REG - Berkeley Group Hldgs - Final Results
19/06/2024 07:00
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RNS Number : 9379S Berkeley Group Holdings (The) PLC 19 June 2024
PRESS
RELEASE
19 JUNE 2024
YEAR END RESULTS ANNOUNCEMENT
Strong performance in continued challenging operating conditions and
ready to increase investment once the conditions for growth are re-established
£283 million Annual Shareholder return to be completed by 33 pence per share
ordinary dividend in July and 174 pence per share special dividend to be paid
in September and accompanied by a share consolidation
FY25 guidance increased by 5% to £525 million
87% of homes delivered by Berkeley in FY24 were on brownfield land with some
£370 million investment in socio-economic benefits
Berkeley is establishing its own Build to Rent platform, alongside its core
trading business, adopting a strategic approach to maximising returns from its
long-term regeneration sites
The Berkeley Group Holdings plc ("Berkeley") today announces its audited
results for the year ended 30 April 2024.
Rob Perrins, Chief Executive, said:
"Berkeley has delivered pre-tax profits of £557 million in line with the
guidance provided at the start of the year and increased its net cash position
to over £500 million. This is a strong performance in a challenging and
volatile operating environment, demonstrating the resilience of Berkeley's
business model with its focus on the country's most undersupplied markets.
We continue to see good levels of enquiry for well-located homes built to a
high standard of design and quality but recognise that the current lack of
urgency in the market is likely to remain until the long-anticipated reduction
in interest rates commences. Berkeley continues to benefit from a strong order
book and has already secured 80% of its sales for next year, underpinning
today's 5% increase in guidance for FY25's pre-tax profit to £525 million,
with guidance for FY26 re-affirmed at £450 million.
In the year, we have delivered 3,500 new private and affordable homes, of
which 87% are on regenerated brownfield land, and provided over £370 million
in subsidies to deliver affordable housing and commitments to wider community
and infrastructure benefits.
Recognising the strong occupational and institutional investment demand for
high quality, well-managed rental homes in London and the South East,
Berkeley is establishing its own Build to Rent ("BTR") platform to maximise
returns in today's market conditions.
Berkeley has identified some 4,000 homes across 17 of its sustainable and
well-connected brownfield regeneration sites as an initial portfolio for this
platform.
Developed over the next ten years, and broadly representing a 10% increase in
delivery, the portfolio will be financed by a combination of internally
generated funds (over and above annual scheduled shareholder returns), debt
secured against rental properties once income generating, and the introduction
of third-party capital at the appropriate time, thereby fully supporting
Berkeley's long-term corporate 15% pre-tax ROE target.
Berkeley's passion and purpose is to build quality homes, strengthen
communities and make a positive difference to people's lives. We stand out
as the only large-scale UK homebuilder focussed on brownfield regeneration,
which is a vital driver for growth and a powerful force for good in our towns
and cities.
We are heartened by the strong political consensus behind increasing the
delivery of new homes across the country and the recognition that regenerating
brownfield land is the most sustainable and popular way to deliver this vital
goal. The next step is to ensure that brownfield sites can come forward at
real scale and pace.
For this to happen, planning policy and public funding needs to prioritise the
provision of affordable homes over the other significant financial demands
placed upon the development industry through the planning, taxation and
regulatory regimes. The industry has absorbed many regulatory changes over
recent years and, while all well-intended, when taken together they have
stifled investment, housing delivery and growth. In terms of corporation tax
alone, the industry's rate has increased by 10% (from 19% to 29%) over the
last two years, including the 4% RPDT.
We are supportive of the initiatives being discussed to provide customers with
greater access to higher loan to value mortgages and to reduce stamp duty. We
believe that all surcharges on stamp duty should be removed as, ultimately,
these constrain supply.
I would like to thank all of Berkeley's people for their hard work, resilience
and steadfast focus on our customers and communities to achieve the best
possible outcomes for all stakeholders in this exceptionally challenging
environment."
Summary of FINANCIAL POSITION, Earnings AND Shareholder ReturnS
As at As at Change
Financial Position 30-Apr-24 30-Apr-23 absolute
Net cash £532m £410m +£122m
Net asset value per share ((1)) £33.63 £31.01 +£2.62
Cash due on forward sales ((1)) £1,701m £2,136m -£435m
Land holdings - future gross margin ((1)) £6,929m £7,629m -£700m
Pipeline sites / (plots (approx.)) 13 (13,500) 14 (14,000) -1 (-500)
FY to FY to Change
Earnings 30-Apr-24 30-Apr-23 %
Operating margin 19.5% 20.3% N/a
Profit before tax £557.3m £604.0m -7.7%
Earnings per share - basic 373.9p 426.8p -12.4%
Pre-tax return on equity ((1)) 16.2% 18.7% N/a
FY to FY to
Shareholder Returns 30-Apr-24 30-Apr-23
Share buy-backs undertaken £72.3m £155.4m
Dividends paid £98.1m £98.5m
Shareholder returns £170.4m £253.9m
Share buy-backs - volume 1.8m 4.0m
Average price paid for share buy-backs £39.62 £38.25
Dividends per share £0.92 £0.91
((1)) See Note 8 of the Condensed Consolidated Financial Information
for a reconciliation of alternative performance measures
· The value of net reservations has been consistent through the year
at levels around one third lower than the prior year, reflecting the ongoing
elevated political and macro volatility.
· Sales pricing is firm and above business plan levels, with build
cost inflation across most trades at negligible levels.
· Operating margin is stable at 19.5%, with net operating costs
reduced by £14 million to £165 million.
· Net cash increased to £532 million, with £1.2 billion of
borrowing capacity providing total liquidity of £1.7 billion.
· Net asset value per share has increased to £33.63 and reflects
historic cost.
· Pre-tax earnings guidance met for FY24 and increased by 5% for FY25
to £525 million, with FY26 unchanged. Berkeley is therefore targeting to
deliver at least £975 million of pre-tax profit in the next two years
combined.
· On target to deliver £283 million (£2.67 per share) of
Shareholder Returns by 30 September 2024.
· Unrivalled land holdings with £6.9 billion of future gross margin
- two sites added in the period, including one transfer from the pipeline.
CAPITAL ALLOCATION
· Underpinned by balance sheet strength, our capital allocation policy
provides the flexibility to pursue attractive opportunities as market
conditions evolve, as demonstrated by intention to establish our own BTR
platform.
· No change to previously announced annual scheduled shareholder
returns programme.
· We remain ready to invest in new opportunities once the
conditions for growth are re-established.
DELIVERING FOR ALL STAKEHOLDERS
· 3,521 homes delivered, plus 406 in joint ventures (2023: 4,043, plus
594), 87% of which are on regenerated brownfield land.
· Approximately £370 million of subsidies provided to deliver
affordable housing and committed to wider community and infrastructure
benefits in the year.
· 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 (+80.2) and customer
satisfaction ratings maintained.
· Since 2017/18 all new planning applications have committed to
biodiversity net gain ahead of it becoming mandatory in February 2024. In
total 56 developments are now committed, which together will create more than
580 acres of new or measurably improved natural habitats.
· Awarded a place on CDP's "A List" for climate transparency and
performance. 48 embodied carbon studies completed as we progress our Climate
Action programme. Awarded CDP's Supplier Engagement Award for our work with
our supply chain to reduce carbon impacts.
· Gold membership of The 5% Club, with 9.5% of direct employees in 'earn
and learn' positions as graduates, apprentices or sponsored students within
the year.
