REG - Berkeley Group Hldgs - Half-year Report
06/12/2024 07:00
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RNS Number : 0363P Berkeley Group Holdings (The) PLC 06 December 2024
PRESS
RELEASE
6 DECEMBER 2024
INTERIM RESULTS ANNOUNCEMENT
Strong execution driving robust operating performance with the Company on
track to deliver FY25 and FY26 profit guidance
Launch of new growth strategy, Berkeley 2035, to drive long-term shareholder
value using the Company's operating expertise and balance sheet strength
to take advantage of opportunities as they arise
Berkeley 2035 provides an agile capital allocation framework to enhance
investment in the near-term to increase profits and shareholder returns over
the long-term
The Berkeley Group Holdings plc ("Berkeley") today announces its unaudited
interim results for the six months ended 31 October 2024.
Rob Perrins, Chief Executive, said:
"Berkeley has delivered £275 million of pre-tax profit for the six months,
with net cash at £474 million. Despite ongoing geopolitical and macroeconomic
volatility, we remain on track to achieve our pre-tax profit guidance of £525
million for the full year and at least £450 million for FY26. We are also on
target to complete the final annual £283 million payment under the current
Shareholder Returns programme by 30 September 2025.
There is good underlying demand for our homes, but transaction volumes remain
around a third lower than FY23. Whilst we have seen a slight uptick in recent
weeks, a meaningful recovery will require a sustained improvement in consumer
confidence and stability in the wider macroeconomic environment.
As previously announced, pre-tax return on equity will dip below Berkeley's
long-term target of 15% at the above levels of profitability, due to the
impact of the operating environment and market conditions of recent years on
our industry and the wider economy.
We therefore welcome Government's mission for growth and its brownfield-led
housing agenda to resolve the issues in the planning system and deliver 1.5
million new homes over the next five years. Indeed, the strength and tone of
Government's housing commitments have already galvanised the planning system.
We are now working closely with all levels of government to ensure that this
positive momentum quickly translates into economically viable planning
consents to unlock greater investment and delivery on the ground, but this
will take time. We also remain alive to the very significant changes to
Building Regulations and the establishment of a new industry regulator. This
necessary change brings uncertainty as it beds-in and with it the risk of
delays and additional costs.
Illustrating the scale of the opportunity, but also the challenge, housing
starts in London fell to just 8,450 in the twelve months to 30 June 2024,
according to the most recent quarterly statistics issued by MHCLG. This
compares to Government's newly identified annual target of 80,000 for the
capital.
Berkeley wants to play its full part in addressing this shortfall and helping
Government meet its ambitions and believes that we are close to the point of
inflection when both the operating environment and market conditions are
supportive of investment. In light of this, we are today announcing a new
10-year strategy - Berkeley 2035 - which takes into account both the
volatility that persists in the operating environment and emerging
opportunities.
Berkeley 2035 provides a framework within which Berkeley can utilise its
entrepreneurial property expertise to: (i) increase return on capital in the
core business through optimising existing sites, bringing pipeline sites into
delivery and investing in new land; (ii) establish our own market-leading
Build to Rent ("BTR") platform and significantly grow its value; and (iii)
make returns to shareholders, through share buy-backs or dividends; a strategy
that will grow the long-term value of the Company, while retaining financial
strength. The opportunity to introduce third party funding to the BTR platform
provides the financial capacity and flexibility to increase investment or
shareholder returns further.
Berkeley has identified £7 billion of its free cash flow to deploy over the
next ten years in a combination of: (i) land investment; (ii) construction of
its BTR platform; and (iii) returns to shareholders. This is before
introducing any external funding to the BTR platform and anticipates the
initial allocation set out below:
£'billion
Land investment (broadly replacement) 2.5
Existing BTR commitment 1.2
Minimum level of shareholder returns 2.0
Flexible allocation 1.3
7.0
This agile framework for capital allocation combines necessary near-term
resilience with the ability to flex a greater allocation to new land, the BTR
platform or shareholder returns as the operating environment evolves. We are
targeting to maintain operating margins in the historic range of 17.5% to
19.5% over this period, maintain the future gross margin in our land holdings
above £6.0 billion, grow the value of our BTR platform and grow net asset
value per share. Adopting this strategy at this point in the cycle will
result in Berkeley investing more in the near-term to drive higher profits and
returns to shareholders in the long-term, and meeting our long-term 15%
pre-tax return on equity target.
Our teams have made fantastic progress throughout the period as we breathe new
life into neglected urban sites and create some of the most exciting mixed-use
neighbourhoods in the country. St William's stunning Regent's View
development in Bethnal Green exemplifies our approach and I am hugely proud
that this innovative gasworks regeneration project has been named the world's
best Future Residential Project at the World Architecture Festival.
I wish to thank the entire team across Berkeley for their hard work,
commitment and sheer ingenuity. They deliver hugely positive outcomes for
all of our stakeholders and remain the bedrock of our continued success."
Summary of FINANCIAL POSITION, Earnings AND Shareholder Returns
As at As at Change
Financial Position 31-Oct-24 30-Apr-24 absolute
Net cash £474m £532m -£58m
Net asset value per share £34.47 £33.63 +£0.84
Cash due on forward sales ((1)) £1,510m £1,701m -£191m
Land holdings - future gross margin £6,723m £6,929m -£206m
Pipeline sites / (plots (approx.) 13 (13,500) 13 (13,500) - (-)
HY to HY to Change
Earnings 31-Oct-24 31-Oct-23 %
Operating margin 20.2% 19.5% +0.7%
Profit before tax £275.1m £298.0m -7.7%
Basic earnings per share 186.8p 198.3p -5.8%
Pre-tax return on equity 15.6% 17.7% -2.1%
HY to HY to
Shareholder Returns 31-Oct-24 31-Oct-23
Share buy-backs undertaken £23.3m £64.5m
Dividends paid £218.7m £63.1m
Shareholder returns £242.0m £127.6m
Share buy-backs - volume 0.5m 1.7m
Average price paid for share buy-backs £46.33 £39.01
Dividends per share £2.07 £0.59
( )
((1)) Cash due on private exchanged forward sales completing within the next
three years
See Note 9 of the Condensed Consolidated Financial Information for a
reconciliation of alternative performance measures
· Sales during the period have been largely consistent with FY24 run
rates, with a slight improvement in recent weeks, and we are on target to
achieve our FY25 and FY26 pre-tax profit guidance.
· Sales prices are resilient and build costs are stable with
negligible inflation albeit we are alert to wider macroeconomic risk.
· Operating efficiency maintained with operating costs in line with
last year.
