Housebuilder's sales fell but average price increased 30%, boosting figures
Companies: Berkeley Group Holdings plc
On a very quiet Friday, the only announcement worth writing about this morning is the interim results released by Berkeley Group Holdings Plc, who reported revenues of over £1.4bn (+24%), pre-tax profits of £393m (+33%), and announced an 11% dividend boost.
Berkeley sold 2,076 homes, 15 short of its 2015 total, but with a far greater average selling price of £655k (2015: £506k), "reflecting the mix of properties sold in the year."
Despite delivering strong figures, management flagged that the market is down due to stamp duty and uncertainty following Brexit:
“excluding a hiatus around Brexit, reservations for the period remain 20% down on the same period last year. The market has begun to adjust to the increased stamp duty and general market uncertainty and Berkeley plans to launch more new product in the first half of 2017.
Pricing remains resilient and continues to be above business plan levels. In overall terms, we have seen prices move in line with the market.”
Management also announced changes in shareholder distributions, which don't seem to be negative, but are worth highlighting to investors:
“The current shareholder returns programme was established in 2011 as a framework through which Berkeley would return £13.00 per share to shareholders... (Read more)
The Board of Berkeley has now reviewed the mechanism for making the remaining £10.00 per share payments in light of its assessment that the current short-term macro volatility is preventing the long-term value of Berkeley being recognised by the market.
As a consequence, the Board is proposing to introduce flexibility such that the remaining £10.00 per share payments can be made through a combination of share buy-backs and dividends, as opposed to solely dividends. This recognises that, at certain price points, the Board is of the opinion that the Company is materially undervalued and share buy-backs will be in the best interests of all shareholders.”
It seems like an eminently sensible switch in dividend policy, allowing the Management to maintain distributions to shareholders but doing it in as nimble and value-adding way as possible.
Chairman Tony Pidgley CBE said today's results reflected decisions made by the company following the financial crisis to invest in land at the right time. He also said that strong forward sales, combined with the "resilient" current market conditions, has enabled the Board to outline a new five-year target of £3bn of pre-tax profit in the five years from 1 May 2016.
Mr Pidgley then went on to talk about the political instability that had been felt across the western world during the year:
"During a period of political upheaval around the world, which has affected the immediate economic outlook, Berkeley has focussed on its core business of regenerating run-down estates, transforming ex-industrial land, and creating successful places for people from all walks of life."
BKG's share price rose 4% in early trading.