Berkeley gains as it stands out from rivals in confidence on future profit and dividends

0 28

Berkeley Group Holdings PLC (LON:BKG) has maintained its profit and dividend guidance for the current year after noting that trading has proved “resilient” and construction rates returning to 90% of normal since its new financial year began in May. 

The FTSE 100-listed housebuilder said pricing has been higher than expected, as shown in recent house price surveys, and the value of underlying sales reservations for the first four months of the year had been “around 20% below the annualised run rate for last year”.

READ: Three FTSE 100 builders’ wrists slapped by watchdog over unfair leasehold terms

Berkeley, which is focused on London, south-east England and Birmingham, said this was supportive of forward sales remaining above £1.8bn, as they were at the last year-end.

Full-year pre-tax profit guidance of £500mln was maintained, with the board still committed to returning £280mln per year to shareholders.

The group, which has net cash in excess of £1bn and unlike some peers including Barratt Developments PLC (LON:BDEV), decided not to put staff on the government furlough scheme, said last month that it will pay a dividend of 107p per share on September 11, 2020, with another £140.1mln having already been spent on share buy-backs.  

A further £140.1mln will be returned by the end of March 2021 through a combination of dividends and share buy-backs, it added, with the amount to be paid as a dividend to be announced before the end of February.

Some of the cash will also continue to be invested in bringing forward the portfolio of over 25 large regeneration developments, the company noted, having also said it plans to buy new land should opportunities arise.

Shares in the company rose 1% to 4,703p on Friday morning, while some sector rivals were wobbling slightly after the Competition & Markets Authority said it had uncovered mis-selling in the new house leasehold market, with Berkeley not mentioned.  

Broker Peel Hunt noted that Berkeley had been the second-best performer among the housebuilders in 2020, with a decline of only 4%, just behind Persimmon with -2% and ahead of a sector down 22%.

“We do not expect London to have come out of lockdown well relative to the rest of the country, so we think this outperformance is down to the increasing understanding of how much of a step-up in output the group will deliver in the next few years.

“The group has put in place some great long-term schemes that will form a major backbone for the business for the next 5-10 years. While we see cheaper housebuilders to invest in for the short term, investors looking for a long-term housebuilder can do a lot worse than start with Berkeley.”

Analyst William Ryder at Hargreaves Lansdown said the update on pricing was “particularly reassuring given Berkeley’s higher end London properties”.

He said the big question is what happens going forward.

“While other builders are being more cautious Berkeley is giving full year projections for both profits and dividends.

“Berkeley offers something a bit different to the other housebuilders, which is reflected in management’s confidence and the group’s valuation. Assuming we can avoid further disruption or a sustained recession the group looks well placed going forwards.”

    –Adds share price and broker comment–

Leave A Reply

Your email address will not be published.