· Net cash is £474 million, following shareholder returns of £242
million in the period, with £1.2 billion of borrowing capacity providing
total liquidity of £1.7 billion.
· Net asset value per share has increased to £34.47 and reflects
historic cost.
· Unrivalled land holdings with £6.7 billion of future gross
margin - with strong planning momentum during the period.
CAPITAL ALLOCATION
· New 10-year strategy, Berkeley 2035, announced to provide resilience
and flexibility for Berkeley to allocate capital between land investment,
growing its BTR platform and shareholder returns, as the operating environment
evolves.
· On track to make the final £283 million annual shareholder return
under the current Shareholder Returns programme by 30 September 2025,
including a 33 pence per share interim dividend to the paid in March 2025.
DELIVERING FOR ALL STAKEHOLDERS
· 2,103 homes delivered, plus 177 in joint ventures (2023: 1,785,
plus 204) - 92% of which are on brownfield land.
· Over £300 million of subsidies provided to deliver affordable housing
and committed to wider community and infrastructure benefits in the period.
· Berkeley is delivering some 10% of London's new private and affordable
homes - supporting an average of approximately 26,000 UK jobs per annum
directly and indirectly through its supply chain over the last five years.
· Industry leading Net Promoter Score (+78.2) and customer
satisfaction ratings maintained.
· A recognised leader in the industry for nature, committing to
biodiversity net gain seven years before it became mandatory in February
2024. In total, 57 developments are now committed which together will create
more than 600 acres of new or measurably improved natural habitats.
· Awarded a place on CDP's "A List" for climate transparency and
performance and Supplier Engagement Award. More than 50 embodied carbon
studies completed as we progress our Climate Action programme.
· Gold membership of The 5% Club, with 9% of direct employees in 'earn
and learn' positions as graduates, apprentices or sponsored students within
the period.
Investor and Analyst Presentation:
A pre-recorded presentation by the Directors of Berkeley on the results will
be made available on the Company's website at 11:00 today -
https://www.berkeleygroup.co.uk/investors/results-and-announcements
(https://www.berkeleygroup.co.uk/investors/results-and-announcements) .
For further information please contact:
The Berkeley Group Holdings
plc
Novella Communications
R J Stearn (01932
868555)
Tim Robertson (02031 517008)
CHIEF EXECUTIVE'S REVIEW
Purpose, Long-term Strategy and Capital Allocation
Berkeley's purpose is to build quality homes, strengthen communities and make
a positive difference to people's lives, using our sustained commercial
success to make valuable and enduring contributions to society, the economy
and natural world.
We are the only large UK homebuilder to prioritise brownfield land, as we
progress 32 of the country's most complex regeneration projects, 27 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.
Berkeley is a unique, asset-focussed development business that seeks to manage
risk and generate value through market cycles, with its inherent latent value
rooted in its unrivalled land holdings. We seek to find the optimum
development solution for each site in terms of the social, environmental and
economic value for all stakeholders, and the returns we deliver to our
shareholders. We firmly believe these objectives are mutually compatible and
reinforcing. The pace at which we deliver homes from our land holdings is
determined by the prevailing operating environment and we will always adopt a
long-term approach, prioritising financial strength above annual profit
targets.
Our capital allocation policy is clear: first, ensure financial strength
reflects the cyclical nature and complexity of brownfield development and is
appropriate for 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 share buy-backs and dividends.
Strategy Positioning - "Berkeley 2035"
The new Government's clear and decisive commitment to increase the delivery of
new homes heralds a new era for home-building. The prioritisation of
brownfield development makes Berkeley, with its unrivalled land holdings,
ideally placed to play a leading role in this new era. This support for the
industry provides a more certain outlook into which businesses can invest,
although we cannot ignore the impact of prolonged geopolitical and
macroeconomic volatility in re-setting our strategy.
Berkeley 2035 is a clear strategy through which we can take advantage of
opportunities that present themselves over the next 10 years. We are
forecasting that we will have around £7 billion of free cash flow to deploy
over this period into a combination of:
· Land investment (replacement and new);
· Investing in our Build to Rent ("BTR") platform; and
· Shareholder returns - through share buy-backs or dividends
Berkeley will adopt an agile approach to capital allocation over this period,
with the ability to flex a greater allocation to new land, its BTR platform or
shareholder returns as the operating environment evolves. This is before
introducing any external funding to the BTR platform and targets the initial
allocation set out below:
£'billion
Land investment (broadly replacement) 2.5
Existing BTR commitment 1.2
Minimum level of shareholder returns 2.0
Flexible allocation 1.3
7.0
Land Investment Strategy
Berkeley enters the 10-year period with land holdings comprising some 52,500
future homes (over 90% of which have at least an outline planning consent),
with a further 13,500 in its pipeline. With detailed planning in place for all
homes being delivered over the next 3½ years, Berkeley has excellent
visibility over this period. Beyond this, we will take the necessary time to
work with all levels of government and local authorities to ensure each site
has the appropriate development solution, aligned with local priorities and
the needs of all stakeholders, prior to committing to delivery.
As greater certainty returns to the operating environment, accompanied by
Government's support for brownfield development, we anticipate more land
opportunities will meet our investment criteria which will allow us to target
growth in the second half of the 10-year period. We anticipate around £2.5
billion of available free cash flow will be required to replace the land being
used in production over the next 10 years and target £6.0 billion of future
gross margin in the land holdings at the end of the period, with a greater
allocation possible should the operating environment be favourable.
Berkeley BTR Platform
In June Berkeley announced plans to establish its own BTR platform,
identifying around 4,000 homes across 16 sites for an initial portfolio. In
the current operating environment, characterised by ongoing cost and
affordability pressures, coupled with strong and increasing occupational and
institutional demand, Berkeley believes that BTR will be central to the
Government meeting its ambition for new homes during this Parliament.
Berkeley will therefore continually review the right allocation of its
production to its own BTR platform, seeing this as an opportunity to
accelerate delivery and create value for shareholders. The construction of the
initial portfolio properties will absorb some £1.2 billion of free cash flow
over the next ten years, with the optionality to grow the portfolio more
aggressively should this be determined as the best course of action for
delivering shareholder value.
Shareholder Returns
Berkeley's current plan for shareholder returns was put in place in 2011 and
has returned £3.3 billion to shareholders over thirteen years, weighted
towards the second half of the period, which ends in September 2025. This is
an increase of £1.6 billion on the original plan which was to return £1.7
billion over 10 years.
