High-end housebuilder Berkeley (BKG) fell 6.6% to £42.71 as it sounded a slightly downbeat note in a year-end trading update and pointed to a drop in the value of reservations on new properties in the current year as it phased developments to coincide with a reopening of the economy.
Berkeley said it remained on track to deliver annual profit similar to last year's, in line with guidance, as market fundamentals remained 'strong' supported by low interest rates and undersupply of homes.
The company expects profit for the 12 months to 26 February to be roughly in line with the previous year's £504 million and forward sales are anticipated to be above £1.7 billion at the year-end.
DISAPPOINTING GUIDANCE ON RESERVATIONS
The estimated future gross margin on the land bank is expected to be in excess of last year's £6.4 billion, with net cash around £954 million, the level reported at the half year.
This underpins the company’s commitment to return £280 million to shareholders each year. AJ Bell investment director Russ Mould commented: ‘While Berkeley still has strong levels of enquiry it is phasing developments to coincide with a reopening of the economy.
‘This may look very clever in time if it sees Berkeley deliver a smoother flow of profit and cash flow than its peers, many of which seem to be operating at 100 miles an hour.
‘And given Berkeley has previously earned a reputation for calling the housing market successfully, albeit under its late chairman Tony Pidgley, this might provoke some concern among its rivals.
‘On the flipside Berkeley could miss out on some of the demand created by the current stamp duty holiday which is due to end in September - even if the elevated average selling price on its high-end homes makes this a less relevant consideration than for some other housebuilders.’
