an increase of 1,287 units in the period. The largest site acquired is for 866units at Reading where planning has been secured and site clearance has started.In addition, St James is working up further schemes totalling some 2,000 units. Berkeley is committed to developing its partners' land holdings through jointventures if there is mutual benefit in so doing and this is very much part ofour ongoing business model. Forward Sales Berkeley's strategy continues to be to sell homes at an early stage in thedevelopment cycle, often at the off-plan stage, as this secures customers'commitment and therefore the quality of future revenue. At 31st October 2005, Berkeley held forward sales of £622.6 million. This is adrop of £64.4 million on the 30th April 2005 position of £687.0 million and anincrease of £47.7 million on the £574.9 million of forward sales held at 31stOctober 2004 by the continuing Group. Of the £622.6 million, £33.4 million (2004 - £14.9 million) is included indebtors in the balance sheet, with the remaining £589.2 million (2004 - £560.0million) benefiting both the second half of the current year and future years'profit and loss account and cash flow. Land Holdings At 31st October 2005 the Group (including St James) controlled some 24,197 plotscompared to 23,123 plots at 30th April 2005. Of these holdings, 19,222 plots(April 2005 - 20,091) are owned and included on the balance sheet. In addition,3,024 plots (April 2005 - 2,680) are contracted and a further 1,951 plots (April2005 - 352) have terms agreed and solicitors instructed. At 31st October 2005the estimated gross margin is £1,683 million compared to £1,671 million at 30thApril 2005, an increase of £12 million. Over 95% of our holdings are onbrownfield or recycled land. The comparative figures exclude Crosby. Berkeley is concentrating on maximising the return from its existing landholdings and has submitted planning applications for the majority of itsregeneration sites. Board Structure Berkeley was delighted to announce at its AGM on 1st September 2005 that MichaelTanner has joined the Board as a Non-Executive Director. Most recently aDivisional Managing Director of George Wimpey, Michael has over 34 years ofexperience in the building and construction industry with Tarmac and GeorgeWimpey. Current Trading and Prospects Berkeley has developed a business model that is cash generative and efficient interms of scale - one that allows the skills of its individuals to add valuethroughout the development process. This strategy rests on the twin strengths ofan unrivalled land bank and highly talented entrepreneurial teams. This model allows Berkeley to be flexible - a necessary feature in a cyclicalbusiness. Through our powerfully branded divisions and joint ventures, Berkeleyis in a position to undertake and manage any form of development that presentsitself - be it a smaller more traditional site or the development a newcommunity in our towns and cities. This capability differentiates Berkeley as anadded value urban regenerator and property developer from a volume house-builderand provides competitive advantage for the future. Berkeley remains on target to deliver the £2 2006 B share payment and the £12 intotal by January 2011 while also creating a strong, sustainable and meaningfulongoing business. The Group is well placed for 2006 and beyond, and we lookforward to the future with confidence and enthusiasm. Berkeley's aim is toremain at the forefront of the renaissance of our cities - pioneering theinnovations essential for creating new communities, while remaining true to ourvalues and heritage." END For further information please contact: The Berkeley Group Holdings plc Cardew Group A W Pidgley Tim RobertsonR C Perrins Sofia Rehman T: 01932 868555 T: 0207 930 0777 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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