Berkeley Group reports a 35% decline in annual pre-tax profit due to COVID-19 restrictions

Berkeley Group reports a 35% decline in annual pre-tax profit due to COVID-19 restrictions
  • Berkeley Group reports a 35% decline in annual pre-tax profit due to COVID-19 restrictions.
  • The British housebuilder commits to maintaining shareholder returns at £280 million.
  • Berkeley defers £455 million payout for the next 2 years to practice flexibility in buying new land.

Berkeley Group Holdings (LON: BKG) said on Wednesday that its full-year profit came in 35% lower due to the Coronavirus pandemic that has so far infected a little under 300,000 people in the United Kingdom and caused over 41,500 deaths.

Shares of the company jumped more than 2% in premarket trading on Wednesday. Berkeley is currently a little over 10% down year to date in the stock market. At the time of writing, it has a market capitalisation of £5.51 billion and a price to earnings ratio of 10.15.

Berkeley commits to maintaining shareholder returns at £280 million

The British housebuilder expressed commitment to maintaining shareholder returns at £280 million annually until 2025. The next payment worth £140 million, Berkeley said, will be made in September. The company, however, deferred £455 million payout for the next 2 years to practice flexibility in buying new land.

The housing market in the United Kingdom has remained weighed in recent years due to the uncertainties laid out by Brexit. The outbreak of the novel flu-like virus further worsened the market in 2020. As PM Johnson expressed confidence in late May that the government will slowly start to lift COVID-19 restrictions, however, the housing market is now showing early signs of recovery. Here’s why price uncertainty is worrisome for housebuilders.

Berkeley said in a statement on Wednesday:

“Berkeley’s strategy is designed for a high-risk cyclical housing market, so when conditions shift for any reason, we have high liquidity, long-term cash flow visibility and highly skilled teams with the grip to effect decisive operational change.”

Berkeley’s full-year revenue comes in 35% lower

In the year that ended on 30th April, the Cobham-headquartered company printed £503.7 million in pre-tax profit. In the previous year, its annual pre-tax profit was recorded at a much higher £775.2 million. The company also registered a 35% decline in full-year revenue to £1.9 billion. In the last two months (April and May), the FTSE-100 listed company noted a 50% decline in sales.

According to Berkeley, it delivered 2,723 homes in the recently ended financial year as compared to 3,698 homes that it delivered last year. In terms of the average selling price, the British property developer posted a 9.5% decline to £677K from £748K last year.

At the end of the financial year, Berkeley had £1.1 billion in net cash that represents a 16.8% year over year increase.

By Wajeeh Khan
Mr. Khan specialises in Public Health by academia but is a trader by passion. Taking up two new hobbies of writing and trading in his teen years, he is now a professional trader and news writer with over 5 years of experience in various financial markets. Khan is passionate about bringing insightful articles to his readers and hopes to add value to their portfolios.
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