Berkeley: one housebuilder still ahead of plan

Berkeley has issued a robust trading statement saying it has enjoyed cash generation “ahead of plan”, after entering the current financial year in a strong position, with forward sales of £1.2bn.

The group’s latest management statement, covering Q1 (the three months to 31 August 2008) reveals that even after spending £15m on buying back Berkeley shares, net cash has increased to £71m compared with net debt of £5m at the start of the year.

The strong cash position is helping Berkeley “take advantage of the numerous land opportunities that are coming to the market”.

Tony Pidgley, chief executive, has called the ups and down of the housebuilding market far better than his counterparts over the past couple of decades.

As a result, other housebuilders listed on the Stock Exchange are wringing their hands, pouring out a tale of woe as share prices tumble and profits are wiped out by drops in the carrying value of the land they bought at the peak of the market.

By contrast, restructuring at Berkeley over the past few years has enabled shareholders to enjoy cash payments running to a total value of £1.1bn, and there is still enough spare in the pot to provide for the return of a further £3/share.

Berkeley’s management statement reports: “Property development has always been cyclical. This drives our strategy which is to concentrate on balance sheet strength before income.

“Since the beginning of the current financial year, Berkeley has experienced sales levels 50% below the historical average. This is a level that, with the benefit of the strong opening forward sales position, will enable the group to meet its strategic objectives.

“Berkeley is confident in its ability to maintain operating margins within its historic range through a combination of efficiency measures.

“Performance is in line with expectations for the six months ending 31 October 2008 and the full year ending 30 April 2009.”