ii view: Berkeley Group builds stable start to financial year

Trading update for first four months of financial year to 31 August

• Total of £260 million of a £2 billion shareholder returns programme to 2035 completed
• Now targeting a further £640 million of buybacks and dividends by 2030

Guidance:

• Continues to expect full-year 2026 pre-tax profit of £450 million, with 85% already secured via exchanged sales contracts
• Continues to expect FY 2027 pre-tax profit of a similar level to 2026
• Continues to target net cash of around £300 million by year-end

Chief executive Rob Perrins said:

“Berkeley's flexible capital allocation framework balances near-term volatility with the investment of free cash flow in areas that will drive long-term shareholder value, namely through maximising the value and potential of our land holdings and our BTR (Build-to-Rent) platform.”

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ii round-up:

Berkeley Group Holdings (The) (LSE:BKG) was established in 1976 with the housebuilder today operating principally in London, Birmingham and the Southeast. 

Group brands include Berkeley Homes, St Edward, St George, St James, St Joseph and St William. 

Management previously outlined plans to establish a Build to Rent (BTR) platform, with 4,000 of its builds over the next 10 years being kept by itself and rented to tenants.

For a round-up of these latest results announced on 5 September, please click here.

ii view:

Berkeley was started in 1976 by Tony Pidgley and Jim Farrer. Today, the group highlights itself as the only large UK homebuilder focused on the regeneration and reviving of disused and underused land to build mixed-use neighbourhoods within the UK's most undersupplied markets. Group competitors include Barratt Redrow (LSE:BTRW), Taylor Wimpey (LSE:TW.) and Persimmon (LSE:PSN).

Berkeley’s 10-year strategic plan hopes to offer increased financial flexibility in allocating an expected £7 billion in free cashflow to 2035 between land investment, growing the BTR platform and shareholder returns. 

For investors, management’s prediction for full-year 2026 and 2027 profits of around £450 million is potentially down from 2025’s £528 million, pointing to steady if not near-term grow. Group comments highlighting London house build starts at 2008 lows suggest the government’s initiative to ease planning restrictions has yet to have an impact. Economic outlook uncertainties arguably now include concerns about UK government debt levels and interest rates following previous policy U-turns, while changes to building safety regulations may increase costs and lengthen build times. 

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More favourably, the value of private sales reservations in 2025 improved 5% compared to the financial year 2024, suggesting robust customer demand. Flexibility in funding new land, the BTR platform, or shareholder returns, looks highly sensible in an ongoing challenging and potentially volatile environment. Government progress easing planning regulations would likely be beneficial for Berkeley, while a share price-to-net asset value below the three-year average points to potential investor value. 

In all, and while flat near-term profits are reason for caution, an enviable track record of navigating tough market conditions and a forecast dividend yield of over 3.5% will likely keep investors interested in this major housebuilder.

Positives: 

• An industry revered track record
• Enjoys interest from overseas customers

Negatives:

• Uncertain economic outlook
• Planning reforms have in the past failed

The average rating of stock market analysts:

Strong hold