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 (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 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. 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.
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. Examples include Grand Union where our St
George team is working in partnership with the London Borough of Brent to
transform a derelict 22-acre industrial estate into a popular and productive
part of Alperton with private and affordable homes, 10 acres of public open
space, a community centre, shops, cafes, offices and an innovative
multi-storey industrial workspace. And at Poplar Riverside our Berkeley
Capital team is partnering with the London Borough of Tower Hamlets to turn a
disused 20-acre gasworks into a sustainable riverside neighbourhood with
private and affordable homes, parks, play-space, a secondary school, shops,
cafes and flexible commercial and leisure space.
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 dividends and share buy-backs.
Planning and Regulatory Environment
The operating environment has become increasingly uncertain over recent years
as a high number of well-intended regulatory and policy changes came into
effect. This contributed to a marked decrease in private and affordable
homebuilding activity, with SME developers and housing associations
particularly impacted.
This significant decline in housing delivery has been acknowledged by
policymakers at all levels and triggered a renewed focus on addressing
barriers within the regulatory and planning system. This positive response has
carried through to the General Election campaign and we are greatly encouraged
by the tone and substance of manifesto commitments in support of homebuilding
and urban regeneration.
Berkeley continues to work alongside industry partners, including other
leading urban regeneration specialists and housing associations, to make the
case for a stable and efficient regulatory environment which enables all parts
of the market to invest with confidence.
Our core asks for the next Government include:
· refraining from a further round of major reforms in favour of a
focussed effort to resolve a number of relatively small operational challenges
within the planning and regulatory system to make it faster and more
predictable;
· greater resources for severely overstretched local authorities and
statutory bodies so they can operate the system more effectively;
· stronger policy support for well-designed, high density neighbourhoods
on sustainable brownfield sites close to transport and employment hubs;
· replacing fixed CIL tariffs (which fund off-site infrastructure)
with locally negotiated S106 agreements which prioritise on-site affordable
housing and public amenities;
· refinancing under pressure housing associations so they can get back
into the market and perform their key role in driving housing delivery; and
· simplify the complex Government grant funding regimes so they can
become faster and more flexible.
Strategy Positioning and Establishment of Rental Fund
Core Business Strategy
In December, Berkeley set out a medium-term plan to respond to the extended
period of volatility in the housing market, that began with the sharp increase
in interest rates in September 2022, which also reflects the wider challenges
presented by the planning and regulatory environment. Despite this
challenging backdrop, Berkeley's long-term business model continues to be
resilient with good forward visibility:
Near-term (FY25 and FY26)
· Having met its guidance for FY24, Berkeley is targeting at least
£975 million of pre-tax profit across the next two years with the guidance
for FY25 increased by 5% to £525 million.
· Operating margins are expected to be within the long-term historical
range (17.5% to 19%) following a 7.7% reduction in operating costs in FY24 and
targeting no increase in FY25.
· While the sales market remains subdued, cash due on private forward
sales remains strong at £1.7 billion but will continue to moderate until
transaction volumes recover. Consequently, Berkeley will carry higher
completed stock levels than in recent years over this period.
· Berkeley will continue to review the development solution on all its
sites to achieve the optimum outcome for all stakeholders, including
accommodating our best current assessment of the impact of evolving
regulations, such as the requirements surrounding second staircases in
buildings over 18 metres.
· In the absence of material new land investment, the land holdings
future gross margin will be targeted at around £6 billion at the end of this
period.
· Pre-tax ROE will be above 15% for the period as a whole but is likely
to fall slightly below this for FY26.
Medium-term (FY27, FY28 and FY29)
· Until the planning and regulatory environments unlock, alongside an
inflection in the sales market, pre-tax profitability is anticipated to remain
around the level to be delivered in FY26.
· The focus will be on maintaining operating margin through our
added-value approach to each site's development solution and ensuring our
operating costs are aligned to the size of the business.
Capital allocation flexibility
· We are on track to continue with the current shareholder returns
programme into the future but remain agile and are ready to switch our capital
allocation emphasis to invest in value accretive opportunities should these
present themselves.
· Berkeley's position has always been that, if it cannot deploy capital
to deliver appropriate risk-adjusted returns, it will return surplus capital
to shareholders. With the creation of the BTR platform, the surplus capital
that we indicated in December would be available to make additional returns
from 2027, should no new investment opportunities arise, will now be allocated
to the development of the rental portfolio.
· Berkeley sees this as an attractive opportunity to accelerate
delivery of its existing assets by building a best-in-class London and
South-East focused BTR residential portfolio and platform that will enable us
to maximise value on our brownfield regeneration sites from this growing
market segment to the benefit of both society and shareholders.
Establishment of Berkeley Build to Rent ("BTR") Platform
Recognising the severe shortage of high-quality rental accommodation, Berkeley
is today announcing a natural extension of its strategy that will see the
establishment of its own BTR platform, which will be developed over the next
ten years, comprising some 4,000 new homes across 17 of the Group's
well-connected, nature-rich, low-carbon brownfield urban regeneration
developments.
This will represent additional delivery of around 10% of much needed new
homes, when compared to the plan set out in December with the Company's
interim results, along with the acceleration of place-making and affordable
homes on these sites.
There is strong, unsatisfied demand for quality residential rental property
built at scale in and around London, the country's most under-supplied market,
from institutional capital which is attracted to its inflation-correlated
attributes. Having sold over 1,000 homes across five sites in the last three
years to institutional investors on a forward commitment basis, we now believe
that adopting a more strategic route to this market will drive best value for
these assets by creating a portfolio of scale, professionally managed, with
proven income levels stabilised prior to disposal.
With strong demand and a systemic under-supply of high-quality homes to rent
in and around London, upward pressure on rents is forecast to remain. We will
be locking in build costs early in the investment cycle and with yields linked
to long-term interest rates, there is strong potential to drive value
accretion over the next ten years, as well as incremental income while the
properties in the portfolio remain owned by Berkeley.
Drawing on our experience in 2011-2014 when we developed and managed a
portfolio of 900 homes, and utilising our ongoing site presence, we will
create our own operating and management platform to provide tenants with the
high levels of customer service experienced by our purchasers.
The establishment of the portfolio will be financed by a combination of
internally generated funds (over and above annual scheduled shareholder
returns), debt secured against rental properties once income generating, and
the introduction of third-party capital at the appropriate time, thereby
enhancing the efficiency of Berkeley's balance sheet and fully supporting the
long-term 15% pre-tax ROE target. It will not inhibit new land investment in
the core business when appropriate opportunities arise.
The platform being established is flexible, ensuring Berkeley is able to
dispose of the properties individually or in stand-alone blocks at any time
should this become the more compelling exit route for any reason over the
course of the next ten years.
Shareholder Returns
The current shareholder returns framework is based upon an annual return of
£283 million through to September 2025 (as the shareholder returns year runs
from 1 October to 30 September each year), which can be made through either
dividends or share buy-backs, subject to a dividend underpin of 66 pence per
share (approximately £70 million).
Shareholder returns during the financial year totalled £170.4 million:
Shareholder Returns for the year ending 30 April: 2024 2023
£'m £'m
Dividends paid 98.1 98.5
Share buy-backs undertaken 72.3 155.4
Shareholder return in the financial year 170.4 253.9
Dividends paid during the financial year of £98.1 million comprised:
· A £63.1 million dividend in September 2023 (59.30 pence per
share) which completed the return of £283 million for the year ended 30
September 2023; and
· A £35.0 million dividend in March 2024 (33.00 pence per share)
representing half of the dividend underpin in respect of the scheduled return
of £283 million for the year ending 30 September 2024.
