One of London’s biggest housebuilders has lifted its profit guidance for the next four years after a swift rebound in demand for its homes in the capital.
Berkeley Group, the FTSE 100 developer, forecast its pre-tax profits for the current financial year, which runs until April, would come in at about £562 million — about £27 million, or 5 per cent, more than City analysts had estimated.
It expects revenues to grow by 5 per cent in the following three years. By 2025, Berkeley expects its annual profit will have reached £625 million.
Rob Perrins, the chief executive, said he and his team had been encouraged by the return of buyers in London. Demand for properties in the capital fell sharply during the pandemic as people, commuting less into the office, looked to move to the countryside instead.
Demand was so thin that Berkeley held back some of its homes for sale last year although it spent £2 billion to keep building out its developments.
Advertisement
However, the number of inquiries it was receiving for homes at its 64 sites started to rebound over summer this year and those inquiries are turning into sales. Underlying sales, the company said, were now “slightly ahead” of those in the two years before the pandemic.
“London remains a world city where people want to live and it’s really picked up in the last three or four months,” Perrins said. “I think the move out of London was overblown — but I would say that as someone who’s just invested £2 billion into London!”
Berkeley, listed on the FTSE 100, has a market capitalisation of £5.2 billion. It operates a collection of brands, principally Berkeley Homes, St George and St James. It has developments across the East and West Midlands and South East and a big presence in London.
Pre-tax profit rose 26 per cent to £290.7 million from £230.8 million in the six months to the end of October. During that period, it built 2,223 homes — not far off double the 1,249 homes it delivered in the same period a year ago.
Each of those houses sold for an average of £647,000 compared with £799,000 this time last year. Perrins said that the drop-off was because last year’s figure was skewed by the sale of a bigger number of central London flats, which tend to be more expensive.
Advertisement
Developers have been battling to control costs as prices of materials, particularly timber and steel, surged earlier in the year. However, the company has seen a “gradual easing of the supply constraints for most materials”.
Other builders have struggled to get enough labourers on site but Berkeley said it had “sufficient” numbers, with 11,000 workers on its sites — more than it had before the pandemic.
Perrins said, in London particularly, there were enough labourers given the reduction in commercial projects.
Building analyst Clyde Lewis, deputy head of research at Peel Hunt, said there were “no major surprises” in the half-year results themselves.
Berkeley’s share price performance has been among the weakest in the sector this year, largely because of concerns about the health of the London property market, especially when compared to the rest of the country.
Advertisement
However, boosted by the profits upgrades, the shares closed up by 109p, or 2.4 per cent, at £47.44 yesterday — their highest since September.