Under Berkeley 2035, we are targeting a minimum level of shareholder returns
of £2.0 billion over the ten years; £0.9 billion of which will be paid by 30
September 2030 and includes the remaining £260 million of the current
shareholder returns programme to be paid by 30 September 2025. Returns after
September 2025 will be phased over the period and delivered through a
combination of share buy-backs, to be undertaken on a dynamic basis, and
dividends.
The actual level of shareholder returns will depend upon the extent to which
the flexibly allocated free cash flow is deployed into additional land
investment, an increase in scale of our BTR platform or other opportunities.
Flexibility to increase investment or shareholder returns
As the table setting out the initial allocation indicates, there is some £1.3
billion of capital that is yet to be allocated. This can be deployed for
additional investment in new land or BTR delivery, or used to increase
shareholder returns as set out above. Capacity for further investment or
shareholder returns can be created to the extent third party funding (debt or
equity) is introduced to the BTR platform over the next 10 years.
Conclusion
Berkeley 2035 incorporates the necessary resilience to navigate what remains a
volatile near-term operating environment, while providing Berkeley with the
flexibility to use its entrepreneurial property expertise to grow
profitability, maximise the value and potential of our land holdings and BTR
platform, and grow net asset value per share over the 10-year period, within a
disciplined framework for capital allocation.
Over this time Berkeley will continue to focus on maintaining its operating
margin at or above the long-term historic range of 17.5% to 19.5% and growing
net asset value per share in line with its investment plans.
Shareholder Returns
The current shareholder returns framework was put in place in 2011 and is now
based upon an annual return of £283 million up to September 2025, which can
be made through either dividends or share buy-backs.
Shareholder returns during the six months ended 31 October 2024 totalled
£242.0 million:
Six months to 31 October 2024 2023
£'m £'m
Dividends paid 34.9 63.1
Special dividend paid 183.8 -
Share buy-backs made 23.3 64.5
Shareholder return for the period 242.0 127.6
The dividend of £34.9 million (33 pence per share) was paid in July and the
special dividend of £183.8 million (174 pence per share) was paid in
September which completed the £283.2 million shareholder return for the year
to 30 September 2024. The special dividend was followed by a share
consolidation which reduced the Company's share capital, net of Treasury and
EBT shares, by 3.7 million shares (3.5%).
The £23.3 million share buy-backs were across 0.5 million shares (average
price: £46.33 per share).
Following the share buy-backs in the period, there is a residual £260.4
million to be returned to shareholders under the prevailing returns
programme. £33.6 million (33 pence per share) of this will be paid as an
interim dividend in March 2025. Any residual amount, after accounting for
share buy-backs, will be paid as a dividend in September 2025.
Housing Market and Operating Environment
Sales
Market conditions have been stable during the period, supported by the
systemic undersupply of new homes in London and the South-East, strong
employment levels and recent wage growth, alongside a supportive mortgage
market and London's reputation as a leading global city. These factors have
been balanced by the impact of ongoing geopolitical risks and uncertainty
around the domestic macroeconomic environment, with inflation tail risks
heightened following the Autumn Budget.
In these conditions, Berkeley's sales have been resilient at levels largely
consistent with FY24 run rates, with a slight improvement in recent weeks.
Wandsworth Mills and Spring Hill (in Maidenhead) were launched during the
period, securing a good level of early sales, alongside new releases at
Westmont, London Dock, TwelveTrees Park, Bow Green, Royal Arsenal and Lombard
Square amongst others. Sales pricing for the period has generally been ahead
of business plan levels, with cancellations at normal rates.
As set out in the FY24 results announcement, these market conditions were
anticipated, and the business positioned to operate accordingly. Cash due on
exchanged private forward sales has moderated to £1,510 million (30 April
2024: £1,701 million) and completed stock levels increased in line with
expectations.
Berkeley's core markets in London and the South-East continue to be, and are
set to remain, structurally under-supplied. Focussing on the capital, the
latest MHCLG data reports new-build starts for the 12 months to June 2024 of
just 8,450 (including private, PRS and affordable homes) below both the
current London Plan target of 52,000 per annum and Government's newly
identified target of 80,000 per annum.
Land and planning
During the period, Berkeley acquired one new site; a strategic site in
Berkshire for 220 homes, following the grant of a planning consent.
We have made good progress on the planning front in the recent weeks, with a
resolution to grant planning permission obtained on five future sites in the
land holdings and pipeline, including Bromley-by-Bow and Bath. We have also
obtained a resolution to grant planning permission for a new master-plan at
the Green Quarter, Southall which will see the number of homes delivered on
this site double.
We are now working with the respective Local Authorities to conclude the
Section 106 agreements in a form that meets their local priorities and our own
hurdle rates and will provide further updates on planning progress at the
year-end.
At 31 October 2024, Berkeley's land holdings comprise 52,501 plots across 68
developments (30 April 2024: 54,081 plots across 70 developments), including
those in the St Edward joint venture. The plots in the land holdings have an
estimated future gross profit of £6.72 billion (30 April 2024: £6.93
billion), which includes the Group's 50% share of the anticipated profit on St
Edward's joint venture developments.
The net reduction in future gross profit during the period of £0.21 billion
arises from the gross profit taken through the Income Statement, partly
mitigated by the new site and market and optimisation movements, with some 20
planning amendments agreed in the period, including additional homes at London
Dock, Wapping and Poplar Riverside. The estimated future gross margin in the
land holdings does not include the impact of new or revised planning consents
until this is secured through the Section 106 agreement. The estimated
future gross margin is 25.0% (30 April 2024: 25.1%).
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.
The pipeline comprises approximately 13,500 plots across 13 sites at 31
October 2024. This includes the sites at Bromley-By-Bow (2,100 homes) and in
Brentford (2,100 homes), a St Edward joint venture site, pending finalisation
of the Section 106 agreements for each site.
Positive momentum on planning
The Government's determined start to delivering its 1.5 million homes target
has had a profound and hugely positive impact on the planning system, lifting
the tone and encouraging a proactive approach to unblocking housing delivery
at scale.
We believe there are three key areas that, if addressed, will greatly assist
in unlocking the full potential of well-connected urban land and see
Government make huge strides in achieving its ambitious housing targets in the
regions where homes are most needed. First, is ensuring we make the best
possible use of brownfield land through increased density and intensification,
which is wholly appropriate for many urban areas. Second, is the setting of
clear priorities to ensure these get delivered. Specifically, the need for
affordable housing to take priority in the planning system and be delivered
directly by Section 106 agreements rather than more cash payments via
inflexible mechanisms like the Community Infrastructure Levy. Third, removing
the inefficiency and cost of duplicative and incremental local design
guidance.
