London-focused housebuilder Berkeley Group (BKG) sold just 20 more houses in its last financial year but the company increased its cash pile and committed to further returns to shareholders in the coming years.
Berkeley’s dividend of 3% does not make it one of the sector’s big hitters: Persimmon yields more than 12% and Bovis (BVS) pays out more than 5% a year. The amount paid out to Berkeley investors in dividends more than halved from £146.7 million to £53 million, but this was almost made up for by a big rise in share buybacks in the year.
Berkeley returned £251 million to shareholders last year, compared with £287 million the year before, but like Persimmon (PSN), Berkeley is in the middle of a multi-year programme of capital returns to investors. It plans to return another £140 million to shareholders before the end of September 2019.
Its net cash position is up from £687 million to £975 million, a rise of 41% in the year.
Annual profits were down 20% to £775 million, but the firm had previously guided investors that profits would fall 30%. Analysts had estimated profits of £710 million for the full year. The company described profits as “normalising” after the big increases seen in the wake of the financial crisis when profits and house prices soared. Revenue was up 4% to just below £3 billion.
How does Berkeley compare with its rivals? It managed to increase the average price of houses sold over the year to £748,000, compared with 2018’s £725,000, a 3% increase. The average selling price of homes made by FTSE 100 giant Persimmon rose just 1% in 2018 to £215,563.
According to the Office for National Statistics, house prices in Greater London – one of Berkeley’s key areas – fell 1.2% in the year to the end of April 2019 to an average of £471,504. UK house prices as a whole were up 1.4% in the period to an average of £228,903.
A key feature of recent housebuilder results has been the very modest increases in houses sold: Berkeley sold 3,698 houses, just 20 more than in 2018/2019; Persimmon increased the number of houses sold in the last financial year by 406 to 16,449 but still managed to boost revenue by 4% to £3.74 billion.
Shares in the Berkeley drifted 1% lower to around £35 a share, having hit nearly £40 in March this year. The Brexit impasse has been weighing on sentiment in the housing market and listed shares are off the record highs seen in 2018.
Last month FTSE 250 housebuilder Bovis made an approach for mid-cap construction company Galliford Try (GFRD), but that was rejected. The move was seen as a sign of consolidation in a sector that is struggling to sustain year on year profit increases.
