REG - Berkeley Group Hldgs - Half-year Report
09/12/2022 07:00
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RNS Number : 1283J Berkeley Group Holdings (The) PLC 09 December 2022
PRESS
RELEASE
9 DECEMBER 2022
INTERIM RESULTS ANNOUNCEMENT
Robust results, strong position and well-placed with good order book
visibility
delivering homes on brownfield land with highest ever investment in
socio-economic benefits
ready and able to invest in new opportunities if conditions for growth present
themselves
The Berkeley Group Holdings plc ("Berkeley") today announces its unaudited
interim results for the six months ended 31 October 2022.
Rob Perrins, Chief Executive, said:
"These robust results reflect the strength of Berkeley's uniquely long-term
operating model and the enduring appeal of high-quality homes and places
within London and the South-East - a region which is the country's most
under-supplied market - in spite of the uncertain and challenging operating
environment.
We ended the period in a strong position having increased net cash from £269
million to £343 million and cash due on forward sales from £2.2 billion to
£2.3 billion, while maintaining the estimated gross profit in our unrivalled
land holdings above £8 billion. Our guidance for the full year is
unchanged, as is our shareholder returns policy.
Sales for the six months have been ahead of the same period last year,
demonstrating the resilience of Berkeley's core markets. This includes five
weeks of trading since the end of September in which the value of underlying
sales has been around 25% lower than the previous five months. Pricing has
remained firm throughout.
Our delivery in the period has generated a fantastic mix of social, economic
and environmental benefits. £374 million of subsidies have been provided to
deliver affordable housing and committed to wider community and infrastructure
benefits, which is over 100% of the post-tax profits. This is the highest ever
level and supports our conviction that reviving brownfield land within our
towns and cities is the most sustainable way to tackle the housing crisis,
reenergise the economy and strengthen local communities.
These outcomes have been achieved against an increasingly challenging
operating and regulatory environment, which has been brought into even sharper
focus by the deteriorating economic outlook as the world comes to terms with
the cost of the pandemic, the war in Ukraine and other global events.
While Berkeley is ready and able to invest in new opportunities to increase
delivery, we are positioning the business to reflect today's environment until
the conditions for growth are present to support responsible, sustainable
investment. Future investment decisions will need to take into account the
increase in corporation tax of 6%, the 4% RPDT and the proposed additional
building safety levy designed to raise a further £3 billion from the
industry.
We are experienced at operating in times like these and will focus on
generating value from our existing assets with limited new investment,
matching supply to demand and cash generation.
London is the most beautiful and dynamic city in the world but is not
currently attracting the necessary investment from private or public sources,
including for infrastructure and affordable housing grant, to unlock more
brownfield sites and address the systemic under-supply of new homes.
Berkeley will continue to work closely with local partners to ensure each site
has an appropriate and deliverable solution and we will continue to work
constructively with all levels of Government to address the barriers to
complex brownfield regeneration and enable housing delivery on the most
sustainable land.
I would like to take this opportunity to thank all of our people for their
tremendous efforts and commitment."
Summary of Earnings, Shareholder Returns and Financial Position
HY to HY to Change
Earnings 31-Oct-22 31-Oct-21 per cent
Profit before tax £284.8m £290.7m -2.0%
Earnings per share - basic 200.4p 201.7p -0.6%
Pre-tax return on equity 18.0% 19.1% -1.1%
HY to HY to
Shareholder Returns 31-Oct-22 31-Oct-21
Share buy-backs undertaken £110.5m £34.7m
Dividends paid / B-Share payment £23.3m £451.5m
Shareholder returns £133.8m £486.2m
Share buy-backs - volume 2.9m 0.8m
As at As at Change
Financial Position 31-Oct-22 30-Apr-22
Net cash £343m £269m +£74m
Net asset value per share £29.56 £28.18 +£1.38
Cash due on forward sales ((1)) £2,330m £2,171m +£159m
Land Holdings - estimated future gross profit £8,158m £8,258m -£100m
((1)) Cash due on private exchanged forward sales completing within the next
three years
See Note 8 of the condensed consolidated financial information for a
reconciliation of alternative performance measures
· The value of underlying sales secured in the first half was 2%
ahead of the equivalent values secured in the financial year to 30 April 2022
on a like-for-like basis, with sales since the end of September around 25%
lower than they were for the first five months of the financial year.
Pricing has remained firm throughout.
· On target to deliver pre-tax earnings of approximately £600
million for the year ending 30 April 2023.
· Matching supply to demand and, based upon current trading, now
targeting pre-tax earnings of at least £1.05 billion for the following two
years (previously £1.25 billion), which is likely to be slightly weighted to
the first of these, in line with market consensus and the objective of
delivering a sustainable pre-tax ROE of 15% through the cycle.
· Commitment to £283 million (£2.60 per share) per annum ongoing
Shareholder Returns up to 30 September 2025 re-affirmed, with next £141
million due for the six months ending 31 March 2023, of which £56 million has
already been returned via share buy-backs.
· Maintaining target to be working capital neutral over this and
the next financial year.
· 26 of 32 long-term complex regeneration developments in
production.
DELIVERING FOR ALL STAKEHOLDERS
· 2,080 homes delivered, plus 251 in joint ventures (2021: 1,828, plus
395) - Berkeley is delivering some 10% of London's new private and affordable
homes - supporting approximately 27,000 UK jobs per annum directly and
indirectly throughout its supply chain over the last five years.
· Approximately £374 million of subsidies provided to deliver
affordable housing and committed to wider community and infrastructure
benefits in the period.
· Industry leading Net Promoter Score (+73.9) and customer
satisfaction ratings maintained.
· Supporting nature recovery with 49 developments now committed to
biodiversity net gain, which together will create more than 500 acres of new
or measurably improved natural habitats.
· Rated "A-" by CDP for climate action and transparency and AAA
rated in the MSCI global ESG index.
· A further 77 apprentices, graduates and trainees joined in the
period, with 9% of employees in 'earn and learn' positions.
A pre-recorded presentation by the Directors of Berkeley on the interim
results will be made available on the Company's website at 11:00 today -
https://www.berkeleygroup.co.uk/about-us/investor-information/results-and-announcements
(https://www.berkeleygroup.co.uk/about-us/investor-information/results-and-announcements)
.
For further information please contact:
The Berkeley Group Holdings
plc
Novella Communications
R J Stearn (01932
868555)
Tim Robertson (020 3151 7008)
CHIEF EXECUTIVE'S REVIEW
Purpose, Long-Term Strategy and Capital Allocation
Berkeley's purpose is to build quality homes, strengthen communities and
improve lives, using its sustained commercial success to make valuable and
enduring contributions to society, the economy and natural world.
Berkeley is the only large UK homebuilder to align with Government on
prioritising brownfield land, as we progress 32 of the country's most
challenging regeneration projects, 26 of which are in delivery. Each of these
neighbourhoods is uniquely designed in partnership with local councils and
communities and includes valuable public amenities alongside tenure-blind
private and affordable homes.
