Shares in the housebuilding sector continue to rise with Berkeley (BKG) taking the lead on the back of half-year results, rising 7% to £24.41. The London and the South of England-focused group posts a 19.2% rise in first-half pre-tax profit to £169.5 million, adding that it has reached its target of growing the land bank to over £3 billion earlier than originally anticipated.
Berkeley, which is a running Shares Play of the Week, insists that it remains on course to meet the first milestone payment of £568 million cash return to shareholders by September 2015 and to return £1.7 billion in cash by September 2021.
Earnings per share have risen by 22% to 100p while the housebuilder's interim dividend of 90p per share (payable in January 2014) is a welcome bonus for income investors who this time last year had to be content with 15p per share. A pre-tax return on equity of 25% remains a fillip for those looking for growth.
Berkeley has net cash of £78.9 million which compares favourably to April 2013 when cash stood at £44.7 million.
While the news from Berkeley has been largely upbeat, Dublin-based broker Davy does point out that while operating profit was well ahead of its estimates, it included a contribution from the 534 properties sold to M&G Investments in June. If you exclude this contribution, revenue was £715.6 million; slightly behind its estimate of £743.5 million.
As the bellwether of the housebuilding sector, Berkeley's landbank strategy and balance sheet continues to impress. While there are concerns about runaway house price inflation, particularly in the South East, it's worth bearing in mind that property prices are still returning from a very low base brought about by the 2007 recession suggesting this tide still has some way to rise.