Berkeley (BKG) attempts to build investors’ hopes with shareholder returns

The housebuilder also reassured on full-year guidance despite profit slump

Article updated: 6 December 2019 11:00am Author: Ian Forrest

  • The drop in the number of houses sold in the first half of the year, at a lower average price, had contributed to a 31% decline in pre-tax profits in the period
  • Cash levels increased and Berkeley reiterated its commitment to returning £280m to shareholders in the current financial year, through a mixture of dividends and buybacks
  • Shares responded cautiously to today’s news with a slight rise in early trading
  • Recommendation: we continue to recommend the stock as a ‘Hold’

Berkeley reported that the drop in the number of houses sold in the first half of the year was expected and reflected the completion of a number of developments in central London. The reassuring news for investors was that the company’s profit forecasts have not changed and it still expects to achieve £500-700m each year until 2025.

The market gave the news a cautious welcome with the shares up slightly in early trading. That comes on top of a strong performance over the past six months when the shares have comfortably outperformed the market. That could well be due to the prospect of a "No-Deal" Brexit retreating as that scenario would be more damaging for Berkeley than for other housebuilders given its exposure in London and the South East. Despite the uncertain political and economic backdrop it’s good to see Berkeley pushing ahead with significant new developments totalling 7,000 new homes.

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Ian Forrest

Investment Research Analyst

Ian’s background in investments, financial journalism and research has seen him advising private investors on equities and helping to manage portfolios. His qualifications include the Certificate in Financial Planning and the Chartered Institute for Securities & Investment’s Investment Advice Diploma.

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