It has been hugely exciting to see more of these complex sites transform into
popular, inclusive and low carbon communities, including White City Living, a
former warehouse complex, where we have now delivered 840 private and
affordable homes, a hugely popular community park, pedestrian routes to
Westfield Shopping Centre and an Amazon Fresh convenience store.
At Grand Union we recently joined local residents and councillors to launch a
beautiful canal-side public plaza, featuring a restored narrowboat, life-size
sculptures inspired by pupils from nearby Alperton Community School and a
5,000 sq ft Community Hub. This regeneration partnership with the London
Borough of Brent is transforming the previously derelict Northfield Industrial
Estate.
Alongside this, Berkeley's financial strategy reflects the cyclical nature and
complexity of brownfield development, protecting and enhancing long-term value
for shareholders and using its development expertise to maximise the returns
from its assets, creating the right development solution for each site. Our
capital allocation policy is therefore clear and remains unchanged: first,
ensure financial strength is appropriate to the prevailing operating
environment; second, invest in the business (land and work-in-progress) at the
right time; and third, make returns to shareholders through dividends and
share buy-backs.
This disciplined approach allows Berkeley to deliver sustainable,
risk-adjusted returns over the cycle, targeting a sustained pre-tax return on
equity of 15%.
Current position
From the strong trading period that followed the Global Financial Crisis,
Berkeley invested in accumulating its unrivalled portfolio of complex
large-scale brownfield regeneration sites in and around London, which will
sustain the Group's delivery profile for the next ten years. As investment
in the upfront development costs on a number of these sites completes over
this and the next financial year, Berkeley's focus will increasingly be on
cash generation. This will provide the optionality to invest further in the
business or reassess the level of returns to shareholders, depending upon the
characteristics of the prevailing operating environment. Berkeley is targeting
being working capital neutral over this period and will only invest in new
sites very selectively or in partnership with landowners; such as retailers,
utilities, local authorities and housing associations.
In the near-term, Berkeley will focus on matching production on existing sites
to demand and delivering its forward sales over the period to 30 April 2025.
Beyond this, the current operating environment, characterised by record levels
of planning tariff within an increasingly complex and slow planning system, at
a time of high build costs, increased regulation and higher corporation tax,
alongside the RPDT and proposed new Building Safety Levy, will inevitably
continue to see a reduction in supply of new homes in London and the South
East. Berkeley's delivery of new homes will therefore result in a reduction in
its land holdings.
While sales prices have been at levels to largely offset increasing costs in
recent years, margins may be placed under pressure if these headwinds do not
abate sufficiently and as households and businesses come to terms with
heightened inflation, increased interest rates and the more protracted
recession articulated by the Bank of England in its most recent forecasts.
Shareholder Returns
Berkeley has in place a long-term plan for shareholder returns, based upon an
ongoing annual return of £283 million planned through to September 2025,
which can be made through either dividends or share buy-backs.
In September, Berkeley paid a dividend of £23 million (21.25 pence per share)
which completed the return of £141 million that was due in respect of the six
months ended 30 September 2022, with £118 million having been returned via
share buy-backs, of which £64 million was returned in the previous financial
year and £54 million during this half.
Berkeley has committed to the next ongoing scheduled shareholder return, which
is the £141 million in respect of the six months ending 31 March 2023,
against which £56 million has been returned via share buy-backs in the first
half of the year.
Therefore, the total amount returned via share buy-backs in this period is
£110 million across 2.9 million shares, at an average price of £37.61 per
share.
The ongoing annual return of £283 million currently equates to £2.60 per
share; a 30% increase on the initial £2.00 per share initiated in 2016
following share buy-backs undertaken since that date and the share
consolidation in the previous financial year.
Summary of Performance
Berkeley has delivered pre-tax profit of £284.8 million for the six-month
period:
Six months ended 31 October 2022 2021 Change
£'m £'m £'m %
Revenue 1,200.7 1,220.7 -20.0 -1.6%
Gross profit 323.8 346.5 -22.7 -6.6%
Operating expenses (89.9) (75.5) -14.4 +19.1%
Operating profit 233.9 271.0 -37.1 -13.7%
Net finance costs (10.6) (5.0) -5.6
Share of joint ventures 61.5 24.7 +36.8
Profit before tax 284.8 290.7 -5.9 -2.0%
Pre-tax return on equity 18.0% 19.1% -1.1%
Earnings per share - basic 200.4p 201.7p -1.3p -0.6%
Shareholder Returns
Dividend paid / B-Share payment 23.3 451.5 -428.2
Share buy-backs 110.5 34.7 +75.8
Shareholder return in the period 133.8 486.2 -352.4
As a result of its forward sales at the start of the financial year and sales
rates which have been ahead of last year, Berkeley anticipates delivering full
year profits in line with its previous guidance of approximately £600
million.
Berkeley expects its pre-tax earnings for the following two years to be at
least £1.05 billion (previously approximately £1.25 billion). This level
of profitability is in line with Berkeley's objective of generating a
sustainable 15% pre-tax ROE through the cycle, whilst operating margins are
expected to be at normal historical levels.
Housing Market and Operating Environment
Sales
For Berkeley, the value of underlying sales reservations for the current six
month period to 31 October 2022 is 2% ahead of the levels secured throughout
2021/22 on a like-for-like basis. As noted in June, sales in this
comparative period were back to pre-pandemic levels.
Since the end of September, Berkeley's sales have been 25% lower than levels
experienced for the first five months of the financial year. This is a
resilient performance in the context of the current market volatility and
reflects the strength and depth of demand in London.
Pricing has remained above business plan levels throughout this period and
into November, with cancellation rates rising from early-teens to around 20%
in the last couple of months. Berkeley's sales continue to be split broadly
evenly between owner-occupiers and investors.
In line with the strength of the London market during the first half, the
Group's cash due on forward sales stands at £2.33 billion as at 31 October
2022, up 7% on the £2.17 billion held at the recent year-end. This
represents the cash due on exchanged private sales contracts which will be
collected over the next three financial years and excludes secured sales in St
Edward and forward sales to housing associations.
The latest quarterly DLUHC data shows new starts in London for the 12 months
to June 2022 of 21,500 (including private, PRS and affordable homes). This
remains substantially below both the current London Plan target of 52,000 per
annum and the Government's identified local housing need of 94,000 per annum.
Land and planning
Berkeley has not added any new sites to its land holdings in this period,
whilst one long-term site contracted on a conditional basis in Motspur Park
has been added to the long-term pipeline.
On the planning front, Berkeley has secured one new consent in the period; at
St William's site in Worthing, Sussex for around 190 homes. We have obtained
numerous revisions to existing consents in the period as we continue to
progress our sites; most notably at The Green Quarter (Ealing), White City,
Hartland Village (Fleet), Hareshill (Crookham) and The Eight Gardens
(Watford).
The Levelling Up and Regeneration Bill has continued to evolve as it
progresses through Parliament, with a number of significant amendments tabled
in recent weeks. We support the Government's key objectives for reform, which
are to further encourage a brownfield first approach, improve the quality of
new homes and the new places created, and to better engage communities in the
plans made for their area. This does, however, need to be balanced with the
societal need for more homes and wider benefits they bring. Consequently, we
are concerned that any weakening of the presumption in favour of sustainable
development and the status of five year land supply targets will reduce the
pace of delivery of new homes. This will create uncertainty, less
predictability of outcome and less stability, which will lead to lower
investment going forward.