The total amount returned via share buy-backs in the financial year was £72.3
million across 1.8 million shares at an average price of £39.62 per share.
This includes £29.2 million in respect of the year annual return to 30
September 2024. When combined with the £35.0 million dividend paid in
March, there is currently £218.9 million still due for return by 30 September
2024. This will be completed by:
· A further £34.9 million (33.00 pence per share) interim dividend
to be paid on 26 July 2024 to shareholders on the Company's register of
members at close of business on 27 June 2024. The ex-dividend date is 28
June 2024; and
· A special dividend of £184.0 million (174 pence per share) to be
paid in September 2024 accompanied by a share consolidation, subject to
approval by shareholders at the September AGM.
Any further share buy-backs undertaken in the intervening period will
therefore count towards the £283 million return for the year to 30 September
2025, which currently equates to £2.67 per share and compares to the initial
£2.00 per share initiated in 2016.
Housing Market and Operations
Sales
Throughout the year, the value of underlying private reservations has been
consistently around a third lower than FY23, reflecting the ongoing
macroeconomic and geopolitical uncertainty and, in particular, the prolonged
period of elevated interest rates. Sales prices have been largely stable
across our sites and above business plan levels, with cancellation levels in
the normal range.
Our core markets are underpinned by the systemic under-supply of new homes,
the related strong rental growth of recent years and a supportive mortgage
market. Enquiry levels remain robust, with the slow-moving nature of the
second-hand market impacting transaction timescales for sale-dependent
owner-occupiers. We anticipate sales reservations will remain around current
levels until we see the first reduction in interest rates and customers have
confidence in the trajectory for rates and the wider economy.
We continue to benefit from a strong order book. Cash due on exchanged private
forward sales stands at £1.70 billion, down from £2.14 billion at the start
of the year, with 80% of private sales for FY25 already secured. This level
will moderate over the course of the coming year while the prevailing sales
rates continue. Equally, and as anticipated, Berkeley's completed stock has
increased in this environment, providing readily available homes for those
currently in the zone to move and for when the market conditions
normalise.
Positively, inflation is now abating, and the market expectation is for
measured interest rate reductions over the near term against a backdrop of
full employment levels and resilient wage growth which has improved
affordability in real terms. Nonetheless, Berkeley is mindful of the ongoing
uncertainty on a number of macro fronts which weighs on market sentiment.
Berkeley is therefore positioned for sales rates to remain subdued for the
near-term but is alert to the prospect of these responding decisively to
evolving market conditions.
More fundamentally, Berkeley's core markets in London and the South East are
under-supplied. Focussing on the capital, the latest DLUHC data is new-build
starts for the 12 months to December 2023 of just under 17,000 (including
private, PRS and affordable homes) below both the current London Plan target
of 52,000 per annum and Government's identified local housing need of 94,000
per annum.
Land and planning
Following extended planning processes and timescales, Berkeley has secured
five new consents during the year:
· 199 homes in Spring Hill, Maidenhead;
· 470 homes in Guildford, Surrey (St Edward);
· 550 homes adjacent to West End Gate, Marylebone;
· 970 homes in Chalk Gardens, Sutton; and
· 2,150 homes at Syon Lane, Brentford (St Edward).
The sites in Maidenhead and Guildford have been added to the land holdings
during the year, with the former a strategic land site and the latter
transferred from the pipeline. While consent was secured in December 2023
for the large-scale regeneration development in Brentford, the site will
remain in the pipeline while Berkeley re-plans the development to reflect
building regulation changes, notably to accommodate second staircases, that
have arisen since the application was called-in by central Government in late
2021. In addition, Berkeley has obtained some 30 amendments to planning
consents on existing sites.
At 30 April 2024, Berkeley's land holdings comprise 54,081 plots across 70
developments (30 April 2023: 58,045 plots across 73 developments), including
those in the St Edward joint venture.
The plots in the land holdings have an estimated future gross profit of £6.93
billion (30 April 2023: £7.63 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 of £0.70 billion principally arises through
the gross profit taken through the Income Statement, with the two new sites
added partly mitigating the impact of market movements and regulatory changes
on the anticipated future gross profit in the land holdings. Consequently,
the estimated future gross margin is 25.1% (30 April 2023: 26.2%).
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 30 April
2024 (30 April 2023: 14,000 plots on 14 sites) following the transfer of the
Guildford site to the land holdings.
Construction
For Berkeley, build cost inflation in today's market is at negligible levels
apart from some isolated trades where demand is high, reflecting a combination
of reduced energy prices, the reversal of the very high materials inflation of
recent years and reduction in new homes starts and construction output more
broadly. For the early trades and those most impacted by the decline in
orders we are already seeing some reductions in current tender pricing. We
expect these market-led dynamics to continue placing downward pressure on
build costs, but this will continue to be balanced by the costs associated
with ongoing regulatory change. These include the impacts of evolving building
regulations, the introduction of the new building safety regime and the
requirements for second staircases in buildings above 18 metres.
We continue to work with and support our established supply chain partners to
ensure sustainability of the supply chain and delivery on our development
sites as the market continues to adjust to these changing dynamics.
CMA investigation
Berkeley notes the outcome of the Competition and Markets Authority ("CMA")
market study into house- building, which concluded on 26 February 2024 with
the CMA's decision not to launch a market investigation at this time. As one
of the eight large housebuilders covered by the CMA's subsequent investigation
into possible anti-competitive sharing of information in the housebuilding
industry, we continue to cooperate with the CMA and their enquiries.
Self-Remediation Terms and Contract
On 13 March 2023 Berkeley entered into the Self-Remediation Terms and Contract
with DLUHC, 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 40 buildings where works are still to be completed, 12 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.
Looking forward, Berkeley is ensuring its procedures are compliant with new
legislation and is working 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
The last 12 months has seen a continuation of the volatile and uncertain
operating environment for Berkeley. However, while interest rates have
stayed at elevated levels for longer than the market had anticipated, there
are signs that the outlook is improving with inflation greatly reduced, the
first interest rate cut expected later this year and a return to growth.
Housing is a central issue in the upcoming General Election and we are
optimistic that the next Government will prioritise increasing housing supply
of all tenures to deliver the homes the country badly needs where they are
needed most. This is not straight-forward due to the multiple demands on
development and the impact of policy and regulatory changes of recent years.
However, we look forward to working with all levels of Government to unlock
development on brownfield sites which have a vital role to play in tackling
the housing crisis and re-energising our towns and cities to meet the
challenges of tomorrow.
Berkeley enters the coming year in a robust position with over £0.5 billion
of net cash, £1.7 billion of cash due on exchanged private sales and £6.9
billion of future gross margin in our land holdings.
We have in place a clear strategy for capital allocation, maintaining our
previously announced scheduled annual shareholder returns programme and
investing surplus capital to increase delivery by around 10% to develop our
own BTR platform to deliver much needed quality homes for the rental market on
our well-connected, nature-rich regeneration sites.
Our focus for the next twelve months is to find the best development solution
for each of our sites, adding value to maintain operating margins in the
long-term historic range of 17.5% to 19.5%. The challenge in the near-term
is maintaining pre-tax return on equity above our 15% hurdle rate given the
subdued sales market and the time required to achieve satisfactory planning
consents in the current planning and regulatory environment.
