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Berkeley activity holds up but profit down 17%

4 Dec 20 It looks like house-builder Berkeley Group has adjusted to Covid life rather successfully, with a thousand more people working on its sites today than it had before the pandemic.

Berkeley Group chief executive Rob Perrins
Berkeley Group chief executive Rob Perrins

Berkeley Group’s half-year results for the six months to 31 October 2020 show that revenue was only down 4% compared with the same period of 2019, at £895.9m (2019: £930.9).

Additional costs associated with the new operating procedures meant that profit before tax for the May to October period was down 17% to £230.8m (2019: £276.7m ).

This was from the sale of 1,104 homes (2019: 1,389) at an average selling price of £799,000 (2019: £644,000).

At the start of the financial year in May, in the midst of the first lockdown, Berkeley anticipated full year pre-tax profits of around £500m, split broadly one third in the first half and two thirds in the second half.  But it has bounced back more quickly than expected. “With our production recovering quickly, aided by our decision not to furlough any employees, we have delivered pre-tax profits of £230.8m and therefore now anticipate a more even distribution of profits over the year,” chief executive Rob Perrins said.

"Berkeley's performance over the last six months is characterised by four features,” he said.

“First, the resolve and expertise of our people and supply chain who have adapted their working practices to ensure they could continue serving our customers and meeting our commitments to all stakeholders safely and securely within the unprecedented constraints placed upon us all by Covid-19.  I would like to express my thanks and admiration to them all.

“Secondly, today's resilient results which are in line with Berkeley's guidance of achieving a 15% pre-tax return on equity and maintaining our £280 million annual cash return to shareholders across the cycle, are underpinned by Berkeley's uniquely long-term operating model.

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“Thirdly, we have continued to invest in the business; adding four new sites covering 2,800 homes to our land holdings that now includes 28 large, complex, long-term regeneration sites; and increasing our investment in build work-in-progress ahead of the growth in annual completions forecast for the next five years. At 11,000, we now have over 10% more people working on our construction sites than prior to the pandemic.

“Finally, we have developed a new ten year vision for the business to ensure Berkeley continues to deliver a positive and lasting contribution to society, the economy and natural world, alongside sustainable, risk-adjusted returns for our shareholders. This includes new science-based targets for climate change which ensure Berkeley is fully aligned to the international effort to limit global warming to 1.5°C above pre-industrial levels."

In the last six months Berkeley has launched four new developments: TwelveTrees Park in West Ham, Eden Grove in Staines, and joint ventures Highcroft in Wallingford and the Arches in Watford.  It has also launched new phases at White City, Royal Arsenal Riverside and Chelsea Creek. 

Four new sites have been acquired, representing more than 2,800 new homes subject to planning. Three are in London: at Borough Triangle in Southwark, a land parcel in Paddington next to its West End Gate development and in Sutton.  It has also conditionally acquired a site in Wallingford, Oxfordshire. 

Planning consents has been secured at Malt Street in Southwark for 1,350 homes and at Silk Park, Barnet for 1,300 new homes. 

With construction sites remaining open, build costs have been stable. Materials are generally on extended lead times when compared to those available at the start of 2020, although this has eased, Berkeley said.  “More generally the market is very competitive and we expect this to remain the case, particularly in London with a backdrop of falling supply, and therefore we anticipate build costs to be benign as we move into 2021,” Rob Perrins said.

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