As a brownfield focused developer we welcome the Government's recent
announcement of a review into what further measures would prioritise the use
of brownfield land. We will continue to make the case for an efficient,
delivery focused, planning and regulatory system that is able to meet the
needs of local people through bespoke design led negotiations on strategic
development sites, for which we believe S106 agreements remain an essential
tool.
Similarly, we have consistently argued that design codes make sense for new
additions to existing neighbourhoods, but that where a new neighbourhood is
being created it is more appropriate to engage in a bespoke, design led,
approach. This will better engage the local community than an abstract
conversation, it will maximise the benefits of a site, and ensure new
development is built to an appropriate density.
Inevitably during a period of transition there is a pause as stakeholders seek
to understand the new system. We therefore hope the reform agenda has now
reached a settled position that is able to command broad support in order to
create a settled planning environment as soon as possible, providing
confidence for all stakeholders.
Construction
Material cost inflation has begun to reduce, but this varies considerably by
product, with those which are energy-intensive in their manufacture or in high
demand remaining at elevated levels. Labour cost inflation has been benign
relative to materials inflation and, despite the ongoing wider inflationary
environment for consumers, we do not expect labour costs to substantially
increase from this point given the softening outlook for the construction
sector.
Overall, despite the fact that high increases in some materials will continue,
we expect build cost inflation to start to moderate during 2023 from the
current elevated levels which have been between up to 10% across our portfolio
on a blended basis for some time.
Berkeley Modular continues to produce the first modules at its modular factory
in Northfleet, which will be delivered to Kidbrooke Village during the New
Year and is working with the numerous statutory bodies to achieve the various
regulatory approvals required for efficient future delivery.
Fire Safety
Berkeley has been very supportive of Government in its determination both to
ensure buildings are fire-safe for people to live in and mortgageable so they
can move home and re-mortgage their properties when they wish. Berkeley's
focus in this area has been on ensuring its buildings achieve the required EWS
1 form certification for mortgage purposes and it has obtained this on 99% of
its relevant freehold buildings.
Earlier in the year, Berkeley welcomed the withdrawal of the Consolidated
Advice Note, which had created much uncertainty in this process, and its
replacement by PAS9980, a proportionate risk-based approach that has the
support of the wider industry. Based upon this approach and assurances from
Government about its fair and equitable implementation, Berkeley signed the
Developer Pledge. The Pledge commits signatories to take responsibility for
remediating life-critical fire safety issues, based upon the PAS 9980
assessment, on buildings it developed over 30 years which Berkeley is fully
committed to and progressing. Berkeley is carrying out PAS9980 assessments
on all relevant buildings and will undertake any works necessary to address
life-critical fire safety issues.
The Pledge also commits signatories to assume responsibility for remediating
buildings accepted by Government into the Building Safety Fund and to meet
historic funding commitments Government has made on certain of these
buildings. It is Berkeley's preference to take full responsibility for all its
buildings and complete any required works ourselves as determined by a PAS9980
assessment as this will speed up the overall process of remediation. There
are a number of buildings that Berkeley has been asked to fund where historic
funding commitments have been made for works that are not life-critical fire
safety issues and we are working through these with the relevant parties.
We are in detailed discussions with DLUHC in respect of the long-form contract
that sits alongside the Pledge. It is in the interests of all stakeholders,
including leaseholders, local and national government, banks and developers
that the long form contract follows the principles of the Pledge and has both
a clear standard against which buildings can be assessed for life-critical
fire safety issues, and an independent dispute resolution process.
Government has undertaken to ensure that all developers and house-builders are
treated equally and that all parties involved in the development process are
held to account and pay their fair share. Berkeley believes this is fair and
equitable and is fully supportive of this approach. With the Developer
Pledge and 4% Residential Property Developer Tax ('RPDT') Berkeley believes
that UK house-builders have played a very full part in resolving this issue
and further levies on the industry would be unjust and constrain delivery and
innovation. We are therefore concerned to see recently that Government is
continuing with its plans to introduce an additional Building Safety Levy with
the target of raising a further £3 billion from the industry, as it will
further reduce much needed investment in brownfield regeneration.
Looking forward, Berkeley is ensuring its procedures are compliant with new
legislation and is supportive of the Building Safety Act which, together with
the actions taken to date, should restore trust and confidence to the housing
market, enabling it to operate efficiently, effectively and be fair for all.
Outlook
Berkeley ends the period in a robust position with good visibility of
near-term earnings underpinned by £2.3 billion of cash due on secured private
sales. We have unrivalled land holdings in the most fantastic city in the
world that suffers from a systemic under-supply of new homes, providing
resilience to the sales market.
In these uncertain times, Berkeley has a very clear strategy; realising its
forward sales, matching supply to demand, adding value to its existing land
holdings and pipeline sites, protecting operating margins and focusing on cash
generation ahead of the income statement.
We will also continue to serve our customers and the communities in which we
work, delivering new neighbourhoods on brownfield land that stitch these
neglected parts of our cities back into the local fabric, bringing new
amenities and using land in the most efficient and sustainable way.
The delivery of new private and affordable homes is a force for good,
generating better health outcomes, new jobs and skills, economic growth and
social mobility which benefits the whole of society. Its importance needs to
be fully recognised.
Rob Perrins
Chief Executive
TRADING AND FINANCIAL REVIEW
Trading performance
Revenue of £1,200.7 million in the period (2021: £1,220.7 million) arose
primarily from the sale of new homes in London and the South East. This
included £1,185.8 million of residential revenue (2021: £1,199.7 million)
and £14.9 million of commercial revenue (2021: £21.0 million).
2,080 new homes (2021: 1,828) were sold across London and the South East at an
average selling price of £560,000 (2021: £647,000) reflecting the mix of
properties sold in the period.
The gross margin percentage is 27.0% (2021: 28.4%), reflecting the mix of
developments. Overheads of £89.9 million (2021: £75.5 million) include St
William overhead following the acquisition in March 2022. The operating margin
has decreased to 19.5% (2021: 22.2%), moving towards the historic range.
Berkeley's share of the results of joint ventures is a profit of £61.5
million (2021: £24.7 million), with St Edward's profits arising predominately
from completions at Royal Warwick Square and Milbank.
The Group has remained cash positive on a net basis throughout the period. Net
finance costs were
£10.6 million for the period (2021: £5.0 million) due to facility fees,
interest on borrowings and imputed interest on land creditors, which continues
to outweigh interest income on cash deposits.
The taxation charge for the period is £63.1 million (2021: £50.9 million)
which yields an effective tax rate of 22.2% (2021: 17.5%) following the
introduction of the additional 4% residential property developer tax (RPDT) in
April 2022.
Pre-tax return on equity for the period is 18.0%, compared to 19.1% for the
comparative period. Basic earnings per share have decreased marginally to
200.4 pence per share (2021: 201.7 pence per share), which takes account of
the buy-back of 2.9 million shares at a cost of £110.5 million under the
Shareholder Returns Programme.
