Half-Year Profit Rise Helps Berkeley’s Repayment Plan

on Dec 10, 2012
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**Berkeley’s Profit 41% Up on Astute Land Acquisitions and Robust London Market**

Berkeley Group (LON:BKG), Britain’s second-largest homebuilder by market value, has posted a sharp increase in half-year earnings, The Times reported on 8 December 2012. The group’s exposure to the robust London property market and the acquisition of land at the low point of the economic cycle meant pre-tax profits rose 40.7 per cent to £142.2 million in the six months to October 31, from £74 million a year earlier.

In the first half of the fiscal year, the property developer snapped up 1,965 plots on five sites throughout the UK capital, including the £150-million purchase of the former headquarters of News International in the Wapping district, the former home to The Sun, The Times, The Sunday Times and News of the World. The company said this would meet its objective of growing the value of its land bank to £3 billion by April 2014, a year earlier than originally intended. Berkeley also announced that it sold 1,927 homes in the first half compared with 1,506 a year earlier, at an average price of £335,000, up from £254,000. About 35 per cent of the buyers were foreigners, down from 40 per cent earlier in the year, as volatile stock markets attracted more equity-rich domestic investors, the property group said.

Berkeley added that demand for residential property remained strong despite the economic backdrop, with the shortage of good quality homes supporting the case for investment in the London house market. The company said: “London’s reputation has only been enhanced during the period, above all from the successful staging of the Olympic and Paralympic games, and it has remained a stable and attractive market for investment.”

**First Step in Berkeley’s Repayment Plan**
Berkeley’s strong performance in the six months to October will trigger an interim dividend worth a total of £20 million for shareholders — its first distribution since 2008 and counting towards the £568 million Berkeley expects to return to investors by September 2015. Further share buybacks and dividends are expected to bring the total shareholder return to £1.7 billion by September 2021.

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!m[First Dividend to Shareholders as Homebuilder’s Shares Reach their Highest Levels since 2007](/uploads/story/1005/thumbs/pic1_inline.png)Mr Pidgley said: “These results, delivered in an uncertain market, demonstrate the value created by acquiring land at the right point in the economic cycle. The quality of the land bank, enhanced by the planning consents achieved and further investment in construction, means that Berkeley remains on track to return £568 million in cash to shareholders by no later than the first milestone date of 30 September 2015.”
**Stock Climbs the Most in Five Years**
Following its profit report for the first half of the fiscal years, Berkeley’s shares climbed 7.1 per cent to 1,767 pence — their highest level since 2007.
Bloomberg quoted Rachael Applegate, an analyst at Panmure Gordon & Co., as saying “The group has seen a strong trading performance across the board, with increases in average selling prices, volumes and net margins.” In an investor note the broker also announced that it has increased its 12-month target price for the London-listed property group’s shares to 1,650 pence from 1,390 pence and kept its hold rating.

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