Berkeley Group's shares leap after announcing in-line performance and solid cash foundations

Oliver Gill
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Tony Pidgley's firm called the government's stamp duty hike an "extraordinary attack on buy to let landlords"

Shares in property firm Berkeley Group jumped over four per cent in trading this morning after revealing an "outstanding" balance sheet.

The figures

Half year revenue to the end of October leapt from £1.1bn to £1.4bn, with gross profit jumping from £391m to £504m.

Profit before tax was £393m, up from £293m last year.

The coffers at Berkeley are brimming with cash. Its net reserves stood at £208m, up from £107m in April – and this was after it had shelled out £157m payments to shareholders in the form of dividends and share buybacks.

Basic earnings per share soared by 35 per cent to 225.7p and dividends per share jumped by 11 per cent to 100p.

Read more: Berkeley Group's home reservations hit by stamp duty and the Brexit vote

Why it's interesting

The Cobham-based group has previously promised to return bundles of cash to shareholders – perhaps replicating the generosity of fellow Cobham-based Chelsea footballers' donations to charity over Christmas.

Berkeley had previously planned to pay a further £10 per share to investors between now and 2021 in the form of dividends.

However, the company said: "The current heightened macro uncertainty has led to significant market volatility and there is a dislocation between this and both underlying market conditions and the strength of Berkeley’s operating model."

The total return won't be adjusted, but the plan instead is to give investors the option to realise their return more flexibly – either through receiving dividends or letting the company buy back their shares, rather than simply through dividends.

Read more: Berkeley Group just had a huge rant at the government about London housing

2 December 2016 @ 8:15amBerkeley Group Holdings (BKG)

As for trading – in short, it's what the market expected, say analysts at Jefferies.

"Berkeley is performing in line with expectations even though the market it serves is somewhat challenged."

Reservations are down, not just because of Brexit-induced market uncertainty but because of the increase in stamp duty tax earlier in the year something Berkeley term an "extraordinary attack on buy to let landlords".

So why the jump in share price? Jefferies analysts conclude:

Berkeley has tackled the issue of Brexit and stamp duty head on today. Reservations are down, but the return programme is on track. The tweak being that some of the return may be through buybacks rather than dividends.

Read more: Why Brexit could spell trouble for Berkeley Group

What the company said

Chairman Tony Pidgley said:

Today’s strong results reflect decisions made by Berkeley following the 2008 financial crisis to invest in land at the right time, made possible by Berkeley’s cyclical operating model.

During a period of political upheaval around the world, which has affected the immediate economic outlook, Berkeley has focussed on its core business of regenerating run-down estates, transforming ex-industrial land, and creating successful places for people from all walks of life.

More widely, there remains a tension in the planning system between the community infrastructure levy and the London Mayor’s ambition for affordable homes.

The new London Mayor is bringing a refreshing focus to the capital’s housing challenge and we fully support his ambition to increase the supply of homes for everyone.

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