Berkeley Group has reported another bumper set of annual results following a jump in home purchases across London and the South East of England.
The FTSE 100 company saw profits climb by £59.7million to £482.4million in the year ending 30 April, as it continued to benefit from a UK property market underpinned by high demand, undersupply and low mortgage rates.
The Surrey-based firm noted that demand for homes in the capital city had been helped by the loosening of Covid-19 restrictions, the rebound in office-based working and the recent opening of the Elizabeth Line.
As a consequence, it managed to sell 42 per cent more homes than in the previous year and increased revenues by £145.8million, despite selling new properties at an average selling price of £603,000.
Strong results: Berkeley Group saw profits and revenue grow as it continued to benefit from a UK property market underpinned by high demand and severe undersupply
Such is the high price of new homes, though, that it offset the higher costs Berkeley incurred from building materials, labour and other supply chain issues.
The value of underlying sales reservations also leapt by a quarter to ‘slightly ahead’ of pre-pandemic volumes, while forward sales at the end of April were up by around £500million to £2.17billion.
Berkeley claims the fundamentals of its housing market ‘remain strong,’ even against a backdrop of surging property prices and recent interest rate hikes, due to an undersupply of housing in London and South East England.
It pointed to UK Government data showing that only 39,000 homes had been delivered in the capital over the past three years, compared to an annual housing need of 94,000.
New railway: Berkeley Group noted that demand for its new homes in the capital city had been helped by the recent opening of the Elizabeth Line
Berkeley attributed the majority of the growth in forward sales to its acquisition of National Grid’s 50 per cent stake in the St William Homes joint venture in March.
The purchase meant the group took ownership of 24 sites containing over 20,000 future homes, one of which was a new development on Prince of Wales Drive in Battersea.
Alongside this, the business added four new sites to its land holdings, including a Peckham shopping centre, the former Ram Brewery site in Wandsworth, and land in Milton Keynes, where it has won planning permission to build 4,600 new homes and 403,000 square metres of logistics space.
Chief executive Rob Perrins said: ‘These strong results reflect the stability of our uniquely long-term operating model throughout an exceptionally volatile period.
‘They are underpinned by our portfolio of major brownfield regeneration projects, where patient and sustained investment is transforming disused land into distinct and highly sustainable mixed-use neighbourhoods within the UK’s most undersupplied markets.’
The company told investors that it forecasts pre-tax earnings of around £600million this year followed by £625million in the two years afterwards. In addition, they said £282million is intended to be returned to shareholders for the next three years.
Yet despite posting exceptionally strong results, Berkeley Group shares plunged 5.1 per cent to £35.97 in morning trading, meaning their value has fallen by over a quarter so far this year.
Mark Crouch, an analyst at investment platform eToro, comments: ‘Annual house price growth is tipped to halve by the end of the year as a toxic combination of runaway inflation and rising interest rates hit housing demand.
‘Berkeley’s numbers are solid but its share price, which is down more than 23 per cent since the start of the year, suggests that investors are worried about market conditions.
‘While that is clearly a concern, Berkeley has a strong balance sheet and so we expect it to be able to weather any slowdown in the wider housing market.’