We therefore warmly welcome the Government's clear support for brownfield
urban development, as set out in proposed changes to the National Planning
Policy Framework, the emerging proposals for National Development Management
Policies and the Government's recent working paper on making the most of urban
development, which present valuable opportunities to cut through the excess of
red tape and enable sustainable brownfield regeneration at far greater scale.
In the first six months of our financial year, Berkeley has provided over
£300 million in subsidies to deliver affordable housing and commitments to
wider community and infrastructure benefits. At over 150% of post-tax profit,
this rate has doubled over the last ten years. Over the same period new starts
across the industry in London have more than halved.
Construction
During the period build cost inflation for Berkeley has been stable at
negligible levels. There is a complex set of competing factors at play.
First, we have seen downward market-led pressure due to the weak macro
conditions which has led to lower new starts and construction output and the
reduction in materials cost inflation. Upside cost risk comes from the impact
of the recent increase in Employers' National Insurance Contributions and
ongoing regulatory change, including the transition to a new regulatory
regime.
Overall, Berkeley expects build costs to remain benign as we move into 2025
with the market remaining competitive in a subdued environment. However, we
are alert to the macroeconomic risk in this respect and continue to focus on
efficiency to control costs while working with and supporting our established
supply chain partners to ensure sustainability of the supply chain and
delivery on our sites.
Berkeley's Build to Rent ("BTR") Platform
During the period, Berkeley has commenced the production of dedicated BTR
buildings on six of its regeneration sites. These buildings comprise 833
homes, over 20% of the initial portfolio of 4,000 homes:
Regeneration Development Location Initial BTR Total BTR
Homes Homes
London
- Alexandra Gate, Haringey Zone 3 187 402
- Grand Union, Brent Zone 3 177 326
- Kidbrooke Village, Greenwich Zone 3 90 206
- Silkstream, Hendon Zone 3 74 183
South-East
- Eden Grove, Staines Surrey 158 158
- Horlicks Quarter, Slough Berkshire 147 327
Total 833 1,602
BTR future production 3,167 -
Other sites - 2,398
Identified BTR Portfolio 4,000 4,000
The first of these homes will be delivered during FY27. Berkeley will
continue to assess the pace at which it allocates its capital to this initial
portfolio, alongside potentially allocating further capital to its BTR
platform, in line with the strategy announced today.
These BTR homes are included in the aforementioned land holdings plots and
future estimated gross profit.
CMA investigation
In February 2024, the Competition and Markets Authority ("CMA") announced an
investigation into possible anti-competitive sharing of information in the
housebuilding industry. We continue to cooperate with the CMA and its
enquiries.
Self-Remediation Terms and Contract
On 13 March 2023 Berkeley entered into the Self-Remediation Terms and Contract
with MHCLG, under which developers have responsibility for any life-critical
fire safety defects in buildings they have developed in the 30-year period to
April 2022.
For the 820 relevant buildings Berkeley has developed over this period, we
have third party assessments on over 95%. All of the remaining buildings are
where Berkeley is not the freeholder and has not yet been provided access.
There are 35 buildings where works are still to be completed, 11 of which are
buildings where Berkeley is reimbursing Government for the works under the
Developer Remediation Contract. Where works are required and yet to commence,
Berkeley intends to begin works as soon as reasonably possible, subject to
access being provided by the freeholder. It is Berkeley's preference to take
full responsibility for all its relevant buildings and to complete any
required works itself as this will speed up the overall process of
remediation. We are seeking recoveries from the supply chain and insurers
where appropriate.
We welcome the new Government's collaborative approach to remediation and look
forward to working with them to deliver our shared aspiration to complete
required works as quickly as possible. In conjunction with this, Berkeley
continues to work closely with the new Building Safety Regulator, which
together with the actions taken to date, should restore trust and confidence
to the housing market, enabling it to operate efficiently, effectively and
fairly for all.
Outlook
Berkeley is determined to play a full part in helping Government meet its
ambition to deliver 1.5 million new homes over the next five years and fully
supports the brownfield-led housing agenda to resolve the issues in the
planning system.
We have already experienced notable traction in the planning system in recent
weeks brought about by the change in tone ushered in by the new Government.
This positive intent will lead to the delivery of more homes provided all
levels of government now work with developers to deliver economically viable
planning consents.
The supply of new homes is unsurprisingly at a low ebb given the meaningful
challenges faced by the industry across both the operating environment and
market conditions in recent years. While short-term risks remain
prevalent, we are optimistic that we are close to the point of inflection when
conditions become far more supportive of increased investment and growth.
Already, Berkeley has accelerated the production of 833 new homes on our
existing regeneration sites through our BTR platform.
The scale of opportunity for a new era of homebuilding is substantial.
Berkeley's new 10-year strategy announced today is firmly rooted therein. By
investing more in the near-term, we can not only accelerate the delivery of
much needed new homes, but also drive higher profits and returns to
shareholders in the long-term through optimising our existing sites, acquiring
new ones and investing in our own BTR platform to grow the long-term value of
the company, while retaining financial strength.
Berkeley embarks on this new plan from a strong financial position with net
cash of £0.4 billion, £1.5 billion of cash due on exchanged private forward
sales and £6.7 billion of future gross margin in our land holdings, some 85%
of which (by plots) is on brownfield land which is now widely recognised as
the most sustainable way to solve the UK's housing crisis.
Rob Perrins
Chief Executive
TRADING AND FINANCIAL REVIEW
Trading performance
Berkeley has delivered pre-tax profit of £275.1 million for the six month
period:
Six months ended 31 October 2024 2023 Change
£'m £'m £'m %
Revenue 1,278.9 1,191.9 +87.0 +7.3%
Gross profit 338.5 311.6 +26.9 +8.6%
Operating expenses (80.1) (79.7) -0.4 +0.5%
Operating profit 258.4 231.9 +26.5 +11.4%
Net finance income 9.6 5.1 +4.5
Share of joint ventures 7.1 61.0 -53.9
Profit before tax 275.1 298.0 -22.9 -7.7%
Pre-tax return on equity 15.6% 17.7% -2.1%
Earnings per share - basic 186.8p 198.3p -11.5p -5.8%
Revenue of £1,278.9 million in the period (2023: £1,191.9 million) included
£1,275.7 million of residential revenue (2023: £1,153.0 million) and £3.2
million of commercial revenue (2023: £38.9 million). 2,103 new homes (2023:
1,785) were sold across London and the South-East at an average selling price
of £600,000 (2023: £624,000) reflecting the mix of properties sold in the
period.
The gross margin percentage is 26.5% (2023: 26.1%), reflecting the mix of
developments on which homes were completed in the period.