We are delighted that over the last year our advocacy has helped the
development of brownfield land to be recognised as the most sustainable way of
solving the UK's housing crisis, and we will continue to fulfil our purpose
and transform the most challenging sites into exceptional places with a real
sense of community, yielding a long-term positive impact for society, the UK
economy and natural world.
Rob Perrins
Chief Executive
TRADING AND FINANCIAL REVIEW
Trading performance
Berkeley has delivered pre-tax profits of £557.3 million for the year:
Year ended 30 April 2024 2023 Change
£'m £'m £'m %
Revenue 2,464.3 2,550.2 -85.9 -3.4%
Gross profit 644.5 696.8 -52.3 -7.5%
Operating expenses (164.8) (178.5) +13.7 -7.7%
Operating profit 479.7 518.3 -38.6 -7.4%
Net finance income / (costs) 12.0 (10.6) +22.6
Share of joint ventures 65.6 96.3 -30.7
Profit before tax 557.3 604.0 -46.7 -7.7%
Pre-tax return on equity 16.2% 18.7% -2.5%
Earnings per share - basic 373.9p 426.8p -52.9p -12.4%
Revenue of £2,464.3 million in the year (2023: £2,550.2 million) arose
primarily from the sale of new homes in London and the South East. This
included £2,395.7 million of residential revenue (2023: £2,508.3 million),
£21.4 million of land sales (2023: £nil) and £47.2 million of commercial
revenue (2023: £41.9 million).
3,521 new homes (2023: 4,043) were sold across London and the South East at an
average selling price of £664,000 (2023: £608,000) reflecting the mix of
properties sold in the year.
The gross margin percentage is 26.2% (2023: 27.3%), reflecting the mix of
developments on which homes were completed in the year. Overheads of £164.8
million (2023: £178.5 million) have decreased by £13.7 million (7.7%). The
operating margin is 19.5% (2023: 20.3%).
Berkeley's share of the results of joint ventures is a profit of £65.6
million (2023: £96.3 million), with St Edward's profits arising predominately
from completions at Royal Warwick Square and Millbank.
The cost of borrowings, amortisation of associated fees and imputed non-cash
interest on land creditors is outweighed by interest earned from gross cash
holdings, resulting in net finance income of £12.0 million for the year
(2023: net finance cost of £10.6 million).
The taxation charge for the year is £159.7 million (2023: £138.3 million) at
an effective tax rate of 28.7% (2023: 22.9%), which incorporates the
additional 4% RPDT and Corporation Tax of 25%, following the increase from 19%
from April 2023.
Pre-tax return on equity for the year is 16.2% (2023: 18.7%).
Basic earnings per share has decreased by 12.4% from 426.8 pence to 373.9
pence, which takes account of the buy-back of 1.8 million shares at a cost of
£72.3 million under the Shareholder Returns Programme.
Financial Position
The Group's net assets increased by £228.2 million during the year to
£3,560.5 million (2023: £3,332.3 million):
Summarised Balance Sheet as at 30 April 2024 2023 Change
£'m £'m £'m
Non-current assets 393.4 394.9 -1.5
Inventories 5,283.9 5,302.1 -18.2
Debtors 127.0 92.3 +34.7
Creditors (2,775.8) (2,867.4) +91.6
Capital employed 3,028.5 2,921.9 +106.6
Net cash 532.0 410.4 +121.6
Net assets 3,560.5 3,332.3 +228.2
Shares, net of treasury and EBT 105.9m 107.5m -1.6m
Net asset value per share 3,363p 3,101p +262p
Inventory
Inventories of £5,283.9 million include £725.8 million of land not under
development (2023: £927.1 million), £4,347.7 million of work in progress
(2023: £4,249.2 million) and £210.4 million of completed stock (2023:
£125.8 million).
During the year, three sites moved from land not under development into work
in progress: Broadway East in Bethnal Green, Bow Green and Winterbrook Meadows
in Wallingford.
Creditors
Total creditors of £2,775.8 million include £907.7 million of on-account
receipts from customers (2023: £921.3 million) and land creditors of £881.7
million (2023: £900.7 million). Of the total £881.7 million land creditor
balance, £198.1 million is short-term, with a further £227.9 million due to
settlement in the financial year ending 30 April 2026 and the residual £455.7
million is spread over the following seven years.
Creditors include provisions of £209.8 million (30 April 2023: £193.6
million) which represents post-completion development obligations, including
those related to building fire-safety matters, and other provisions.
Net cash
The Group ended the year with net cash of £532.0 million (30 April 2023:
£410.4 million), an increase of £121.6 million:
Abridged Cash Flow for year ended 30 April 2024 2023
£'m £'m
Profit before taxation 557.3 604.0
Taxation paid (170.5) (133.7)
Net investment in working capital (105.9) (50.1)
Net investment in joint ventures (3.7) (33.0)
Other movements 14.8 8.2
Shareholder returns (170.4) (253.9)
Increase in net cash 121.6 141.5
Opening net cash 410.4 268.9
Closing net cash 532.0 410.4
The net cash of £532.0 million comprises gross cash holdings of £1,192.0
million and long-term borrowings of £660.0 million.
Net assets and NAVPS
Net assets increased over the year by £228.2 million, or 6.8% to £3,560.5
million (2023: £3,332.3 million) primarily due to the profit after tax for
the year of £397.6 million outweighing the shareholder returns of £170.4
million and other movements in reserves of £1.0 million.
The shares in issue, net of treasury and EBT shares, closed at 105.9 million
compared to 107.5 million at the start of the year. The net reduction of 1.6
million shares comprises two movements:
· The 1.8 million share buy-backs undertaken during the year
for £72.3 million (£39.62 per share);
· The issue of 0.2 million shares under the 2011 LTIP.
Consequently, the net asset value per share is 3,363 pence at 30 April 2024,
up 8.4% from the 3,101 pence a year ago.
Funding
The Group's borrowing capacity of £1,200 million was unchanged during the
year and comprises:
· £400 million unsecured 10-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").
In February 2024, Berkeley exercised the second of two one-year extensions on
its £800 million bank facility, which extended the term to February 2029.
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
billion throughout the year have been placed on deposit with its six
relationship banks.
In February 2024, Berkeley entered a borrowing 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 30 April 2024.
Joint Ventures
Included within non-current assets are investments in joint ventures accounted
for using the equity method which are at £227.0 million at 30 April 2023
(2023: £223.4 million). The net £3.6 million increase in the year arises
from Berkeley's 50% share of three movements:
· Profits earned in joint ventures of £65.6 million;
· Dividend distribution from St Edward of £74.9 million; and
· Cash contributions (loans) to site specific joint ventures of
£12.9 million.
In St Edward, 406 homes were completed in the year at an average selling price
of £788,000 (2023: 594 homes at £885,000). 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, 2,502 plots (30 April 2023: 2,435 plots) in Berkeley's land holdings
relate to five St Edward developments, one in London (Westminster) and four
outside the capital (Reading, Fleet, Wallingford and Guildford).
Our Vision 2030: Transforming Tomorrow
Our Vision 2030 is Berkeley's ambitious long-term strategy, which sets 10
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.
Delivering for our customers
From delivering exceptional service with a personal touch to a focus on the
quality of our homes, we aim to delight our customers. Our independently
verified Net Promoter Score (NPS) of +80.2 significantly outperforms the
industry average of 44 (HBF, March 2024) and 97.7% of our customers would
'recommend us to a friend'. 63% of our homes had zero defects, as reported by
our customers, compared to only 5% of homes on average across the industry
(HBF, March 2024). This year we celebrated 10 consecutive years of
'Outstanding Achievement' from In-House Research, an independent third party
which undertakes our customer surveys.