Financial Position
The Group's net assets increased over the six-month period by £73.5 million
to £3,209.6 million
(30 April 2022: £3,136.1 million):
Summarised balance sheet as at 31-Oct-22 30-Apr-22 Change
£'m £'m £'m
Non-current assets 363.2 374.6 -11.4
Inventories 5,298.2 5,134.0 +164.2
Debtors 82.8 150.2 -67.4
Creditors (2,877.2) (2,791.6) -85.6
Capital employed 2,867.0 2,867.2 -0.2
Net cash 342.6 268.9 +73.7
Net assets 3,209.6 3,136.1 +73.5
Shares, net of treasury and EBT 108.6m 111.3m -2.7m
Net asset value per share 2,956p 2,818p +138p
Inventories
Inventories of £5,298.2 million include £919.7 million of land not under
development (30 April 2022: £738.1 million), £4,259.6 million of work in
progress (30 April 2022: £4,255.1 million) and £118.9 million of completed
stock (30 April 2022: £140.8 million).
The increase in land not under development in the period arises from the
completion during May and June of a further 11 sites into St William as part
of the transaction in March 2022, which are represented by land creditors.
There is one further St William site which will complete in 2025. No sites
have been moved into production during the period.
Creditors
Total creditors of £2,877.2 million include £939.2 million of on-account
receipts from customers (30 April 2022: £931.4 million) and land creditors of
£929.1 million (30 April 2022: £800.7 million), with the latter's increase
represented by the completion of the St William sites noted above. Of the
total £929.1 million land creditor balance, £69.8 million is short-term and
£859.3 million is spread over the following nine years.
Creditors also include provisions of £175.3 million (30 April 2022: £161.0
million) which represents post-completion development obligations and other
provisions.
Net cash
The Group ended the period with net cash of £342.6 million (30 April 2022:
£268.9 million), an increase of £73.7 million:
Abridged Cash Flow for the period ended 31-Oct-22
£'m
Profit before taxation 284.8
Taxation paid (67.3)
Net investment in working capital (13.7)
Net distribution from joint ventures 6.2
Other movements (2.5)
Shareholder returns (133.8)
Decrease in net cash 73.7
Opening net cash 268.9
Closing net cash 342.6
The net cash of £342.6 million consists of gross cash holdings of £1,002.6
million, net of £660 million of long-term borrowings.
Net assets and NAVPS
Net assets increased over the six-month period by £73.5 million, or 2.3%, to
£3,209.6 million
(2022: £3,136.1 million) primarily due to the profit after tax for the period
of £221.7 million outweighing the shareholder returns of £133.8 million
(comprising £110.5 million share buy backs and £23.3 million dividends) and
other movements in reserves of £14.4 million.
The shares in issue, net of treasury and EBT shares, closed at 108.6 million
compared to 111.3 million at the start of the period. The net reduction of
2.7 million shares comprises two movements:
· The 2.9 million share buy-backs undertaken during the
period for £110.5 million (£37.61 per share);
· The issue of 0.2 million shares under the 2011 LTIP.
Consequently, the net asset value per share is 2,956 pence, up 4.9% from the
2,818 pence at 30 April 2022.
Funding
The Group's borrowing capacity is unchanged from the recent year-end at
£1,200 million, comprising:
· £400 million unsecured 10-year Green Bonds which mature in
August 2031 at a fixed coupon of 2.5% per annum;
· £800 million banking facilities, comprising a £260 million
Green Term loan and a £540 million undrawn revolving credit facility ('RCF').
These facilities are in place for a period of five years to February 2027,
with two one-year extension options available.
Berkeley has allocated the proceeds of the Green Bonds and Green Term Loan to
its ongoing development activities in accordance with its Green Bond Framework
(available on its website).
With total borrowings of £660 million, the Group's gross cash holdings of
around £1.0 billion are placed on deposit with its relationship banks.
Joint Ventures
Included within non-current assets are investments in joint ventures accounted
for using the equity method which are at £184.2 million at 31 October 2022
(30 April 2022: 190.4 million). The net £6.2 million reduction in the period
arises from three movements:
· Berkeley's share of profits earned in St Edward of £61.5
million;
· Berkley's share of cash distribution from St Edward of £74.9
million;
· Berkeley's share of cash contributions to site specific joint
ventures of £7.2 million.
In St Edward, 251 homes were completed in the period at an average selling
price of £1,036,000 (2021: 109 homes at £889,000). The completions
occurred at Royal Warwick Square and Millbank in London, Hartland Village in
Fleet, Green Park Village in Reading and Highcroft in Wallingford.
In total, 5,156 plots (30 April 2022: 5,317 plots) in Berkeley's land holdings
relate to seven St Edward developments, three in London (Westminster,
Kensington and Brentford) and four outside the Capital (Reading, Fleet,
Wallingford and Guildford). The sites in Brentford and Guildford are
contracted on a conditional basis subject to planning.
Land Holdings and Pipeline
Berkeley's land holdings comprise 64,121 plots at 31 October 2022 (30 April
2022: 66,163 plots), including the St Edward joint venture. Of these land
holdings, 60,956 plots (30 April 2022: 62,998) are on 81 sites that are owned
and included on the balance sheet of the Group or its joint venture, or is
unconditionally contracted in the case of one St William site. The remaining
3,165 plots (30 April 2022: 3,165) are on three contracted sites which either
do not yet have a planning consent or have another conditional element such as
vacant possession.
The plots in the land holdings at 31 October 2022 have an estimated future
gross profit of £8.16 billion (30 April 2022: £8.26 billion), which includes
the Group's 50% share of the anticipated profit on St Edward's joint venture
developments. The future gross profit has reduced in the period as the gross
profit taken through the Income Statement has exceeded optimisation and market
movements, with no new sites added in the period. The future gross margin is
at 26.5% at the end of the period (30 April 2022: 26.5%).
In addition, Berkeley has approximately 8,500 plots on seven sites (30 April
2022: 8,000 plots on six sites) that constitute its pipeline, having
conditionally contracted one long-term site in the period.
The status of the 81 owned and unconditionally contracted sites is:
· 55 sites (plots: 44,680) have an implementable planning consent
and are in production;
· 14 sites (plots: 9,175) have a consent which is not yet
implementable, due to practical technical constraints and challenges
surrounding, for example, vacant possession, CPO requirements or utilities
provision; and
· 12 sites (plots: 7,101) do not have a planning consent.
Of the three contracted sites, one site has a resolution to grant consent, but
remains subject to a call-in.
The estimated future gross margin represents management's risk-adjusted
assessment of the potential gross profit for each site, taking account of a
wide range of factors, including: current sales and input prices; the
political and economic backdrop; the planning regime; and other market forces;
all of which could have a significant effect on the eventual outcome.
Our Vision 2030: Transforming Tomorrow
Our Vision 2030 is Berkeley's ambitious long-term strategy, which sets ten
strategic priorities for the business over the current decade. It is
designed to drive our performance, spur innovation and reinforce our position
as the country's most sustainable developer through maximising our positive
impacts on society, the economy and the natural world.