Overheads of £80.1 million are in line with the comparative period (2023:
£79.7 million). Consequently, the operating margin is 20.2% (2023: 19.5%)
given the higher revenue and slight first half weighting of pre-tax profits in
FY25.
The cost of borrowings and amortisation of associated fees and imputed
interest on land creditors is outweighed by interest earned from gross cash
holdings, resulting in net finance income of £9.6 million for the period
(2023: £5.1 million).
Berkeley's share of the results of joint ventures is a profit of £7.1 million
(2023: £61.0 million), with St Edward's profits arising from its South-East
developments following delivery of its central London developments in the
comparative period.
The taxation charge for the period is £79.5 million (2023: £86.5 million) at
an effective tax rate of 28.9% (2023: 29.0%), which incorporates the
additional 4% RPDT and Corporation Tax of 25%.
Pre-tax return on equity for the period is 15.6% (2023: 17.7%).
Basic earnings per share has decreased by 5.8% from 198.3 pence to 186.8
pence, which takes account of the share consolidation which accompanied the
Special Dividend during the period and the buy-back of 0.5 million shares for
£23.3 million under the Shareholder Returns Programme.
Financial Position
The Group's net assets decreased by £50.2 million over the six month period
to £3,510.3 million:
Summarised Balance Sheet as at 31-Oct- 24 30-Apr- 24 Change
£'m £'m £'m
Non-current assets 388.8 393.4 -4.6
Inventories 5,230.7 5,283.9 -53.2
Debtors 88.4 127.0 -38.6
Creditors (2,672.0) (2,775.8) +103.8
Capital employed 3,035.9 3,028.5 +7.4
Net cash 474.4 532.0 -57.6
Net assets 3,510.3 3,560.5 -50.2
Shares, net of treasury and EBT 101.8m 105.9m -4.1m
Net asset value per share 3,447p 3,363p +84p
Inventory
Inventories of £5,230.7 million include £568.4 million of land not under
development (30 April 2024: £725.8 million), £4,346.8 million of work in
progress (30 April 2024: £4,347.7 million) and £315.5 million of completed
stock (30 April 2024: £210.4 million).
During the period, Milton Keynes, Wandsworth Mills, Spring Hill in Maidenhead
and Hurlingham in Fulham have been moved from land not under development into
work in progress. The completed stock is spread across 24 developments.
Creditors
Total creditors of £2,672.0 million include £811.1 million of on-account
receipts from customers (30 April 2024: £907.7 million) and land creditors of
£884.1 million (30 April 2024: £881.7 million). Of the total £884.1 million
land creditor balance, £235.4 million is short-term and £648.7 million is
spread over the next seven years.
Creditors also include provisions of £223.9 million (30 April 2024: £209.8
million) which represents post-completion development obligations, including
those related to building fire-safety matters, and other provisions.
Net cash
The Group ended the period with net cash of £474.4 million (30 April 2024:
£532.0 million), a decrease of £57.6 million during the period:
Abridged Cash Flow for the period ended 31-Oct-24
£'m
Profit before taxation 275.1
Taxation paid (63.4)
Net investment in working capital (21.2)
Net contribution to joint ventures (8.0)
Other movements 1.9
Shareholder returns * (242.0)
Decrease in net cash (57.6)
Opening net cash 532.0
Closing net cash 474.4
* includes £4.9 million share buy-backs which were settled shortly after the
period end with an offsetting adjustment made in Other movements in the
table.
The net cash of £474.4 million comprises gross cash holdings of £1,134.4
million and borrowings of £660.0 million.
Net assets and NAVPS
Net assets decreased over the six-month period by £50.2 million, or 1.4% to
£3,510.3 million (30 April 2024: £3,560.5 million) due to the profit after
tax for the period of £195.6 million being outweighed by the shareholder
returns of £242.0 million and other movements in reserves of £3.8 million.
The shares in issue, net of treasury and EBT shares, closed at 101.8 million
compared to 105.9 million at the start of the period. The net reduction of 4.1
million shares comprises three movements (subject to rounding):
· The 0.5 million share buy-backs undertaken during the
period for £23.3 million (£46.33 per share),
· The issue of 0.2 million shares under the 2011 LTIP; and
· A reduction of 3.7 million resulting from the share
consolidation.
Consequently, the net asset value per share is 3,447 pence, up 2.5% from the
3,363 pence at 30 April 2024.
Funding
The Group's borrowing capacity of £1,200 million was unchanged during the
period and comprises:
· £400 million unsecured ten-year Green Bonds which mature in
August 2031 at a fixed coupon of 2.5% per annum; and
· £800 million bank facility, including a £260 million Green Term
loan and a £540 million undrawn revolving credit facility ("RCF").
Berkeley has allocated the proceeds of the Green Bonds and Green Term Loan to
its ongoing development activities in accordance with its Green Financing
Framework (available on its website).
With borrowings of £660 million, the Group's gross cash holdings of over
£1.1 billion throughout the six-month period have been placed on deposit with
its six relationship banks.
Berkeley has a facility with Homes England whereby it may apply amounts
borrowed towards financing or re-financing certain infrastructure type costs
incurred on three of its developments. The facility totals £125.6 million, is
unsecured, has floating interest rates linked to UK base rate and requires
33.33% of any outstanding loans to be repaid by 31 December 2031, 50% by 31
December 2032 and 100% by 31 December 2033. There are no loans outstanding
as at 31 October 2024.
Joint Ventures
Included within non-current assets are investments in joint ventures accounted
for using the equity method which are at £235.0 million at 31 October 2024
(30 April 2024: £227.0 million). The net £8.0 million increase in the
six-month period arises from Berkeley's 50% share of two movements:
· Share of profits earned in joint ventures of £7.1 million;
and
· Share of loan contributions to site specific joint ventures
of £0.9 million.
In St Edward, 177 homes were completed in the period at an average selling
price of £484,000 (2023: 204 homes at £1,204,000). The completions
occurred at Hartland Village in Fleet, Green Park Village in Reading and
Highcroft in Wallingford.
In total, 2,325 plots (30 April 2024: 2,502 plots) in the land holdings relate
to five St Edward developments.
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.
Berkeley's independently verified Net Promoter Score is +78.2 on a scale of
-100 to +100, exceeding our target and the industry average of +44 (HBF, March
2024).
We continue to strengthen our build safety and quality training and
arrangements. We have also produced new standards in response to the Building
Safety Act, in addition to a comprehensive guide to the requirements for our
workforce.
In partnership with industry peers and Unseen, we have produced a new film to
raise awareness about the issue of labour exploitation on construction sites.
The aim is for this film to be used across the built environment sector as
part of both training programmes and site inductions to raise awareness of
this issue and thereby increase the chances of exploitative activity being
reported.