Delivering enduring contributions through brownfield regeneration
Reviving neglected sites in our towns and cities is the most sustainable place
to build new homes and enables Berkeley to deliver valuable contributions to
society. Over the last five years we have built 19,608 homes, supported 26,000
jobs and contributed £2.0 billion in affordable housing subsidies and wider
community and infrastructure benefits. Our developments are creating more than
500 public facilities alongside public open spaces and upgrades to transport
and infrastructure.
An increasing number of our sites have a bespoke community plan to bring
together new and existing communities and engages residents in the long-term
stewardship of their neighbourhood. They are underpinned by research into
local priorities and needs, our learnings to date and are augmented by strong
local partnerships.
Taking a leading role in regreening cities
Having pioneered the successful implementation of Biodiversity Net Gain (BNG)
on new developments since 2017, we welcomed the national milestone of
mandatory BNG in February 2024 and were delighted to have been cited as a best
practice case study by government and public bodies. We now have BNG
strategies on 56 developments covering an area of 580 hectares.
Building on our collaboration with Natural England and the Local Government
Association last year to co-host the industry's Biodiversity Conference, this
year we partnered with Natural England to run a series of sessions to upskill
local authorities and SMEs.
We are expanding our approach from measurable improvements in nature to
delivering a more valuable and holistic contribution to the environment.
Having successfully completed an award-winning trial of water neutrality with
Thames Water at Royal Exchange in Kingston, we have now identified a suite of
metrics to demonstrate net gain across other topics, such as air and soil
quality.
Playing our part in climate action
We are delighted to be recognised by CDP as a climate leader, being listed on
the prestigious 'A List'. Since 2021 we have completed 48 embodied carbon
assessments, which better informs our design, specification and sourcing
choices and enables us to engage with manufacturers of high impact materials.
For example, this year we have focussed on aluminium manufacturers, providing
our operating businesses with information on low carbon products.
We are updating our energy efficiency standards for construction sites to
reflect results from energy modelling on topics such as out of hours
consumption, together with learnings from third party audits undertaken by the
Carbon Trust. We also continue to transition from traditional diesel to low
carbon biodiesel; this year 17 sites operated diesel free and 96% of directly
purchased diesel was biodiesel HVO.
Carbon emissions from homes are regulated and in March we responded to
government's consultation on the Future Homes and Buildings Standard. We adopt
a holistic approach, with our focus on creating nature-rich landscapes also
establishing resilience to future climate change impacts.
Maintaining industry-leading standards of health and safety
We have an established and robust approach to Health & Safety; our Annual
Injury Incidence Rate for the year is 52 per 100,000 people, compared to an
industry average of 296 (HSE, October 2023). We were proud to have once again
won RoSPA's Construction, Housebuilding and Property Development sector award
for safety in 2024. Alongside our Working at Height campaign, this year we
have launched an intervention app to bolster a culture of raising potential
issues whereby our teams can anonymously log an issue on site using a phone or
tablet by scanning a QR code on posters.
Our CITB approved training academy runs training for employees across a range
of topics, from health and safety to building quality and sustainability.
Within the year we developed training on the new Principal Contractor
duty-holder role under the Building Safety Act; this course has now been
published as a training standard by CITB, helping to guide the industry.
Fostering a fair, inclusive and respectful workplace
Our employee survey this year has provided insight into how our colleagues
feel about working life at Berkeley, informing areas of focus for each of our
operating businesses. We have also launched our approach to equity, diversity
and inclusion which encompasses five aspects: setting the right tone at
leadership level; external partnerships to support action; awareness, allyship
and celebration; attracting and recruiting the best talent; and using
analytics to drive change. Our operating businesses are taking action and we
have also brought colleagues together at Group-wide events such as the London
Pride Parade and International Women's Day.
Investing in the talent of the future
We retain our Gold membership of The 5% Club, with 9.5% of our employees in
'earn and learn' positions. This includes more than 150 apprentices, 50
graduates and 55 sponsored students studying towards an accredited external
qualification. Our emerging talent programmes support our commitment to social
mobility and diversity, helping us to provide a selection of routes into the
company and attract a broad range of people from different backgrounds.
This year we ran almost 200 careers events with schools, colleges and
universities, together with more than 50 work experience placements to give
people an opportunity to experience working life in the sector.
Supporting the work of the Berkeley Foundation
Berkeley established the Berkeley Foundation in 2011. It has become regarded
as a market-leading corporate foundation with its long-term commitments and
innovative approach to charitable giving and partnerships. The Foundation is
now deeply embedded at Berkeley and our employees give their time and
expertise to support its strategic and community partners. More than half of
our workforce chose to get involved in the Foundation's work over the last 12
months, including 1,990 volunteering hours and raising £940,000 of the £3.6
million invested in to the Foundation this year. We have offered work
placements and job opportunities, held careers days and shared our expertise
to help young people about to start their journey into employment.
The Foundation has also focussed on building the resilience of a voluntary
sector that is under pressure. This year saw the second year of the
Resilience Fund get underway, with a cohort of ten charities working to
support the mental health of young people from global majority communities
embarking on projects to increase their organisational resilience. Alongside
this, the Foundation met the immediate needs of its charity partners through
the cost of living crisis with a programme of targeted grants totalling
£262,000.
- End -
Principal risks and uncertainties
Financial risk
The financial risks to which Berkeley is exposed include:
· Liquidity risk - The risk that the funding required for the Group to
pursue its activities may not be available.
· Market credit risk - The risk that counterparties (mainly customers)
will default on their contractual obligations, resulting in a loss to the
Group. The Group's exposure to credit risk is comprised of cash and cash
equivalents, loans to joint ventures and trade and other receivables.
· Market interest rate risk - The risk that Group financing
activities are affected by fluctuations in market interest rates.
· Other financial risks - Berkeley contracts all sales and the vast
majority of its purchases in sterling, and so has no significant exposure to
currency risk, but does recognise that its credit risk includes receivables
from customers in a range of jurisdictions who are themselves exposed to
currency risk in contracting in sterling.
Management of financial risks
Berkeley adopts a prudent approach to managing these financial risks.
· Treasury policy and central overview - The Board approves treasury
policy and senior management control day-to-day operations. Relationships with
banks and cash management are co-ordinated centrally as a Group function. The
treasury policy is intended to maintain an appropriate capital structure to
manage the financial risks identified and provide the right platform for the
business to manage its operating risks.
· Low gearing - The Group is currently financing its operations
through shareholder equity, supported by £532 million of net cash on the
Balance Sheet and debt facilities. This in turn has mitigated its current
exposure to interest rate risk.
· Headroom provided by bank facilities - The Group has £800 million of
committed credit facilities maturing in February 2029. This comprises a green
term loan of £260 million and the revolving credit facility of £540 million.
In addition, the Group has listed debt in the form of Green Bonds to the value
of £400 million maturing in August 2031.
Berkeley has a strong working partnership with the six banks that provide the
facilities and this is key to Berkeley's approach to mitigating liquidity
risk.
· Forward sales - Berkeley's approach to forward selling new homes to
customers provides good visibility over future cash flows, as expressed in
cash due on forward sales which stands at £1.7 billion at 30 April 2024. It
also helps mitigate market credit risk by virtue of customers' deposits held
from the point of unconditional exchange of contracts with customers.
