Berkley Group Full Year Results Show Higher Home completions
June 18, 2014 10:08 am
Homebuilder, Berkeley Group (BKG.L) today announced full year results for year ending 30th April 2014.
Highlights of the results show strong home completions, an increase in the earnings per share of nearly 40% and a much larger net cash balance. The company has been upgraded to BUY from HOLD buy numis brokers with a new target price of 2491p (current trading around 2194p), though Berkeley Group shares fell in early trading this morning.
OPERATIONAL HIGHLIGHTS
· 3,742 new homes completed in the year, some 30% more than at the peak of the market in 2007
· Consistent delivery of around 10% of all new homes built in London over the last five years
· £353 million invested in nine new sites in the year, sufficient to build a further 2,500 new homes
· All of Berkeley’s sites which benefit from an implementable planning consent are in construction
Commenting on the results, Managing Director Rob Perrins said:
“Berkeley has built and sold 3,742 new homes this year at an average selling price of £423,000, driving a 40.4% increase in pre-tax profits to £380.0 million and a rise in pre-tax return on equity from 22.4% to 27.5%.
The Group remained ungeared throughout the year, with net cash rising from £44.7 million to £129.2 million after paying £195.2 million of dividends to shareholders and investing further in new land and construction. This investment and a favourable market have enabled us to build and sell over 15,000 new homes in London and the South of England over the last five years, during which period we have delivered some 10% of both the total private and affordable homes built in London.
Berkeley’s vision is to be a world class business generating long-term value by creating successful, sustainable places where people aspire to live. These results are due to a unique combination of an entrepreneurial approach to land buying, a track record of working in partnership with local authorities to create great places, strong financial discipline, autonomous management teams and above all a passion for proving how good new housing can be.
With cash due on forward sales now approaching £2.3 billion and estimated gross margin in its land holdings now in excess of £3 billion, the Board has visibility over its commitment to meet the remaining 180 pence of the first milestone through regular dividends. The land and planning now in place has extended this visibility to delivery of the second milestone payment of 433 pence by September 2018 and Berkeley has made substantial inroads into the planning requirement on the land required to cover the third milestone payment of a further 433 pence by September 2021.
Looking forwards, we continue to see opportunities to acquire land that meet our hurdle returns. This will typically be characterised by long term and complex development sites to which Berkeley can bring its expertise. The land already in our pipeline comprises a number of sites that match these criteria and the ongoing operational focus is to deliver this over the next five years. If this is achieved, it has the potential to enhance the existing gross margin in the land bank by some £1.5 billion and help build a sustainable business.
Berkeley has finished the year well, delivering a strong cash flow performance, growing its unrivalled land holdings through acquisition and optimisation, continuing to invest in inventory and securing additional forward sales. This gives the Board the confidence to continue to invest and add value whilst never underestimating the risks inherent in a cyclical market.
Over the remainder of the current plan, the Board aims to deliver the targeted dividends from earnings while maintaining the balance sheet at least at its current level and the value in its land holdings above £3 billion.”
Homebuilder, Berkeley Group (BKG.L) today announced full year results for year ending 30th April 2014.
Highlights of the results show strong home completions, an increase in the earnings per share of nearly 40% and a much larger net cash balance. The company has been upgraded to BUY from HOLD buy numis brokers with a new target price of 2491p (current trading around 2194p), though Berkeley Group shares fell in early trading this morning.
OPERATIONAL HIGHLIGHTS
· 3,742 new homes completed in the year, some 30% more than at the peak of the market in 2007
· Consistent delivery of around 10% of all new homes built in London over the last five years
· £353 million invested in nine new sites in the year, sufficient to build a further 2,500 new homes
· All of Berkeley’s sites which benefit from an implementable planning consent are in construction
Commenting on the results, Managing Director Rob Perrins said:
“Berkeley has built and sold 3,742 new homes this year at an average selling price of £423,000, driving a 40.4% increase in pre-tax profits to £380.0 million and a rise in pre-tax return on equity from 22.4% to 27.5%.
The Group remained ungeared throughout the year, with net cash rising from £44.7 million to £129.2 million after paying £195.2 million of dividends to shareholders and investing further in new land and construction. This investment and a favourable market have enabled us to build and sell over 15,000 new homes in London and the South of England over the last five years, during which period we have delivered some 10% of both the total private and affordable homes built in London.
Berkeley’s vision is to be a world class business generating long-term value by creating successful, sustainable places where people aspire to live. These results are due to a unique combination of an entrepreneurial approach to land buying, a track record of working in partnership with local authorities to create great places, strong financial discipline, autonomous management teams and above all a passion for proving how good new housing can be.
With cash due on forward sales now approaching £2.3 billion and estimated gross margin in its land holdings now in excess of £3 billion, the Board has visibility over its commitment to meet the remaining 180 pence of the first milestone through regular dividends. The land and planning now in place has extended this visibility to delivery of the second milestone payment of 433 pence by September 2018 and Berkeley has made substantial inroads into the planning requirement on the land required to cover the third milestone payment of a further 433 pence by September 2021.
Looking forwards, we continue to see opportunities to acquire land that meet our hurdle returns. This will typically be characterised by long term and complex development sites to which Berkeley can bring its expertise. The land already in our pipeline comprises a number of sites that match these criteria and the ongoing operational focus is to deliver this over the next five years. If this is achieved, it has the potential to enhance the existing gross margin in the land bank by some £1.5 billion and help build a sustainable business.
Berkeley has finished the year well, delivering a strong cash flow performance, growing its unrivalled land holdings through acquisition and optimisation, continuing to invest in inventory and securing additional forward sales. This gives the Board the confidence to continue to invest and add value whilst never underestimating the risks inherent in a cyclical market.
Over the remainder of the current plan, the Board aims to deliver the targeted dividends from earnings while maintaining the balance sheet at least at its current level and the value in its land holdings above £3 billion.”
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