Driving ambitious carbon action
Berkeley's climate action programme is driving our progress towards our
science-based carbon reduction targets and we were delighted to be recognised
with a Carbon Reduction Award at the Better Society Network's cross-sector
National Sustainability Awards 2022. We have a CDP Climate Action and
Transparency Leadership level rating of "A-".
Direct emissions - within our own operations (scopes 1 and 2) we continue to
focus on energy efficiency, with a particular emphasis on site set up and out
of hours usage. We have purchased biodiesel HVO on 95% of our sites as a lower
carbon alternative to diesel, saving 600 tCO2e in this half year period.
When combined with our supply chain consumption on our sites, the saving is
2,250 tCO2e in this half year period.
Embodied carbon - following the completion of 15 detailed life cycle carbon
assessments (scope 3 category 1) last financial year, we have now set
quantitative targets to reduce embodied carbon for new developments. Life
cycle assessments will now be completed on new developments, helping us to
gain further insight and work towards meeting our science-based targets.
We remain committed to a just transition to net zero, which means working
collaboratively with our existing UK-based suppliers and the UK energy sector
as they decarbonise, rather than switching procurement to countries with a
cleaner energy sources and lower embodied carbon products.
Low carbon homes - we continue to deliver efficient homes (scope 3 category
11) through a fabric-first design approach, in combination with the most
appropriate technology and infrastructure solution for each site. We are
implementing the requirements of the 2021 Building Regulations (effective June
2022 with 12-month transitional arrangements) and preparing for the more
stringent Future Homes Standard.
We continue to engage with industry to meet this important challenge through
participation in the UKGBC's Advancing Net Zero Programme and as Chair of the
sector group of the Net Zero Carbon Building Standard Homes Group.
Supporting nature's recovery
We are proud to pioneer nature recovery within our industry and to play a
proactive role in reversing biodiversity loss within the communities we serve.
We have built up a pipeline of 49 developments committed to biodiversity
net gain, which together will deliver over 500 acres of new or measurably
improved natural habitats.
We are evolving our approach, having commissioned and embedded new best
practice landscape design guidance from the Wildfowl and Wetlands Trust (WWT)
on incorporating blue and green infrastructure within our masterplans. This is
enabling both our customers and the natural environment to benefit from the
wealth of biodiversity supported by these habitats. We are honoured to be a
founding member of the WWT's Blue Recovery Leaders Group, working to restore,
improve and create more wetland habitats.
Communities and social value
Our ambition on every site is to strengthen the local community, support
people's health, wellbeing and quality of life and deliver lasting social
value that can be felt both within and beyond our site boundaries.
85% of our projects involve the regeneration of brownfield land in the heart
of existing towns and cities. Reviving these well-connected sites helps to
reenergise surrounding communities and deliver new homes, jobs, amenities and
growth where they are most sustainable and most needed.
Examples include Oval Village, previously a disused gasworks, where we are
currently welcoming residents to the first private and affordable homes and
delivering 2.5 acres of public space, a 179% biodiversity net gain, a mix of
public amenities and flexible employment space to support 1,000 permanent
jobs.
Every new masterplan and wider placemaking strategy is informed by our bespoke
social value tool and we continue to embed Community Plans on every
regeneration site to help connect neighbours and create inclusive, fun and
resilient places. Examples of Community Plan initiatives include Royal
Arsenal's Platinum Jubilee street party which brought together 2,000 Woolwich
residents and mental health awareness events and exercise classes at Hartland
Village in Hampshire.
Future skills
We welcomed 77 apprentices, graduates and sponsored students to our future
skills programmes in autumn 2022 and currently have 9% of our employees in
earn and learn roles, in addition to around 300 trainees working on our sites
through our supply chain. This performance secured Gold Member status from The
5% Club.
We continue to promote careers in the built environment sector and inspire new
talent to join our hugely rewarding and varied industry through a range of
programmes and events. Recent initiatives include partnering with Young
Professionals to bring 150 students to West End Gate in Westminster to
experience a live regeneration site and learn about built environment career
opportunities. We are also supporting the Royal Borough of Greenwich and SHCH
Sixth Form to help young people with learning disabilities take their first
steps into employment.
Increasing the diversity of our workforce is a priority and we continue to
apply the principles and commitments of the Mayor's Fund for London's
Diversity Pledge and work in partnership with Women Into Construction.
The Berkeley Foundation
The Berkeley Foundation (the "Foundation") is our registered charity
established to support young people and their communities in the areas where
we work. The Foundation enables Berkeley to channel its skills, resources and
fundraising efforts towards ambitious, impactful voluntary sector
partnerships.
We are acutely aware that high inflation is putting added pressure on
vulnerable households and the fantastic voluntary sector partners which
support them. The Berkeley Foundation has continued to support our charity
partners over the period, which work closely with the communities around our
sites to tackle inequalities and create opportunities for those in greatest
need.
Highlights for the Foundation within the period include the launch of a new
three-year partnership with Groundwork London to engage disadvantaged young
people to enhance local green community spaces and prepare them for careers in
the green economy.
Principal risks and uncertainties
The principal business risks and uncertainties facing Berkeley for the next
six months are the same as those set out on pages 87 to 101 of The Berkeley
Group Holdings plc Annual Report for the year ended 30 April 2022. These
comprise the economic and political outlook, the impact of regulation on the
business and the wider industry, the availability of land, the planning
process, retention of our people, securing sales, liquidity and working
capital management, mortgage availability, climate change and sustainability
considerations, health and safety on the Group's developments, product
quality, control of build costs and maintaining programmes, and cyber and data
risk. In preparing this interim report, full account has been taken of
this risk profile and the future outlook for the Group's developments as
embraced within the Group's strategy and outlook.
- End -
Statement of Directors' Responsibilities
This statement, which should be read in conjunction with the independent
review of the auditors set out at the end of these condensed consolidated
interim financial statements (the "interim financial statements"), is made to
enable shareholders to distinguish the respective responsibilities of the
Directors and the auditors in relation to the interim financial statements
which the Directors confirm have been presented on a going concern basis.
The Directors consider that the Group has used appropriate accounting
policies, consistently applied and supported by reasonable and appropriate
judgements and estimates.
A copy of the interim financial statements of the Group is placed on the
website of The Berkeley Group Holdings plc: www.berkeleygroup.co.uk. The
Directors are responsible for the maintenance and integrity of the information
on the website. Information published on the internet is accessible in many
countries with different legal requirements. Legislation in the United Kingdom
governing the preparation and dissemination of the financial statements may
differ from legislation in other jurisdictions.
The Directors confirm that this condensed set of interim financial statements
has been prepared in accordance with International Accounting Standard 34,
"Interim Financial Reporting", as adopted by the United Kingdom and that the
interim management report includes a fair review of the information required
by DTR 4.2.7R and DTR 4.2.8R, namely:
· an indication of important events that have occurred during the
first six months and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
· material related party transactions in the first six months and any
material changes in the related party transactions described in the last
annual report.
The Directors of The Berkeley Group Holdings plc are listed in the Annual
Report of The Berkeley Group Holdings plc for the year ended 30 April 2022. A
list of current Directors is maintained on The Berkeley Group Holdings plc's
website.