· Land holdings - By investing in land at the right point in the
cycle, holding a clear development pipeline in our land holdings and
continually optimising our existing holdings, we are not under pressure to buy
new land when it would be wrong for the long-term returns for the business.
· Detailed appraisal of spending commitments - A culture which
prioritises an understanding of the impact of all decisions on the Group's
spending commitments and hence its Balance Sheet, alongside weekly and monthly
reviews of cash flow forecasts at operating company, divisional and Group
levels, recognises that cash flow management is central to the continued
success of Berkeley.
Risk Description and Impact Approach to Mitigating Risk
Economic Outlook
As a property developer, Berkeley's business is sensitive to wider economic Recognition that Berkeley operates in a cyclical market is central to our
factors such as changes in interest rates, employment levels and general strategy and maintaining a strong financial position is fundamental to our
consumer confidence. business model and protects us against adverse changes in economic conditions.
Some customers are also sensitive to changes in the sterling exchange rate in Land investment in all market conditions is carefully targeted and underpinned
terms of their buying decisions or ability to meet their obligations under by demand fundamentals and a solid viability case.
contracts.
Levels of committed expenditure are carefully monitored against forward sales
Changes to economic conditions in the UK, Europe and worldwide may lead to a secured, cash levels and headroom against our available bank facilities, with
reduction in demand for housing which could impact on the Group's ability to the objective of keeping financial risk low to mitigate the operating risks
deliver its corporate strategy. of delivery in uncertain markets.
Production programmes are continually assessed, depending upon market
conditions. The business is committed to operating at an optimal size, with a
strong Balance Sheet, through autonomous businesses to maintain the
flexibility to react swiftly, when necessary, to changes in market
conditions.
Political Outlook
Significant political events in the UK and overseas, may impact Berkeley's Whilst we cannot directly influence political events, the risks are taken
business through, for example, supply chain disruption or the reluctance of into account when setting our business strategy and operating model. In
customers to make purchase decisions due to political uncertainty and, addition, we actively engage in the debate on policy decisions.
subsequently, policies and regulation may be introduced that directly impact
our business model.
Regulation
Berkeley is primarily focused geographically on London, Birmingham and the
South East of England, which limits our risk when understanding and
Adverse changes to Government policy on areas such as taxation, design determining the impact of new regulation across multiple locations and
requirements and the environment could restrict the ability of the Group to jurisdictions.
deliver its strategy.
The effects of changes to Government policies at all levels are closely
Failure to comply with laws and regulations could expose the Group to monitored by operating businesses and the Board, and representations made to
penalties and reputational damage. policy-setters where appropriate.
Berkeley's experienced teams are well placed to interpret and implement new
regulations at the appropriate time through direct lines of communication
across the Group, with support from internal and external legal advisors.
Land Availability
Understanding the markets in which we operate is central to Berkeley's
strategy and, consequently, land acquisition is primarily focused on
An inability to source suitable land to maintain the Group's land holdings at Berkeley's core markets of London, Birmingham and the South East of England,
appropriate margins in a highly competitive market could impact on the Group's markets in which it believes the demand fundamentals are strong.
ability to deliver its corporate strategy.
Berkeley has experienced land teams with strong market knowledge in their
areas of focus, which gives us the confidence to buy land without an
implementable planning consent and, with an understanding of local
stakeholders' needs, positions Berkeley with the best chance of securing a
viable planning consent.
Berkeley's land holdings mean that it has the land in place for its business
plan requirements and can therefore always acquire land at the right time in
the cycle.
Planning Process
The Group's strategic geographical focus and expertise place it in the best
position to conceive and deliver the right consents for the land acquired.
Delays or refusals in obtaining commercially viable planning permissions could
result in the Group being unable to develop its land holdings.
Full detailed planning and risk assessments are performed and monitored for
each site without planning permission, both before and after purchase. The
The current complex and evolving nature of planning policies amplifies the planning status of all sites is also reviewed at both monthly divisional Board
risk. meetings and main Board meetings.
This could have a direct impact on the Group's ability to deliver its product The Group works closely with local communities in respect of planning
and on its profitability. proposals and maintains strong relationships with local authorities and
planning officers.
Berkeley has planning consents in place for its immediate business plan needs.
Retaining People
An inability to attract, develop, motivate and retain talented employees could Two strategic priorities within Our Vision 2030 are designed to help recruit
have an impact on the Group's ability to deliver its strategic priorities. and retain a high calibre work force.
Failure to consider the retention and succession of key management could The first is 'Employee Experience' which places a specific focus on areas
result in a loss of knowledge and competitive advantage. including employee experience and diversity and inclusion, and the second
focuses on 'Future Skills' looking at how we can create tangible long-term
change within the industry.
Succession planning is regularly reviewed at both divisional and main Board
level. Close relationships and dialogue are maintained with key personnel.
Remuneration packages are constantly benchmarked against the industry to
ensure they remain competitive.
Securing Sales
The Group has experienced sales teams both in the UK and within our overseas
sales offices, supplemented by market-leading agents.
An inability to match supply to demand in terms of product, location and price
could result in missed sales targets and/or high levels of completed stock
which in turn could impact on the Group's ability to deliver its corporate
strategy. Detailed market demand assessments of each site are undertaken before
acquisition and regularly during delivery of each scheme to ensure that supply
is matched to demand in each location.
Design, product type and product quality are all assessed on a site-by-site
basis to ensure that they meet the target market and customer aspirations in
that location.
The Group's ability to forward sell reduces the risk of the development cycle
where possible, thereby justifying and underpinning the financial investment
in each of he Group's sites. Completed stock levels are reviewed regularly.
Liquidity
The Board approves treasury policy and senior management control day-to-day
operations. Relationships with banks and cash management are co-ordinated
Reduced availability of the external financing required by the Group to centrally as a Group function.
pursue its activities and meet its liabilities.
The treasury policy is intended to maintain an appropriate capital structure
Failure to manage working capital may constrain the growth of the business and to manage the Group's financial risks and provide the right platform for the
ability to execute the business plan. business to manage its operating risks.
Cash flow management is central to the continued success of Berkeley. There
is a culture which prioritises an understanding of the impact of all decisions
on the Group's spending commitments and hence its Balance Sheet, alongside
weekly and monthly reviews of cash flow forecasts at operating company,
divisional and Group levels.
Mortgages
Berkeley has a broad product mix and customer base which reduces the reliance
on mortgage availability across its portfolio.
An inability of customers to secure sufficient mortgage finance now or in the
future could have a direct impact on the Group's transaction levels.
Deposits are taken on all sales to mitigate the financial impact on the Group
in the event that sales do not complete due to a lack of mortgage
availability.
Climate Change
The effects of climate change could impact Berkeley in different ways. Climate action is a strategic priority within our business strategy, Our
Climate Scenario Analysis has been undertaken to evaluate climate related Vision 2030, and we have set ambitious science-based targets (SBTs) to
risks and opportunities. mitigate our impact, alongside continuing to incorporate adaptation measures
within our developments to make them more resilient to the expected future
impacts of climate change.
Identified risks and opportunities relating to the transition to a lower
carbon economy include: carbon pricing and emissions offsets; evolving
planning and design requirements; skills shortage impacting ability to install We have energy efficiency standards in place that cover the activities of our
low carbon technology; technology evolution; increasing raw material cost; and sites, offices and sales suites and encourage the identification and
demand supply imbalance. investment in measures to take action under our scopes 1 and 2 greenhouse gas
(GHG) emissions reduction target. In addition, our scope 3 SBT commits us to
working with our supply chain to reduce the embodied carbon within the
materials and services we procure, and building more efficient homes.