Taking action to combat climate change remains a key priority for our industry
and during the period Berkeley submitted its response to the UK Government's
Energy Savings Opportunity Scheme following external audits undertaken by the
Carbon Trust. Recommendations that have arisen from this process will be
embedded within the Group's Net Zero Transition Plan which will be published
in 2025. We have now completed more than 50 detailed embodied carbon
assessments. Direct engagement with our supply chain for high impact
materials is key and to date has provided us with important insight on the
procurement of lower carbon aluminium and concrete.
As a recognised pioneer in the industry for nature recovery, committing to
biodiversity net gain ("BNG") seven years before it became mandatory in
February 2024, we are proud to be co-chairing a new BNG Implementation Board
with Government to support the industry through any challenges and ensure
successful implementation of the new legislation. At Berkeley, we have now
committed to achieve BNG on 57 developments, which together will create more
than 600 acres of new or measurably improved natural habitats. To strengthen
our approach and ensure effective governance of habitats, we have partnered
with the London Wildlife Trust to develop guidance on long-term landscape
management and maintenance.
We are focused on enhancing Berkeley as a place to work, where all our
employees feel included and supported. During the period we have enhanced
parental leave policies, introduced a menopause plan and delivered a suite of
wellness sessions covering a range of topics such as bereavement support and
financial wellbeing. We continue to encourage colleagues to get involved with
our growing employee-led networks including for Women, LGBTQ+, Ethnic
Minorities and Parents & Carers.
We have maintained our Gold rating with The 5% Club, with 9% of our colleagues
during the period being an apprentice, graduate or in formal training. This
summer, we celebrated the successful completion of our first large cohort of
construction apprentices who joined the business in 2021. In September, we
welcomed more than 40 new graduates and apprentices who are now immersed in
training programmes, helping to address critical industry skill shortages
while developing their expertise and learning from our teams. We are proud to
have received the Apprenticeship Initiative of the Year Award at the London
Construction Awards 2024 for our inclusive approach to selecting apprentices
and are rated top in the Property and Housebuilding sector by the Job Crowd
for our graduate programme.
The Berkeley Foundation continues to work in partnership with expert frontline
charities, investing in their work to help communities thrive. The
Foundation's Annual Review for FY24 has recently been published sharing
highlights of the £3.6 million given in the year to reach nearly 12,000
people. During the period, the Foundation also launched five new
partnerships through its Resilience Fund, committing £300,000 in grants over
two years to charities working with young people experiencing or at risk of
homelessness.
Principal risks and uncertainties
The Board is conscious of the ongoing volatility in the operating environment
and the Group's business model and risk management approach ensures Berkeley
is agile and responsive to evolving market conditions. As such, the Group's
risk appetite remains dynamic and is respectful of the cyclical nature of the
industry and the risks and opportunities this presents.
The principal business risks and uncertainties facing Berkeley for the next
six months are the same as those set out on pages 94 to 103 of The Berkeley
Group Holdings plc Annual Report for the year ended 30 April 2024. 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
and customers, 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
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 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 set of Interim 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 2024. 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
5 December 2024
R J Stearn
Chief Financial Officer
5 December 2024
Condensed Consolidated Income Statement
Six months ended Six months ended Year ended
31 October 2024 31 October 2023 30 April 2024
Unaudited Unaudited Audited
Notes £m £m £m
Revenue 1,278.9 1,191.9 2,464.3
Cost of sales (940.4) (880.3) (1,819.8)
Gross profit 338.5 311.6 644.5
Net operating expenses (80.1) (79.7) (164.8)
Operating profit 258.4 231.9 479.7
Finance income 3 30.8 25.9 53.9
Finance costs 3 (21.2) (20.8) (41.9)
Share of results of joint ventures using the equity method 7.1 61.0 65.6
Profit before taxation for the period 275.1 298.0 557.3
Income tax expense 4 (79.5) (86.5) (159.7)
Profit after taxation for the period 195.6 211.5 397.6
Earnings per share (pence):
Basic 5 186.8 198.3 373.9
Diluted 5 185.8 196.7 371.1
Condensed Consolidated Statement of Comprehensive Income
Six months ended Six months ended Year ended
31 October 2024 31 October 2023 30 April 2024
Unaudited Unaudited Audited
£m £m £m
Profit after taxation for the period 195.6 211.5 397.6
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss
Actuarial gain/(loss) recognised in the pension scheme 0.7 (1.0) (0.7)
Total items that will not be reclassified to profit or loss 0.7 (1.0) (0.7)
Other comprehensive income/(expense) for the period 0.7 (1.0) (0.7)
Total comprehensive income for the period 196.3 210.5 396.9
Condensed Consolidated Statement of Financial Position
31 October 2024 31 October 2023 30 April 2024
Unaudited Unaudited Audited
Notes £m £m £m
Assets
Non-current assets
Intangible assets 17.2 17.2 17.2
Property, plant and equipment 28.1 33.8 28.0
Right-of-use assets 3.5 5.0 4.3
Investments accounted for using the equity method 235.0 217.6 227.0
Deferred tax assets 105.0 110.8 116.9
388.8 384.4 393.4
Current assets
Inventories 6 5,230.7 5,370.3 5,283.9
Trade and other receivables 84.6 89.3 119.8
Current tax assets 3.8 3.8 7.2
Cash and cash equivalents 8 1,134.4 1,081.6 1,192.0
6,453.5 6,545.0 6,602.9
Total assets 6,842.3 6,929.4 6,996.3
Liabilities
Non-current liabilities
Borrowings 8 (660.0) (660.0) (660.0)
Trade and other payables (648.7) (868.0) (683.6)
Lease liability (1.9) (3.0) (2.3)
Provisions for other liabilities and charges (154.6) (153.2) (140.7)
(1,465.2) (1,684.2) (1,486.6)
Current liabilities
Trade and other payables (1,795.7) (1,774.2) (1,878.0)
Lease liability (1.8) (2.2) (2.1)
Provisions for other liabilities and charges (69.3) (55.0) (69.1)
(1,866.8) (1,831.4) (1,949.2)