On behalf of the Board
R C Perrins
Chief Executive
9 December 2022
R J Stearn
Finance Director
9 December 2022
Condensed Consolidated Income Statement
Six months ended Six months ended Year ended
31 October 2022 31 October 2021 30 April 2022
Unaudited Unaudited Audited
Notes £m £m £m
Revenue 1,200.7 1,220.7 2,348.0
Cost of sales (876.9) (874.2) (1,683.2)
Gross profit 323.8 346.5 664.8
Net operating expenses (89.9) (75.5) (156.9)
Operating profit 233.9 271.0 507.9
Finance income 3 6.0 0.7 2.5
Finance costs 3 (16.6) (5.7) (15.0)
Share of results of joint ventures using the equity method 61.5 24.7 56.1
Profit before taxation for the period 284.8 290.7 551.5
Income tax expense 4 (63.1) (50.9) (69.1)
Profit after taxation for the period 221.7 239.8 482.4
Earnings per share (pence):
Basic 5 200.4 201.7 417.8
Diluted 5 197.9 197.9 411.4
Condensed Consolidated Statement of Comprehensive Income
Six months ended Six months ended Year ended
31 October 2022 31 October 2021 30 April 2022
Unaudited Unaudited Audited
£m £m £m
Profit after taxation for the period 221.7 239.8 482.4
Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss
Actuarial (loss)/gain recognised in the pension scheme (1.7) 0.7 (1.6)
Total items that will not be reclassified to profit or loss (1.7) 0.7 (1.6)
Other comprehensive (expense)/income for the period (1.7) 0.7 (1.6)
Total comprehensive income for the period 220.0 240.5 480.8
Condensed Consolidated Statement of Financial Position
31 October 2022 31 October 2021 30 April 2022
Unaudited Unaudited Audited
As at Notes £m £m £m
Assets
Non-current assets
Intangible assets 17.2 17.2 17.2
Property, plant and equipment 40.4 42.2 40.5
Right-of-use assets 5.0 2.8 5.8
Investments accounted for using the equity method 184.2 333.1 190.4
Deferred tax assets 116.4 40.7 120.7
363.2 436.0 374.6
Current assets
Inventories 6 5,298.2 3,710.0 5,134.0
Trade and other receivables 78.2 74.1 145.7
Current tax assets 4.6 10.8 4.5
Cash and cash equivalents 7 1,002.6 1,245.5 928.9
6,383.6 5,040.4 6,213.1
Total assets 6,746.8 5,476.4 6,587.7
Liabilities
Non-current liabilities
Borrowings 7 (660.0) (400.0) (660.0)
Trade and other payables (859.3) (320.2) (719.8)
Lease liability (3.1) (1.2) (3.8)
Provisions for other liabilities and charges (117.2) (66.9) (98.5)
(1,639.6) (788.3) (1,482.1)
Current liabilities
Trade and other payables (1,837.3) (1,700.6) (1,904.9)
Lease liability (2.2) (1.6) (2.1)
Provisions for other liabilities and charges (58.1) (61.8) (62.5)
(1,897.6) (1,764.0) (1,969.5)
Total liabilities (3,537.2) (2,552.3) (3,451.6)
Total net assets 3,209.6 2,924.1 3,136.1
Equity
Shareholders' equity
Share capital 6.3 6.6 6.5
Share premium 49.8 49.8 49.8
Capital redemption reserve 25.2 25.0 25.0
Other reserve (961.3) (961.3) (961.3)
Retained earnings 4,089.6 3,804.0 4,016.1
Total equity 3,209.6 2,924.1 3,136.1
Condensed Consolidated Statement of Changes in Equity
Capital
Share Share redemption Other Retained Total
capital premium reserve reserve earnings equity
£m £m £m £m £m £m
Unaudited
At 1 May 2022 6.5 49.8 25.0 (961.3) 4,016.1 3,136.1
Profit after taxation for the period - - - - 221.7 221.7
Other comprehensive expense for the period - - - - (1.7) (1.7)
Purchase of own shares (0.2) - 0.2 - (110.5) (110.5)
Transactions with shareholders:
- Charge in respect of employee share schemes - - - - (4.3) (4.3)
- Deferred tax in respect of employee share schemes - - - - (8.4) (8.4)
- Dividends to equity holders of the Company - - - - (23.3) (23.3)
At 31 October 2022 6.3 49.8 25.2 (961.3) 4,089.6 3,209.6
Unaudited
At 1 May 2021 6.6 49.8 24.9 (961.3) 4,055.4 3,175.4
Profit after taxation for the period - - - - 239.8 239.8
Other comprehensive income for the period - - - - 0.7 0.7
Purchase of own shares (0.0) - 0.1 - (34.7) (34.6)
Transactions with shareholders:
- Charge in respect of employee share schemes - - - - (8.3) (8.3)
- Deferred tax in respect of employee share schemes - - - - 2.6 2.6
- Surplus Capital Return via B Share Scheme - - - - (451.5) (451.5)
At 31 October 2021 6.6 49.8 25.0 (961.3) 3,804.0 2,924.1
Audited
At 1 May 2021 6.6 49.8 24.9 (961.3) 4,055.4 3,175.4
Profit after taxation for the year - - - - 482.4 482.4
Other comprehensive expense for the year - - - - (1.6) (1.6)
Purchase of own shares (0.1) - 0.1 - (63.7) (63.7)
Transactions with shareholders:
- Charge in respect of employee share schemes - - - - (8.7) (8.7)
- Deferred tax in respect of employee share schemes - - - - 3.8 3.8
- Surplus Capital Return via B Share Scheme - - - - (451.5) (451.5)
At 30 April 2022 6.5 49.8 25.0 (961.3) 4,016.1 3,136.1
Condensed Consolidated Cash Flow Statement
Six months ended Six months ended Year ended
31 October 2022 31 October 2021 30 April 2022
Unaudited Unaudited Audited
Notes £m £m £m
Cash flows from operating activities
Cash generated from operations 7 218.8 286.8 372.4
Consideration paid for 50% share of St William assets - - (355.6)
Interest received 4.3 0.7 1.9
Interest paid (13.0) (4.0) (5.6)
Income tax paid (67.3) (51.7) (142.6)
Net cash flow from operating activities 142.8 231.8 (129.5)
Cash flows from investing activities
Purchase of property, plant and equipment (1.7) (0.8) (1.3)
Proceeds on disposal of property, plant and equipment - - 0.3
Dividends from joint ventures 74.9 - -
Movements in loans with joint ventures (7.2) (26.7) (26.7)
Net cash flow from investing activities 66.0 (27.5) (27.7)
Cash flows from financing activities
Lease capital repayments (1.3) (0.9) (1.9)
Proceeds associated with settlement of share options - 0.1 -
Purchase of own shares (110.5) (34.7) (63.7)
Dividends / B-Share payments to shareholders (23.3) (451.5) (451.5)
Drawdown of bank borrowings - - 260.0
Increase in listed borrowings - 400.0 400.0
Repayment in bank borrowings - (300.0) (300.0)
Repayment of St William bank borrowings - - (185.0)
Net cash flow from financing activities (135.1) (387.0) (342.1)
Net increase/(decrease) in cash and cash equivalents 73.7 (182.7) (499.3)
Cash and cash equivalents at the start of the financial period 928.9 1,428.2 1,428.2
Cash and cash equivalents at the end of the financial period 1,002.6 1,245.5 928.9
1 General information
The Berkeley Group Holdings plc (the "Company") is a public limited company
incorporated and domiciled in the United Kingdom. The address of its
registered office is Berkeley House, 19 Portsmouth Road, Cobham, Surrey, KT11
1JG. The Company and its subsidiaries (together the "Group") are engaged in
residential led, mixed-use property development.
