The prospect of a £1bn windfall for shareholders in housebuilder Berkeley (BKG) got a rousing welcome, advancing the share price 5% to £54.44. That makes the stock the FTSE 100's top riser on Wednesday.

The company is nearly doubling the amount of capital it plans to return to investors over the next two years, with £500m coming in March 2020 and a further £500m in March 2021.

CLEAR STEER

The business is good at giving very explicit profit guidance and does that today, signalling it will deliver £3.3bn in pre-tax profit over the next six years, with the profit in any individual year ranging between £500m to £700m depending on the timing of delivery of new homes.

The company’s chairman Tony Pidgeley has a reputation for shrewdly calling the housing market and the business bought land cheaply in the wake of the financial crisis and subsequently made a packet by building and selling high end homes.

TACKLING CHANGE

Berkeley is currently in a transitional phase. While annual housing delivery is expected to go up 50% over the next six years, as the company begins construction at a number of locations, including some large regeneration sites, average selling prices are expected to fall.

But while profitability may have peaked in 2018, something which was well flagged by the company, the business is still sitting on a lot of cash, more than £1bn at the last count, enabling it to be very generous with payouts.

READ MORE ON BERKELEY HERE

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Issue Date: 22 Jan 2020