Housebuilder Berkeley is looking to soothe fears of more interest rate pain and a slump in the housing market this week as it updates the City on its full year’s performance.
Investors and analysts are fretting over the outlook for the country’s big housebuilders as the Bank of England prepares to hike interest rates further to tame rampant inflation.
Analysts are now pricing in a peak rate of 5.75 per cent which would inflict further misery on mortgage holders and drag on the housing market.
Shares in Berkeley Group, which will report its full year results on Wednesday, are languishing at around a quarter below their all-time peak in February 2020 – despite bosses ramping up completion and profit targets and hiking the outlook on dividend payouts.
Analysts said the outlook for the market was likely to blame for the lacklustre share price.
“This may be down to investor concerns over the direction of the UK housing market, amid concerns over interest rate rises, housing affordability and the UK’s modest rate of GDP growth, as well as the impact upon Berkeley’s profit margins of input cost inflation and shortages of qualified staff,” said Russ Mould, investment director at AJ Bell.
“No doubt longstanding chief executive Rob Perrins will address all these issues alongside the results for the six months to the end of October.”
March’s trading update featured “no nasty surprises” and analysts and shareholders will be looking for further reassurance, Mould said.
Berkeley has said it is expecting pretax profits of around £600m in the year to April 2023 and more than £400m in the year to April 2024.
The firm also intends to return £283m, or 262p a share, to shareholders each and every year through to September 2025 via a mix of dividends and share buybacks.
Analysts will also have their eyes trained on the volume of completions for the firm and pricing of properties for a picture of the firm’s health. In the first half of the year, completions were up but revenues were down by a fifth as average prices retreated to £560,000 due to a change in its sales mix.
Berkeley’s operating margin also came under pressure last year and analysts are pricing in another drop to 20.9 per cent for the full year.