Wednesday, 18 June 2014

Berkeley Group - Final Results

Berkeley was added to my income portfolio of shares just 6 weeks ago - here’s a link to the opening post.

They have today issued results for the full year to 30th April 2014 (link via Investegate). Berkeley has built and sold 3,742 new homes in the past year, less than 1% more than the year before, but at an average selling price up almost 20% to £423,000 from £354,000, which has driven an 18% increase in revenues to £1.62bn. Pre tax profits are up over 40% at £380m (2013 £270.7m) and earnings (diluted) are up 34% at 188.4p per share (2013 140.3p). The board have declared a further interim dividend of 90p payable in September 2014.

The Group remained ungeared throughout the year, with net cash rising from £44.7m to £129.2m after paying £195.2m of dividends to shareholders and investing further in new land and construction.

 Commenting on the results, Managing Director Rob Perrins said: "With cash due on forward sales now approaching £2.3 billion and estimated gross margin in its land holdings now in excess of £3 billion, the Board has visibility over its commitment to meet the remaining 180 pence of the first milestone through regular dividends. The land and planning now in place has extended this visibility to delivery of the second milestone payment of 433 pence by September 2018 and Berkeley has made substantial inroads into the planning requirement on the land required to cover the third milestone payment of a further 433 pence by September 2021".

This makes a total of £10.46 to be distributed to shareholders over the next 7 years - just under half the current share price.

He added "Looking forwards, we continue to see opportunities to acquire land that meet our hurdle returns.  This will typically be characterised by long term and complex development sites to which Berkeley can bring its expertise.  The land already in our pipeline comprises a number of sites that match these criteria and the ongoing operational focus is to deliver this over the next five years.  If this is achieved, it has the potential to enhance the existing gross margin in the land bank by some £1.5 billion and help build a sustainable business".

Last week the governor of the Bank of England announced that interest rates were likely to be increased earlier than planned - possibly starting before the end of this year. This announcement sent the share prices of the house builders into a tail spin and last Friday BKG dipped around 5%.

These look like excellent figures to me, yet for some reason the share price is down around 1.5% at £22.20 at the time of posting - I am tempted to pick up a few further shares at this point to add to my original purchase.

I am however happy with my purchase - if not the timing - and hope this will become a solid long term hold for my income portfolio. Looking forward to the 7% or so yield for the foreseeable future.

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