Interactive Investor

ii view: resilient Berkeley Group still bullish on profits

This blue-chip housebuilder remains confident in its forward profit projections and offers an attractive forecast dividend yield. Buy, sell, or hold?

22nd September 2023 15:45

by Keith Bowman from interactive investor

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AGM trading update from 1 May to 31 August

  • Continues to expect pre-tax profits of at least £1.05 billion for both this current year and the following
  • The value of underlying private sales reservations down 35% from last year
  • Total of 90% of full-year 2024 revenues exchanged

ii round-up:

Housebuilder Berkeley Group Holdings (The) (LSE:BKG) was established in 1976. 

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

It operates principally in London and the Southeast of England with more than 19,600 homes constructed over the last five years.

For a round-up of these latest results announced on 8 September, please click here.

ii view:

Berkeley Group promotes itself as the only large UK homebuilder focused on the regeneration of large, complex brownfield projects at scale, transforming disused land into mixed-use neighbourhoods within the UK's most undersupplied markets. A constituent of the FTSE 100 index, it is the largest contributor to new homes in London. Industry competitors include Barratt Developments (LSE:BDEV), Taylor Wimpey (LSE:TW.), and Persimmon (LSE:PSN)

For investors, the tough economic backdrop of heightened interest rates is dampening buyer appetite and the planning environment remains tough to navigate. A new building safety regime comes into force at the beginning of October, costs generally for businesses remain elevated, while stretched UK government finances arguably leave its ability to again offer industry assistance in doubt.

On the upside, Berkeley has an enviable track record of navigating difficult market conditions, and forward sales offer reassurance. Build cost inflation has eased considerably, with selling prices staying firm. New builds in London remain well below the mayor’s target, while a strong existing land bank may also enable it to better direct cash back to shareholders as it awaits a broader industry recovery, rather than buying new land.

In all, and despite continued risks, a strong history of navigating economic turbulence combined with forecast dividend yield of over 5.5% should make this housebuilder a popular choice. 

Positives: 

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

Negatives:

  • Uncertain economic outlook
  • Challenging planning environment

The average rating of stock market analysts:

Strong hold

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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