Total liabilities (3,332.0) (3,515.6) (3,435.8)
Total net assets 3,510.3 3,413.8 3,560.5
Equity
Shareholders' equity
Share capital 6.2 6.2 6.2
Share premium 49.8 49.8 49.8
Capital redemption reserve 25.3 25.3 25.3
Other reserve (961.3) (961.3) (961.3)
Retained earnings 4,390.3 4,293.8 4,440.5
Total equity 3,510.3 3,413.8 3,560.5
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 2024 6.2 49.8 25.3 (961.3) 4,440.5 3,560.5
Profit after taxation for the period - - - - 195.6 195.6
Other comprehensive income for the period - - - - 0.7 0.7
Purchase of own shares (0.0) - 0.0 - (23.3) (23.3)
Transactions with shareholders:
- Charge in respect of employee share schemes - - - - (5.3) (5.3)
- Deferred tax in respect of employee share schemes - - - - 0.8 0.8
- Dividends to equity holders of the Company - - - - (218.7) (218.7)
At 31 October 2024 6.2 49.8 25.3 (961.3) 4,390.3 3,510.3
Unaudited
At 1 May 2023 6.3 49.8 25.2 (961.3) 4,212.3 3,332.3
Profit after taxation for the period - - - - 211.5 211.5
Other comprehensive expense for the period - - - - (1.0) (1.0)
Purchase of own shares (0.1) - 0.1 - (64.5) (64.5)
Transactions with shareholders:
- Charge in respect of employee share schemes - - - - (4.2) (4.2)
- Deferred tax in respect of employee share schemes - - - - 2.8 2.8
- Dividends to equity holders of the Company - - - - (63.1) (63.1)
At 31 October 2023 6.2 49.8 25.3 (961.3) 4,293.8 3,413.8
Audited
At 1 May 2023 6.3 49.8 25.2 (961.3) 4,212.3 3,332.3
Profit after taxation for the year - - - - 397.6 397.6
Other comprehensive expense for the year - - - - (0.7) (0.7)
Purchase of own shares (0.1) - 0.1 - (72.3) (72.3)
Transactions with shareholders:
- Charge in respect of employee share schemes - - - - (0.8) (0.8)
- Deferred tax in respect of employee share schemes - - - - 2.5 2.5
- Dividends to equity holders of the Company - - - - (98.1) (98.1)
At 30 April 2024 6.2 49.8 25.3 (961.3) 4,440.5 3,560.5
Condensed Consolidated Cash Flow Statement
Six months ended Six months ended Year ended
31 October 2024 31 October 2023 30 April 2024
Unaudited Unaudited Audited
Notes £m £m £m
Cash flows from operating activities
Cash generated from operations 8 234.0 157.1 383.0
Interest received 31.4 22.6 50.4
Interest paid (19.9) (18.4) (29.5)
Income tax paid (63.4) (87.6) (170.5)
Net cash flow from operating activities 182.1 73.7 233.4
Cash flows from investing activities
Purchase of property, plant and equipment (1.0) (0.9) (1.4)
Proceeds on disposal of property, plant and equipment 0.1 0.4 0.3
Dividends from joint ventures - 74.9 74.9
Movements in loans with joint ventures (0.4) (8.1) (12.9)
Net cash flow from investing activities (1.3) 66.3 60.9
Cash flows from financing activities
Lease capital repayments (1.3) (1.2) (2.3)
Purchase of own shares (18.4) (64.5) (72.3)
Dividends to Company's shareholders (218.7) (63.1) (98.1)
Net cash flow from financing activities (238.4) (128.8) (172.7)
Net (decrease)/increase in cash and cash equivalents (57.6) 11.2 121.6
Cash and cash equivalents at the start of the financial period 1,192.0 1,070.4 1,070.4
Cash and cash equivalents at the end of the financial period 1,134.4 1,081.6 1,192.0
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 Financial Information was approved for issue on 5
December 2024. 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 2024 were approved by the Board of Directors on 19 June 2024
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 Interim Financial Statements have been reviewed,
not audited.
2 Basis of preparation
2.1 Introduction
This Condensed Consolidated Financial Information for the six months ended 31
October 2024 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 2024 do not constitute
statutory accounts as defined in Section 434(3) 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 2024 Interim Financial Statements are
consistent with those followed in the preparation of the Group's annual
financial statements for the year ended 30 April 2024 except in respect of
taxation which is based on the expected effective tax rate for the year ending
30 April 2025.
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 2024:
- Amendments to IAS 1 Presentation of Financial Statements; and
- Amendments to IFRS 16 Leases.
These amendments are not expected to have a significant impact on the results
of the Group.
2 Basis of preparation (continued)
2.2 Going concern
The Directors have assessed the business plan and funding requirements of the
Group over the medium-term and compared these with the level of committed debt
facilities and existing cash resources. As at 31 October 2024, the Group had
net cash of £474.4 million and total liquidity of £1,674.4 million when this
net cash is combined with banking facilities of £800 million (committed to
February 2029) and £400 million listed bonds (which mature in August 2031).
Furthermore, the Group has cash due on forward sales of £1,510 million, 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 not less than 12 months from the date of approval of these
Interim Financial Statements. For this reason, it continues to adopt the going
concern basis of accounting in preparing its Interim Financial Statements.
3 Net finance income
Six months ended Six months ended Year ended
31 October 2024 31 October 2023 30 April 2024
Unaudited Unaudited Audited
£m £m £m
Finance income 30.8 25.9 53.9
Finance costs
Interest payable on borrowings and non-utilisation fees (14.7) (14.6) (29.2)
Amortisation of fees incurred on borrowings (1.1) (1.0) (2.0)
Other finance costs (5.4) (5.2) (10.7)
(21.2) (20.8) (41.9)
Net finance income 9.6 5.1 12.0
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 2024 31 October 2023 30 April 2024
Unaudited Unaudited Audited
£m £m £m
Current tax including RPDT
UK current tax payable (67.7) (80.9) (166.0)
Adjustments in respect of previous years 0.9 0.7 6.4
(66.8) (80.2) (159.6)
Deferred tax including RPDT
Deferred tax movements (11.9) (5.6) 2.8
Adjustments in respect of previous years (0.8) (0.7) (2.9)
(12.7) (6.3) (0.1)
(79.5) (86.5) (159.7)
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 2024 31 October 2023 30 April 2024
Unaudited Unaudited Audited
Profit attributable to shareholders (£m) 195.6 211.5 397.6
Weighted average no. of shares (m) 104.7 106.7 106.3
Basic earnings per share (p) 186.8 198.3 373.9
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 2024, the Group had two (2023: one) categories of potentially
dilutive ordinary shares: 0.5 million (2023: 0.9 million) share options under
the 2011 LTIP and 0.1 million (2023: nil) under the Restrictive Share Plan.
