- Company sticking with 2023 guidance
- Plan to return £141.4 million to shareholders by September
- Sales flagged as ‘resilient’ despite 25% drop
Housebuilder Berkeley (BKG) was only a smidge lower on Friday morning on a difficult day for the markets as it stuck with its 2023 guidance despite a clear softening in demand and property prices.
Berkeley, which operates at the premium end of the market with a focus on London and the South East, fell just 0.3% to £40.24, though as the chart shows the shares have roughly gone nowhere in the last five years as the impact of the pandemic and higher mortgage rates have rocked the wider market.
The company described a 25% drop in sales from 1 November to 28 February compared with 1 May to 30 September as ‘resilient’ and it certainly was a better showing than some of its rivals.
Berkeley stuck to its target of £600 million in pre-tax profit for the 2023 financial year ending in April and said at least £1.05 billion in aggregate would follow in the next two years. Pre-tax profit for the 12 months to 30 April 2022 was £551.5 million.
WHAT IS IT RETURNING TO SHAREHOLDERS?
Berkeley said it aims for the next £141.4 million shareholder return to be doled out through a combination of dividends and share buybacks by September and it expects net cash at the end of the current financial year to come to £375 million, up from £269 million in 2022.
The company added it was focusing on ‘cost control and maintaining operating margins, with build cost inflation showing early signs of moderating’ and added it would adopt ‘a cautious approach to releasing new phases to the market’.
AJ Bell investment director Russ Mould commented: Berkeley is a high-quality operator in a sector facing a tough time and it demonstrated such credentials with a trading update which reaffirmed 2023 guidance.
‘For now, the company is in a retrenchment phase, looking to maintain margins, control costs and take a cautious approach to releasing new phases on its developments.
‘Signs of moderating build-cost inflation will help the company to protect profitability and it is worth watching Berkeley closely for signs of a more expansionist approach given its historic track record of calling shifts in the property market under its late boss Tony Pidgley.’
DISCLAIMER: AJ Bell owns Shares magazine. The author (Tom Sieber) and article editor (James Crux) own shares in AJ Bell.
