Shares in Berkeley Group (LON:BKG) have fallen deep into the red this morning as the London-focused housebuilder warned of a fall in profits this year. The comments came as the company delivered ‘peak’ performance in the financial year ended April 30.
As of 10:32 BST, Berkeley’s share price had given up 4.68 percent to 3,936.00p, underperforming the broader UK market, with the benchmark FTSE 100 index having jumped 1.28 percent higher to 7,701.52 points. The housebuilder’s shares have added more than 23 percent to their value over the past year, as compared with about a three-percent rise in the Footsie.
Berkeley reports ‘peak’ year results
Berkeley said in a statement this morning that revenue had delivered pre-tax earnings of £934.9 million for the year ended April 30, marking a 15.1-percent increase year-on-year. The company sold 3,536 homes during the reported period, down from 3,905 a year ago, at an average selling price of £715,000, up from the previous year’s £675,000.
But Chief Executive Rob Perrins told Reuters that fewer such high-margin sales would come through in 2018/19 as housebuilders had cut back on buying such sites in late 2013 and 2014 as land prices rose and the commercial market improved.
Berkeley further said that today’s results represented ‘a peak’ for the company, with profitability returning to more normal levels from 2018/19, when profits are anticipated to be around 30 percent lower.
Analysts weigh in on group’s results
Proactive Investors quoted Liberum Capital Markets as commenting that it remained impressed at the resilience of Berkeley’s profits in spite of a slower London market but added it takes the “guidance of fading returns seriously and therefore see the shares close to fair value”. The newswire also quoted Shore Capital as pointing out that while the blue-chip housebuilder remained financially very strong, its cash position of £687 million appeared to contain £400 million which has been deliberately held back from investment due to ‘macro uncertainty’.