Risks relating to the physical impacts of climate change include: heat stress,
drought stress, subsidence, windstorm and flood.
To build resilience into our homes and developments, we consider climate
change risks and incorporate measures to reduce these through minimum
Sustainability Standards. These cover areas such as energy efficiency, water
efficiency, rainwater harvesting, sustainable drainage systems (SuDS) and
leaving space for nature.
Sustainability
Berkeley is aware of the environmental and social impact of the homes and The strategic direction for sustainability is set at a Group level within a
places that it builds, both throughout the development process and during dedicated Sustainability Strategy. Three areas of the Sustainability Strategy
occupation and use by customers and the wider community. have been identified as being of material importance and integrated within
our business strategy, Our Vision 2030; communities, climate action and
nature. We have specific commitments to enhance environmental and social
value in the operation of our business and the delivery of our homes and
Failure to address sustainability issues could affect the Group's ability to places.
acquire land, gain planning permission, manage sites effectively and respond
to increasing customer demands for sustainable homes and communities, with
access to green spaces and nature.
Dedicated sustainability teams are in place at Group's Head Office and within
each division of the business, identifying risks, providing advice, driving
improvement and monitoring performance.
Sustainability Standards set out the minimum Berkeley requirements for new
developments and the operation of our construction sites, divisional offices
and sales suites. These are supported by more detailed procedures within our
Sustainability management System, including a requirement for environmental
risk registers for each site and the completion of at least quarterly site
sustainability assessments by our internal sustainability professionals.
Our ambition on every development is to strengthen the local community,
improve people's quality of life and have a positive and lasting social impact
that is felt beyond our site boundary.
Health and Safety Berkeley considers this to be an area of critical importance. Berkeley's
health and safety strategy is set by the Board. Dedicated health and safety
teams are in place in each division and at Head Office.
Berkeley's operations have a direct impact on the health and safety of its
people, contractors and members of the public.
Procedures, training and reporting are all regularly reviewed to ensure that
high standards are maintained and comprehensive accident investigation
procedures are in place. Insurance is held to cover the risks inherent in
A lack of adequate procedures and systems to reduce the dangers inherent in large-scale construction projects.
the construction process increases the risk of accidents or site related
catastrophes, including fire and flood, which could result in serious injury
or loss of life leading to reputational damage, financial penalties and
disruption to operations. The Group continues to implement initiatives to improve health and safety
standards on site.
Product Quality and Customers Detailed reviews are undertaken of the product on each scheme both during the
acquisition of the site and throughout the build process to ensure that
product quality is maintained.
Berkeley has a reputation for high standards of quality in its product.
The Group has detailed quality assurance procedures in place surrounding both
design and build to ensure the adequacy of build at each key stage of
If the Group fails to deliver against these standards and its wider construction.
development obligations, it could be exposed to reputational damage, as well
as reduced sales and increased cost.
Customer satisfaction surveys are undertaken on the handover of our homes, and
feedback incorporated into the specification and design of subsequent
schemes.
Build Cost and Programme
Build costs are affected by the availability of skilled labour and the price A procurement and programming strategy for each development is agreed by the
and availability of materials, suppliers and contractors. divisional Board before site acquisition, whilst a further assessment of
procurement and programming is undertaken and agreed by the divisional Board
prior to the commencement of construction.
Declines in the availability of a skilled workforce, and changes to these
prices could impact on our build programmes and the profitability of our
schemes. Build cost reconciliations and build programme dates are presented and
reviewed in detail at divisional cost review meetings each month.
Our Vision 2030 strategy includes ongoing commitments to training and support
across both our employees and our indirect workforce.
Cyber and Data Risk
The Group acknowledges that it places significant reliance upon the Berkeley's systems and control procedures are designed to ensure that
availability, accuracy and confidentiality of all of its information systems confidentiality, availability and integrity are not compromised.
and the data contained therein.
Our Information Security Programme focuses primarily on the detection and
The Group could suffer significant financial and reputational damage prevention of security incidents and potential data breaches.
because of the corruption, loss or theft of data, whether inadvertent or via a
deliberate, targeted cyber-attack.
An IT Security Committee meets monthly to address all cyber security matters.
The Group operates multiple physical data centres supported by cloud based
services thereby reducing centralised risk exposure. An IT disaster recovery
plan is regularly assessed.
The Group has cyber insurance in place to reduce any potential financial
impact.
Condensed Consolidated Income Statement
For the year ended 30 April 2024 2023
Notes £m £m
Revenue 2,464.3 2,550.2
Cost of sales (1,819.8) (1,853.4)
Gross profit 644.5 696.8
Net operating expenses (164.8) (178.5)
Operating profit 479.7 518.3
Finance income 3 53.9 23.1
Finance costs 3 (41.9) (33.7)
Share of results of joint ventures using the equity method 65.6 96.3
Profit before taxation for the year 557.3 604.0
Income tax expense 4 (159.7) (138.3)
Profit after taxation for the year 397.6 465.7
Earnings per share (pence):
Basic 5 373.9 426.8
Diluted 5 371.1 422.4
Condensed Consolidated Statement of Comprehensive Income
For the year ended 30 April 2024 2023
£m £m
Profit after taxation for the year 397.6 465.7
Other comprehensive expense
Items that will not be reclassified to profit or loss
Actuarial loss recognised in the pension scheme (0.7) (1.3)
Total items that will not be reclassified to profit or loss (0.7) (1.3)
Other comprehensive expense for the year (0.7) (1.3)
Total comprehensive income for the year 396.9 464.4
Condensed Consolidated Statement of Financial Position
As at 30 April 2024 2023
Notes £m £m
Assets
Non-current assets
Intangible assets 17.2 17.2
Property, plant and equipment 28.0 34.6
Right-of-use assets 4.3 5.2
Investments accounted for using the equity method 227.0 223.4
Deferred tax assets 116.9 114.5
393.4 394.9
Current assets
Inventories 6 5,283.9 5,302.1
Trade and other receivables 119.8 92.3
Current tax assets 7.2 -
Cash and cash equivalents 7 1,192.0 1,070.4
6,602.9 6,464.8
Total assets 6,996.3 6,859.7
Liabilities
Non-current liabilities
Borrowings 7 (660.0) (660.0)
Trade and other payables (683.6) (863.4)
Lease liability (2.3) (2.9)
Provisions for other liabilities and charges (140.7) (115.1)
(1,486.6) (1,641.4)
Current liabilities
Trade and other payables (1,878.0) (1,801.6)
Current tax liabilities - (3.7)
Lease liability (2.1) (2.2)
Provisions for other liabilities and charges (69.1) (78.5)
(1,949.2) (1,886.0)
Total liabilities (3,435.8) (3,527.4)
Total net assets 3,560.5 3,332.3
Equity
Shareholders' equity
Share capital 6.2 6.3
Share premium 49.8 49.8
Capital redemption reserve 25.3 25.2
Other reserve (961.3) (961.3)
Retained earnings 4,440.5 4,212.3
Total equity 3,560.5 3,332.3
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
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
At 1 May 2022 6.5 49.8 25.0 (961.3) 4,016.1 3,136.1
Profit after taxation for the year - - - - 465.7 465.7
Other comprehensive expense for the year - - - - (1.3) (1.3)
Purchase of own shares (0.2) - 0.2 - (155.4) (155.4)
Transactions with shareholders:
- Charge in respect of employee share schemes - - - - (4.5) (4.5)
- Deferred tax in respect of employee share schemes - - - - (9.8) (9.8)
- Dividends to equity holders of the Company - - - - (98.5) (98.5)
At 30 April 2023 6.3 49.8 25.2 (961.3) 4,212.3 3,332.3
Condensed Consolidated Cash Flow Statement
For the year ended 30 April 2024 2023
Notes £m £m
Cash flows from operating activities
Cash generated from operations 7 383.0 472.5
Interest received 50.4 18.2
Interest paid (29.5) (21.4)
Income tax paid (170.5) (133.7)
Net cash flow from operating activities 233.4 335.6
Cash flows from investing activities
Purchase of property, plant and equipment (1.4) (2.0)
Proceeds on disposal of property, plant and equipment 0.3 0.8
Dividends from joint ventures 74.9 74.9
Movements in loans with joint ventures (12.9) (11.6)
Net cash flow from investing activities 60.9 62.1
Cash flows from financing activities
Lease capital repayments (2.3) (2.3)
Purchase of own shares (72.3) (155.4)
Dividends paid to Company's shareholders (98.1) (98.5)
Net cash flow from financing activities (172.7) (256.2)
Net increase in cash and cash equivalents 121.6 141.5
Cash and cash equivalents at the start of the financial year 1,070.4 928.9
Cash and cash equivalents at the end of the financial year 1,192.0 1,070.4
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.