This condensed consolidated interim financial information was approved for
issue on 9 December 2022. It does not comprise statutory accounts within the
meaning of Section 434(3) of the Companies Act 2006. Statutory accounts for
the year ended 30 April 2022 were approved by the Board of Directors on 22
June 2022 and delivered to the Registrar of Companies. The report of the
auditors on those accounts was unqualified, did not include reference to any
matters to which the auditor drew attention by way of emphasis without
qualifying their audit report, and did not contain a statement under Section
498 (2) or (3) of the Companies Act 2006. The Condensed Consolidated Interim
Financial Statements have been reviewed, not audited.
2 Basis of preparation
2.1 Introduction
This condensed consolidated interim financial information for the six months
ended 31 October 2022 has been prepared in accordance with IAS 34 'Interim
Financial Reporting' as adopted for use in the UK and the Disclosure Guidance
and Transparency Rules of the UK's Financial Conduct Authority.
The comparative figures for the year ended 30 April 2022 do not constitute
statutory accounts as defined in Section 434 of the Companies Act 2006 and
have been extracted from the statutory accounts, which were prepared in
accordance with International Accounting Standards (IAS) in conformity with
the requirements of the Companies Act 2006 and UK-adopted International
Financial Reporting Standards (IFRS) and were delivered to the Registrar of
Companies.
The accounting policies, presentation and method of computations adopted in
the preparation of the 31 October 2022 Condensed Consolidated Interim
Financial Statements are consistent with those followed in the preparation of
the Group's annual financial statements for the year ended 30 April 2022
except in respect of taxation which is based on the expected effective tax
rate for the year ending 30 April 2023.
The following amendments to standards and interpretations are applicable to
the Group and are mandatory for the first time for the financial year
beginning 1 May 2022:
- IAS 16, Property, Plant and Equipment: Proceeds before Intended Use;
- IAS 37, Onerous Contracts: Cost of Fulfilling a Contract;
- IFRS 3, Business Combinations: References to the Conceptual
Framework; and
- Annual Improvements to IFRS 9 Financial Instruments and IFRS 16
Leases.
The Group did not have to change its accounting policies or make retrospective
adjustments as a result of these amendments.
2.2 Going concern
The Directors have assessed the business plan and future funding requirements
of the Group over the medium-term and compared these with the level of
committed loan facilities, listed debt and existing cash resources. As at 31
October 2022, the Group has net cash of £342.6 million and total liquidity of
£1,542.6 million, when this net cash is combined with banking facilities of
£800 million (which lapse in February 2027) and £400 million green listed
bonds (which mature in August 2031). Furthermore, the Group has cash due on
forward sales of £2.33 billion, a significant proportion of which covers
delivery for the next 18 months.
In making this assessment, consideration has been given to the uncertainty
inherent in future financial forecasts and where applicable, severe but
plausible sensitivities have been applied to the key factors affecting the
financial performance of the Group. The Directors have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future period, and not less than 12 months from
the date of these Condensed Consolidated Interim Financial Statements. For
this reason, they continue to adopt the going concern basis of accounting in
preparing the Group's Condensed Consolidated Interim Financial Statements.
3 Net finance costs
Six months ended Six months ended Year ended
31 October 2022 31 October 2021 30 April 2022
Unaudited Unaudited Audited
£m £m £m
Finance income 6.0 0.7 2.5
Finance costs
Interest payable on borrowings and non-utilisation fees (10.5) (4.8) (12.1)
Amortisation of facility fees (0.8) (0.6) (1.8)
Other finance costs (5.3) (0.3) (1.1)
(16.6) (5.7) (15.0)
Net finance costs (10.6) (5.0) (12.5)
Finance income predominantly represents interest earned on cash deposits.
Other finance costs represent imputed interest on land purchased on deferred
settlement terms and lease interest.
4 Income tax expense
Six months ended Six months ended Year ended
31 October 2022 31 October 2021 30 April 2022
Unaudited Unaudited Audited
£m £m £m
Current tax including RPDT
UK corporation tax payable (67.4) (53.6) (148.2)
Adjustments in respect of previous years (1.9) - 2.3
(69.3) (53.6) (145.9)
Deferred tax including RPDT
Deferred tax movements 4.3 2.7 73.0
Adjustments in respect of previous years 1.9 - 3.8
6.2 2.7 76.8
(63.1) (50.9) (69.1)
The Residential Property Developer Tax ("RPDT") is 4% and was introduced on 1
April 2022.
5 Earnings per share
Basic earnings per share are calculated as the profit for the financial period
attributable to shareholders of the Group divided by the weighted average
number of shares in issue during the period.
Six months ended Six months ended Year ended
31 October 2022 31 October 2021 30 April 2022
Unaudited Unaudited Audited
Profit attributable to shareholders (£m) 221.7 239.8 482.4
Weighted average no. of shares (m) 110.6 118.9 115.5
Basic earnings per share (p) 200.4 201.7 417.8
For diluted earnings per ordinary share, the weighted average number of shares
in issue is adjusted to assume the conversion of all potentially dilutive
ordinary shares.
At 31 October 2022, the Group had one (2021: one) category of potentially
dilutive ordinary shares: 1.2 million (2021: 1.9 million) share options under
the 2011 LTIP.
A calculation is undertaken to determine the number of shares that could have
been acquired at fair value based on the aggregate of the exercise price of
each share option and the fair value of future services to be supplied to the
Group, which is the unamortised share-based payments charge. The difference
between the number of shares that could have been acquired at fair value and
the total number of options is used in the diluted earnings per share
calculation.