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 2024 31 October 2023 30 April 2024
Unaudited Unaudited Audited
Profit used to determine diluted EPS (£m) 195.6 211.5 397.6
Weighted average no. of shares (m) 104.7 106.7 106.3
Adjustments for:
Share options - 2011 LTIP 0.5 0.9 0.7
Share options - Restrictive Share Plan 0.1 - 0.1
Shares used to determine diluted EPS (m) 105.3 107.6 107.1
Diluted earnings per share (p) 185.8 196.7 371.1
6 Inventories
Six months ended Six months ended Year ended
31 October 2024 31 October 2023 30 April 2024
Unaudited Unaudited Audited
£m £m £m
Land not under development 568.4 912.0 725.8
Work in progress: Land cost 1,778.4 1,649.5 1,715.3
Total land 2,346.8 2,561.5 2,441.1
Work in progress: Build cost 2,568.4 2,661.1 2,632.4
Completed units 315.5 147.7 210.4
Total inventories 5,230.7 5,370.3 5,283.9
7 Contingent Liability
In February 2024, the Competition and Markets Authority ("CMA") announced an
investigation into possible anti-competitive sharing of information in the
housebuilding industry. We continue to cooperate with the CMA and their
enquiries. The timetable for conclusion of the CMA's investigation and any
potential impact on the Group, if any, is unknown.
8 Notes to the Condensed Consolidated Cash Flow Statement
Six months ended Six months ended Year ended
31 October 2024 31 October 2023 30 April 2024
Unaudited Unaudited Audited
£m £m £m
Net cash flows from operating activities
Profit for the financial period 195.6 211.5 397.6
Adjustments for:
Taxation 79.5 86.5 159.7
Depreciation 2.1 2.5 4.8
Loss on sale of PPE - - 5.2
Finance income (30.8) (25.9) (53.9)
Finance costs 21.2 20.8 41.9
Share of results of joint ventures after tax (7.1) (61.0) (65.6)
Non-cash charge in respect of share awards (5.3) (4.2) (0.8)
Changes in working capital:
Decrease/(increase) in inventories 53.1 (68.2) 18.2
Decrease/(increase) in trade and other receivables 35.0 5.9 (24.4)
Decrease in trade and other payables (109.3) (10.8) (99.7)
Cash generated from operations 234.0 157.1 383.0
Reconciliation of net cash flow to net cash
Net (decrease)/increase in net cash and cash equivalents, including bank (57.6) 11.2 121.6
overdraft
Movement in borrowings - - -
Movement in net cash in the financial period (57.6) 11.2 121.6
Opening net cash 532.0 410.4 410.4
Closing net cash 474.4 421.6 532.0
Net cash
Cash and cash equivalents 1,134.4 1,081.6 1,192.0
Non-current borrowings (660.0) (660.0) (660.0)
Net cash 474.4 421.6 532.0
The total share buy-backs in the period were £23.3 million. On the
Condensed Consolidated Cash Flow Statement the share buy-backs total £18.4
million as £4.9 million was settled shortly after the period end.
Cash equivalents comprise amounts placed in fixed term deposit and notice
accounts which are all held in order to meet short-term cash requirements and
are subject to an insignificant risk of changes in value. Cash equivalents
include an amount of £311.1 million (30 April 2024: £210.2 million) that is
accessible between 90 and 120 days.
9 Alternative performance measures
The Group uses a number of alternative performance measures ("APMs") which are
not defined by IFRS. The Directors consider these measures useful to assess
underlying performance alongside the relevant IFRS financial information.
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 8.
9 Alternative performance measures (continued)
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 2024 31 October 2023 30 April 2024
Unaudited Unaudited Audited
Net assets (£m) 3,510.3 3,413.8 3,560.5
Total shares in issue (million) 110.2 114.9 114.7
Less:
Treasury shares held (million) (8.3) (8.8) (8.7)
Employee benefit trust shares held (million) (0.1) (0.1) (0.1)
Net shares used to determine NAVPS (million) 101.8 106.0 105.9
Net asset per share attributable to shareholders (pence) 3,447 3,219 3,363
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 2024 31 October 2023 30 April 2024
Unaudited Unaudited Audited
Operating profit (£m) 258.4 231.9 479.7
Share of joint ventures using the equity method (£m) 7.1 61.0 65.6
Profit used to determine ROCE (£m) 265.5 292.9 545.3
Opening capital employed:
Net assets (£m) 3,560.5 3,332.3 3,332.3
Net cash (£m) (532.0) (410.4) (410.4)
Opening capital employed (£m) 3,028.5 2,921.9 2,921.9
Closing capital employed:
Net assets (£m) 3,510.3 3,413.8 3,560.5
Net cash (£m) (474.4) (421.6) (532.0)
Closing capital employed (£m) 3,035.9 2,992.2 3,028.5
Average capital employed (£m) 3,032.2 2,957.1 2,975.2
Return on capital employed (%) 17.5% 19.8% 18.3%
9 Alternative performance measures (continued)
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 2024 31 October 2023 30 April 2024
Unaudited Unaudited Audited
Opening shareholders equity (£m) 3,560.5 3,332.3 3,332.3
Closing shareholders equity (£m) 3,510.3 3,413.8 3,560.5
Average shareholders' equity (£m) 3,535.4 3,373.1 3,446.4
Return on equity before tax:
Profit before tax (£m) 275.1 298.0 557.3
Return on equity before tax (%) 15.6% 17.7% 16.2%
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,
commercial properties and institutional sales as well as 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 and
regulatory regimes; and other market factors; all of which could have a
significant effect on the eventual outcome.
10 Related party transactions
The Group has entered into the following related party transactions:
Transactions with Directors
There were no transactions with Directors during the period. In the
comparative 2023 period, Mr R C Perrins paid £87,123 and Mr P M Vallone paid
£5,831 to the Group in connection with works carried out at their respective
homes at commercial rates in accordance with the relevant policies of the
Group.
Transactions with Joint Ventures
During the period, the joint ventures paid management fees and other recharges
to the Group of £5.2 million (2023: £7.0 million). Other transactions in the
period include the movements in loans of £0.9 million (2023: £8.1 million)
and there was no receipt of dividends (2023: £74.9 million).
The outstanding loan balances with joint ventures at 31 October 2024 total
£54.7 million (30 April 2024: £53.8 million).
INDEPENDENT REVIEW REPORT TO THE BERKELEY GROUP HOLDINGS PLC
Conclusion
We have been engaged by The Berkeley Group Holdings Plc (the Company) to
review the Condensed Consolidated set of Financial Statements in the Interim
Results Report for the six months ended 31 October 2024 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 Consolidated set of Financial Statements in the
half-yearly financial report for the six months ended 31 October 2024 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 Financial Information Performed by the
Independent Auditor of the Entity (ISRE (UK) 2410) issued for use in the UK. A
review of 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 Consolidated 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 Consolidated 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 Consolidated 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
Consolidated 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
5 December 2024
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