2 Basis of preparation
2.1 Introduction
These results do not constitute the Group's statutory accounts for the year
ended 30 April 2024 but are derived from those accounts. Statutory accounts
for 2023 have been delivered to the Registrar of Companies and those for 2024
will be delivered following the Company's Annual General Meeting. The external
auditor has reported on those accounts; its report was unqualified, did not
contain an emphasis of matter paragraph and did not contain any statements
under section 498 of the Companies Act 2006.
The Consolidated Financial Statements have been prepared in accordance with
the requirements of the Companies Act 2006 and with UK-adopted International
Accounting Standards. The statutory accounts have been prepared based on the
accounting policies and method of computations consistent with those followed
in the preparation of the Group's annual financial statements for the year
ended 30 April 2023.
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 30 April 2024, the Group had net
cash of £532 million and total liquidity of £1,732 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 £1,701 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
Consolidated Financial Statements. For this reason, it continues to adopt the
going concern basis of accounting in preparing its Consolidated Financial
Statements.
3 Net finance costs
For the year ended 30 April 2024 2023
£m £m
Finance income 53.9 23.1
Finance costs
Interest payable on borrowings and non-utilisation fees (29.2) (21.9)
Amortisation of fees incurred on borrowings (2.0) (1.7)
Other finance costs (10.7) (10.1)
(41.9) (33.7)
Net finance income/(costs) 12.0 (10.6)
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
For the year ended 30 April 2024 2023
£m £m
Current tax including RPDT
UK current tax payable (166.0) (140.5)
Adjustments in respect of previous years 6.4 (1.4)
(159.6) (141.9)
Deferred tax including RPDT
Deferred tax movements 2.8 2.5
Adjustments in respect of previous years (2.9) 1.1
(0.1) 3.6
(159.7) (138.3)
The effective tax rate for the year is 28.7% (2023: 22.9%) and includes a
£2.9 million credit arising from the re-measurement, in part, of the Group's
UK deferred tax assets. Corporation tax is calculated at the rate of 25%
(2023: 19.5%) and residential property developer tax (RPDT) at 4% (2023: 4%)
on profits arising from residential property development activities.
5 Earnings per share
Basic earnings per share are calculated as the profit for the financial year
attributable to shareholders of the Group divided by the weighted average
number of shares in issue during the year.
For the year ended 30 April 2024 2023
Profit attributable to shareholders (£m) 397.6 465.7
Weighted average no. of shares (m) 106.3 109.1
Basic earnings per share (p) 373.9 426.8
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 30 April 2024, the Group had two (2023: one) categories of potentially
dilutive ordinary shares: 0.7 million (2023: 1.0 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.
For the year ended 30 April 2024 2023
Profit used to determine diluted EPS (£m) 397.6 465.7
Weighted average no. of shares (m) 106.3 109.1
Adjustments for:
Share options - 2011 LTIP 0.7 1.1
Share options - Restrictive Share Plan 0.1 -
Shares used to determine diluted EPS (m) 107.1 110.2
Diluted earnings per share (p) 371.1 422.4
6 Inventories
Year ended 30 April 2024 2023
£m £m
Land not under development 725.8 927.1
Work in progress: Land cost 1,715.3 1,729.2
Total land 2,441.1 2,656.3
Work in progress: Build cost 2,632.4 2,520.0
Completed units 210.4 125.8
Total inventories 5,283.9 5,302.1
7 Notes to the Condensed Consolidated Cash Flow Statement
For the year ended 30 April 2024 2023
£m £m
Net cash flows from operating activities
Profit for the financial year 397.6 465.7
Adjustments for:
Taxation 159.7 138.3
Depreciation 4.8 5.1
Loss on sale of PPE 5.2 3.7
Finance income (53.9) (23.1)
Finance costs 41.9 33.7
Share of results of joint ventures after tax (65.6) (96.3)
Non-cash charge in respect of share awards (0.8) (4.5)
Changes in working capital:
Decrease/(Increase) in inventories 18.2 (168.1)
(Increase)/Decrease in trade and other receivables (24.4) 57.5
(Decrease)/Increase in trade and other payables (99.7) 60.5
Cash generated from operations 383.0 472.5
Reconciliation of net cash flow to net cash
Net increase in net cash and cash equivalents, including bank overdraft 121.6 141.5
Movement in borrowings - -
Movement in net cash in the financial year 121.6 141.5
Opening net cash 410.4 268.9
Closing net cash 532.0 410.4
Net cash
Cash and cash equivalents 1,192.0 1,070.4
Non-current borrowings (660.0) (660.0)
Net cash 532.0 410.4
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 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.
8 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.
As at 30 April 2024 2023
Net assets (£m) 3,560.5 3,332.3
Total shares in issue (million) 114.7 116.5
Less:
Treasury shares held (million) (8.7) (8.9)
Employee benefit trust shares held (million) (0.1) (0.1)
Net shares used to determine NAVPS (million) 105.9 107.5
Net asset per share attributable to shareholders (pence) 3,363 3,101
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).
As at 30 April 2024 2023
Operating profit 479.7 518.3
Share of joint ventures using equity method 65.6 96.3
Profit used to determine ROCE 545.3 614.6
Opening capital employed:
Net assets 3,332.3 3,136.1
Net cash (410.4) (268.9)
Opening capital employed 2,921.9 2,867.2
Closing capital employed:
Net assets 3,560.5 3,332.3
Net cash (532.0) (410.4)
3,028.5 2,921.9
Average capital employed 2,975.2 2,894.5
Return on capital employed (%) 18.3% 21.2%
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.
As at 30 April 2024 2023
Opening shareholders equity 3,332.3 3,136.1
Closing shareholders equity 3,560.5 3,332.3
Average shareholders' equity 3,446.4 3,234.2
Return on equity before tax:
Profit before tax 557.3 604.0
Return on equity before tax (%) 16.2% 18.7%
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.
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