REG - Berkeley Group Hldgs - Strategy and Trading Update

Berkeley groupAnnouncement

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RNS Number : 9460Y  Berkeley Group Holdings (The) PLC  01 April 2026

 

 

The Berkeley Group Holdings plc ("Berkeley")

Strategy Update

1 April 2026

 

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

Ahead of reporting its full year results for the year ending 30 April 2026,
Berkeley is providing a strategic update to reflect the current operating
environment and implications for the delivery of Berkeley 2035.

 

As announced in the recent Trading Update, Berkeley expects to deliver pre-tax
profit for FY26 of £450 million, in line with guidance put in place two years
ago, with around £300 million of net cash.

 

Context and Operating Environment

 

Berkeley's business model of developing brownfield regeneration projects in
urban areas is wholly aligned to Government housing policy of building new
homes where they are needed most. It makes the best use of previously
developed land to deliver construction-led growth, providing homes for sale
and rent alongside new amenities and services for local communities in
well-connected, low-carbon, nature-rich neighbourhoods.

 

This hugely positive activity for the economy and society requires
considerable upfront capital investment which in turn requires a stable,
predictable and supportive operating environment. Recent years have seen an
unprecedented increase in cost and regulation, at a time of increasing
interest rates and faltering consumer confidence, amidst prolonged
geopolitical and macro-economic volatility and uncertainty.

 

We welcome the 'Homes for London' package, announced last week in its final
form by MHCLG and the GLA.  It has all the ingredients required to address
today's viability challenge and stimulate homebuilding. To be successful, it
will now require pragmatic and flexible implementation by local authorities to
give homebuilders the certainty to invest and bring forward currently stalled
regeneration schemes at pace to address the decline in new home starts in
London which currently sit at less than 10% of MHCLG's target.

 

The implementation of the Building Safety Regulator's new gateway process for
building approval has lengthened the time between obtaining planning approval
and starting on site by around twelve months. The system is yet to operate
effectively and predictably, further impacting the timeline for the delivery
of new developments.

 

Against this backdrop and given subdued transaction volumes over the last
three years, the Group has proactively taken action to protect the business
and strengthen its balance sheet, maintaining a strong cash balance, lowering
land creditors from £900 million to around £470 million and reducing
operating costs from £178 million to £150 million, a 25% reduction in real
terms. During this time, we have limited new land investment, buying just
three sites, funded by non-core disposals.

 

In the first two months of 2026, we had begun to see signs of a modest
recovery in sales volumes. However, we indicated in our Trading Update, that
recent geopolitical events and the macroeconomic consequences, including
reduced potential for further rate cuts, could reduce confidence in a
near-term market recovery. This has now become a reality.

 

We are today announcing decisive action to maximise long term shareholder
value by prioritising value creation from our existing land holdings, tightly
sequencing construction, flexing the pace of BTR investment and maintaining
disciplined capital allocation while continuing shareholder returns.

 

Implications for Strategy

 

Berkeley 2035 includes the following levers of long‑term value creation:
Land investment and optimisation; Investment in construction
work‑in‑progress in the core business; Investment and growth in Berkeley
Living (BTR); and Shareholder Returns. Given the prolonged challenging market
backdrop and geopolitical volatility, Berkeley is re‑phasing the delivery of
this strategy over the next four years.

 

1.   New land investment

 

In this environment, Berkeley does not believe it can make its required rate
of return on investment in new land acquisitions. This is due to the
continuous increase in the tax and regulatory burden on residential
development, which other land uses do not experience, allowing them to pay
higher land values. Where residential transactions have been taking place,
land prices have been overheated. Berkeley is therefore not proposing to
acquire new land while these conditions prevail, except through joint venture
arrangements, and will focus on its existing land holdings.

 

2.   Existing land holdings

 

Berkeley already possesses unrivalled land holdings comprising over 50,000
homes, with a further pipeline of more than 10,000 homes, located in London
and the South-East, the UK's most under-supplied markets.  Our focus will be
on applying the principles of the new 'Homes for London' package to our sites
to provide the certainty required to bring forward our long-term regeneration
sites at returns commensurate with the development risk.

 

Our target under Berkeley 2035 is to add £2 billion of value to these land
holdings through optimisation and bringing our pipeline sites through the
planning process.  We have made good progress in the last 12 months which we
will report on with our full year results in June.

 

3.   Investment in construction work-in-progress

 

Construction phasing will continue to be matched to market demand and the pace
of Building Safety Regulator approvals, ensuring disciplined management of
work in progress and stock levels.

 

4.   Investment in Berkeley Living

 

We are well advanced with the first six buildings at Berkeley Living. When
completed in FY28, the buildings will represent an investment of around £400m
at cost. We have launched the marketing of Foundry Yard our first BTR building
at Alexander Gate and the lettings are ahead of expectation.

 

We remain firmly committed to our strategy to deliver 4,000 BTR homes by the
end of FY35 and will review phasing of the second tranche of schemes on an
ongoing basis, along with our plans for recycling capital from the initial six
buildings as market conditions evolve over the period.

 

5.   Focus on Operating Margin

 

Berkeley will target operating margin within its historic range of 17.5% to
19.5%. This requires both the maintenance of development margins and further
real reductions in operating costs.

 

6.   Shareholder Returns

 

Berkeley has now delivered £336 million of the £2.0 billion shareholder
returns under Berkeley 2035. This included £260 million up to 30 September
2025 and £76 million since.  The next target is a further £564 million by
30 September 2030 which we are currently comfortably on target to meet. In
these market conditions where the share price is below NAVPS which is forecast
to be circa £39 at year end, we believe that share buybacks are the best way
to maximise shareholder value.

 

 

Medium-term profit and cash profile

 

With the ongoing conflict and deterioration of the economic outlook, we are
reducing work in progress investment to match the sales levels we are
currently achieving. We are forecasting we can absorb the expected cost
inflation through optimisation of our land holdings, and the business plan
gives the flexibility and agility to do this. Our business plan is based on
this economic outlook and we believe that it is in the best interests of
shareholders to adapt our approach in this way, rather than pursue short-term
profit targets.

 

As a result of the above, we anticipate delivering above £1.4 billion of
pre-tax profit, over the next four years (FY27 to FY30). The profile of profit
before tax will likely be slightly weighted towards 2027 and thereafter
broadly evenly spread.

 

We are targeting to achieve a return on capital employed in the core business
of at least 15% as soon as possible, and between 11% and 15% in the
intervening years.

 

We will continue to strengthen the balance sheet, maintaining net cash across
the period with land creditors continuing to reduce. This will allow Berkeley
to increase investment at the point when the market and regulatory
environments inflect, accelerate shareholder returns or increase investment in
Berkeley Living as appropriate.

 

In the longer term, the outlook for London remains positive. It is a global
City, the largest financial centre in Europe and the second largest in the
world. It offers security, heritage, and innovation in an uncertain global
environment. For customers with liquidity, the current market dislocation
presents a great opportunity to buy.

 

END

 

For further information please contact:

 

The Berkeley Group Holdings
plc
Novella Communications

R J Stearn / N L
Eady
Tim Robertson

T: 01932 868 555
 
T: 020 3151 7008

LEI: 2138009OQSSLVVHQAL78

 

 

The person responsible for making this announcement is Victoria Mee, Company
Secretary.

 

 

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