Berkeley Group has reaffirmed its profit targets for the coming years, as the luxury homebuilder continues to show resilience amid housing sector woes.
The housebuilder said it is aiming to deliver £1.5billion in pretax profit over the three years ending April 2026, with its pretax profit in the coming year expected to hit £550million, meeting consensus estimates.
Berkeley is typically more resilient to challenges in the housing market than some housebuilder peers, as many of its developments are targeted at the luxury market and it has a greater exposure to London.
The FTSE 100 constituent said it is in a strong position, having booked all of its sales for the current financial year, and secured 70 per cent of sales for the coming year.
But cash due on private forward sales also ‘continued to moderate over the second half through a combination of strong delivery and the prevailing sales rates’, it said.
Renewed interest: Customers are returning to the housing market amid hopes of interest rate cuts on the horizon
Sales rates are about a third lower than a year ago, reflecting a broader industry slowdown, but are consistent with its performance in the first half of the year.
These ‘vestiges of weakness… will take some time to wash through,’ Richard Hunter, head of markets at Interactive Investor, commented.
Housebuilders have suffered in recent months, with demand having fallen due to weaker mortgage affordability and availability, as well as higher costs.
Adam Vettese, analyst at investment platform eToro, said: ‘Conditions have been pretty tough for housebuilders given the inflationary environment and high interest rates pouring cold water on demand, with sales around a third lower year on year.
‘However, Berkeley has been weathering the storm and has reaffirmed their guidance as stated in their previous update.’
With hopes rising that the Bank of England could begin cutting interest rates, Vetesse said the market will become ‘significantly more attractive’ considering Berkeley’s robust position.
Berkeley noted that it has seen good levels of enquiry as have renewed their interest in the sector ahead of potential falls in interest rates and a return to economic stability.
Berkeley shares rose 0.19 per cent in morning trading to 4,686p, having hit 4,722p earlier in the day, coming within five per cent of its 52-week high.
‘Given their smart management of a tough market, there’s no reason why they can’t push on in 2024,’ Vetesse said.
Interactive Investor’s Hunter agreed, noting that Berkeley has managed to outperform the FTSE100 by a considerable margin, and ride out the storm faced by housebuilders.
‘Berkeley Group has made some difficult choices in what a tough environment has been, and with some glimmers of light at the end of the tunnel now appearing those choices are poised to be rewarded,’ he said.
The firm said its cash position at the year-end is expected to be above its £422million position six months ago, with pricing having been stable throughout the period, as well as build cost inflation having been low across most trades.
Late last month, Berkeley announced a 33p per share payout, down from 69p a year ago. It said the dividend, along with its share buyback programme, will return £227million to shareholders by the end of September.
DIY INVESTING PLATFORMS
AJ Bell
AJ Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund dealing and investment ideas
interactive investor
interactive investor
Flat-fee investing from £4.99 per month
eToro
eToro
Share investing: 30+ million community
Bestinvest
Bestinvest
Free financial coaching
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.