5 Earnings per share (continued)
Six months ended Six months ended Year ended
31 October 2022 31 October 2021 30 April 2022
Unaudited Unaudited Audited
Profit used to determine diluted EPS (£m) 221.7 239.8 482.4
Weighted average no. of shares (m) 110.6 118.9 115.5
Adjustments for:
Share options - 2011 LTIP 1.4 2.3 1.8
Shares used to determine diluted EPS (m) 112.0 121.2 117.3
Diluted earnings per share (p) 197.9 197.9 411.4
6 Inventories
Six months ended Six months ended Year ended
31 October 2022 31 October 2021 30 April 2022
Unaudited Unaudited Audited
Land not under development 919.7 396.8 738.1
Work in progress: Land cost 1,897.5 1,076.4 1,952.5
Total land 2,817.2 1,473.2 2,690.6
Work in progress: Build cost 2,362.1 2,080.6 2,302.6
Completed units 118.9 156.2 140.8
Total inventories 5,298.2 3,710.0 5,134.0
7 Notes to the Condensed Consolidated Cash Flow Statement
Six months ended Six months ended Year ended
31 October 2022 31 October 2021 30 April 2022
Unaudited Unaudited Audited
£m £m £m
Profit for the financial period 221.7 239.8 482.4
Adjustments for:
Taxation 63.1 50.9 69.1
Depreciation 2.9 2.8 5.6
Loss on sale of PPE - - 0.1
Finance income (6.0) (0.7) (2.5)
Finance costs 16.6 5.7 15.0
Share of results of joint ventures after tax (61.5) (24.7) (56.1)
Non-cash charge in respect of share awards (4.3) (8.1) (8.6)
Changes in working capital:
Increase in inventories (164.3) (54.8) (332.5)
Decrease/(increase) in trade and other receivables 67.9 2.2 (61.0)
Increase in trade and other payables 82.7 74.1 260.9
Net change in employee benefit obligations - (0.4) -
Cash generated from operations 218.8 286.8 372.4
Reconciliation of net cash flow to net cash
Net increase/(decrease) in net cash and cash equivalents, including bank 73.7 (182.7) (684.3)
overdraft
Increase in borrowings - (100.0) (660.0)
Decrease in borrowings - - 485.0
Movement in net cash in the financial period 73.7 (282.7) (859.3)
Opening net cash 268.9 1,128.2 1,128.2
Closing net cash 342.6 845.5 268.9
Net cash
Cash and cash equivalents 1,002.6 1,245.5 928.9
Non-current borrowings (660.0) (400.0) (660.0)
Net cash 342.6 845.5 268.9
8 Alternative performance measures
Berkeley uses a number of alternative performance measures (APMs) which are
not defined by IFRS. The Directors consider these measures useful to assess
the underlying performance of the Group alongside the relevant IFRS financial
information. They are referred to as Financial KPIs throughout the interim
results. The information below provides a definition of APMs and
reconciliation to the relevant IFRS information, where required:
Net cash
Net cash is defined as cash and cash equivalents, less total borrowings. This
is reconciled in note 7.
Net assets per share attributable to shareholders (NAVPS)
This is defined as net assets attributable to shareholders divided by the
number of shares in issue, excluding shares held in treasury and shares held
by the employee benefit trust.
Six months ended Six months ended Year ended
31 October 2022 31 October 2021 30 April 2022
Unaudited Unaudited Audited
Net assets (£m) 3,209.6 2,924.1 3,136.1
Total shares in issue (million) 117.7 121.3 120.6
Less:
Treasury shares held (million) (9.0) (9.2) (9.2)
Employee benefit trust shares held (million) (0.1) (0.1) (0.1)
Net shares used to determine NAVPS (million) 108.6 112.0 111.3
Net asset per share attributable to shareholders (pence) 2,955.7 2,610.7 2,818.2
Return on capital employed (ROCE)
This measures the profitability and efficiency of capital being used by the
Group and is calculated as profit before interest and taxation (including
joint venture profit before tax) divided by the average net assets adjusted
for (debt)/cash.
Six months ended Six months ended Year ended
31 October 2022 31 October 2021 30 April 2022
Unaudited Unaudited Audited
Operating profit 233.9 271.0 507.9
Share of joint ventures using equity method 61.5 24.7 56.1
Profit used to determine ROCE 295.4 295.7 564.0
Opening capital employed:
Net assets 3,136.1 3,175.4 3,175.4
Net cash (268.9) (1,128.2) (1,128.2)
Opening capital employed 2,867.2 2,047.2 2,047.2
Closing capital employed:
Net assets 3,209.6 2,924.1 3,136.1
Net cash (342.6) (845.5) (268.9)
2,867.0 2,078.6 2,867.2
Average capital employed 2,867.1 2,062.9 2,457.2
Return on capital employed (%) 20.6% 28.7% 23.0%
Return on equity (ROE) before tax
This measures the efficiency of returns generated from shareholder equity
before taxation and is calculated as profit before taxation attributable to
shareholders as a percentage of the average of opening and closing
shareholders' funds.
Six months ended Six months ended Year ended
31 October 2022 31 October 2021 30 April 2022
Unaudited Unaudited Audited
Opening shareholders equity 3,136.1 3,175.4 3,175.4
Closing shareholders equity 3,209.6 2,924.1 3,136.1
Average shareholders' equity 3,172.8 3,049.7 3,155.8
Return on equity before tax:
Profit before tax 284.8 290.7 551.5
Return on equity before tax (%) 18.0% 19.1% 17.5%
Cash due on forward sales
This measures cash still due from customers, with a risk adjustment, at the
relevant Balance Sheet date during the next three years under unconditional
contracts for sale. It excludes forward sales of affordable housing and
commercial properties and forward sales within the Group's joint ventures.
Future gross margin in land holdings
This represents management's risk-adjusted assessment of the potential gross
profit for each of the Group's sites, including the proportionate share of its
joint ventures, taking account of a wide range of factors, including: current
sales and input prices; the economic and political backdrop; the planning
regime; and other market factors; all of which could have a significant effect
on the eventual outcome.
9 Related party transactions
The Group has entered into the following related party transactions:
Transactions with Directors
During the period, Mr R C Perrins paid £35,698 (2021: £21,792) to the Group
in connection with works carried out at his home at commercial rates in
accordance with the relevant policies of the Group. There were no balances
outstanding at the period end (2021: £nil).
Transactions with Joint Ventures
During the financial period, the joint ventures paid management fees and other
recharges to the Group of £9.0 million (2021: £22.7 million). Other
transactions in the period include the movements in loans of
£7.2 million (2021: £26.7 million) and the receipt of dividends of £74.9
million (2021: £nil).
The outstanding loan balances with joint ventures at 31 October 2022 total
£36.6 million (30 April 2022: £29.3 million).
INDEPENDENT REVIEW REPORT TO THE BERKELEY GROUP HOLDINGS PLC
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
October 2022 which comprises the condensed consolidated income statement, the
condensed consolidated statement of comprehensive income, the condensed
consolidated statement of financial position, the condensed consolidated
statement of changes in equity, the condensed consolidated cash flow statement
and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 October 2022 is not prepared, in
all material respects, in accordance with IAS 34 Interim Financial Reporting
as adopted for use in the UK and the Disclosure Guidance and Transparency
Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in the
UK. A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. We read the other
information contained in the half-yearly financial report and consider whether
it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention that causes us to believe that the Directors
have inappropriately adopted the going concern basis of accounting, or that
the Directors have identified material uncertainties relating to going concern
that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the Group to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the Group will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
The annual financial statements of the Group are prepared in accordance with
UK-adopted international accounting standards.
The Directors are responsible for preparing the condensed set of financial
statements included in the half-yearly financial report in accordance with IAS
34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the Directors are
responsible for assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
INDEPENDENT REVIEW REPORT TO THE BERKELEY GROUP HOLDINGS PLC (continued)
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. Our conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit procedures, as
described in the Basis for conclusion section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.
Anna Jones
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
9 December 2022
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