Berkeley Group lifts profit to £194m

While other housebuilders struggle, Berkeley Group goes from strength to strength with a record pre-tax profit of £194m.

Berkeley’s latest profit figure, for the 12 month period to 30 April 2008, is slightly higher than the previous year’s tally of £188m.

With turnover at £1.0bn, the latest profit performance gives Berkeley a profit margin of 19.5%.

The average selling price of the 3,200 units sold during the year was £295,000, a rise of £10,000 over the previous year.

During the past year the average profit that Berkeley made on each sale ran to £58,000.

Not a bad achievement given the squeaks of discomfort coming from most of the group’s housebuilding rivals.

Berkeley’s shareholders might feel prompted to send chief executive Tony Pidgley a thank-you note, or even a bunch of flowers, as he called the peak of the housing cycle three years ago, and opted to pull out of volume housebuilding and sold this division on.

That move triggered a massive surplus of cash.

Pidgley proposed a scheme whereby it would flow back to shareholders and so far a total £1.1bn has been returned, amounting to £9m a share.

The latest instalment was paid five months ago and ran to £240m. It came one year ahead of schedule.

Quitting the volume housebuilding market has enabled Berkeley to become more of an urban regenerator.

Not only has Berkeley been so cash-rich that it has forced money back into its shareholders hands, it now sees its debt-free status as a further bonus, because at a time when rivals are tottering under the burden of debt repayment demands and with some banking covenants bordering on breaking point, there is an opportunity to buy further land at knock-down prices.

As a result Berkeley wants to hold back the final £3/share promised to shareholders and use this handy pot to snap up future development land while the going is so good.

“Berkeley will continue to buy land” says Pidgley.

“There remains under-supply of quality housing throughout the country and London retains its allure as a World City. This view is endorsed by the satisfactory level of demand we continue to see from customers unaffected by the current liquidity constraints who are able to take a longer-term view.

“Investors remain attracted to the long-term fundamentals underpinning the housing market in London and the South-East and the lack of alternative investment opportunities.

“The current market conditions provide an exciting opportunity for Berkeley to use its expertise to acquire new land.”