Berkeley’s share price was down 1.9% on Wednesday morning, following a trading notice warning of difficult market conditions in London.
Berkeley’s issued a trading statement saying that it is on track to deliver at least £3.0 billion of pre-tax profit in the five years ending 30 April 2021, with profits for the current year anticipated to be at least as strong as 2016/17.
While Berkeley is in excellent shape, the London market continues to be adversely impacted by both, uncertainty around the terms and implications of Brexit and, the changes in recent years to SDLT and mortgage interest deductibility. This has been partly offset by good availability of mortgage finance at low interest rates, favourable currency exchange rates, the statement said.
On the supply side, the planning environment remains challenging with the multiple requirements of Affordable Housing, CIL and Section 106 requirements, still yet to reflect the current market conditions. As a consequence, new construction starts in London remain some 30% lower than 2015.
“With cash balances forecast to be higher at the half year than at the start of the year, the visibility of earnings and financial strength of the Group underpin Berkeley’s Shareholder Returns Programme, under which in excess of £2.2 billion (£16.34 per share) is being returned through a combination of dividends and share buy-backs by 2021 on a six-monthly basis,” the housebuilder said. “The returns initially equated to £2 per annum but this has increased to £2.04 per annum following share buy-backs undertaken since January 2017.
“As announced on 17 August 2017 a dividend of £70.4 million, or 51.76 pence per share will be paid to shareholders on 15 September 2017 with the remainder of the £138.8 million of the return for the six months ending 30 September 2017 having been satisfied through share buy-backs of £68.5 million.”
The company also announced that the next six-monthly return of £138.9 million will be made by 31 March 2018, with the amount to be paid as dividend to be announced in February 2018, taking account of any share buy-backs in the intervening period. Share buy-backs will be undertaken to the extent the Board believes these are in the best interests of all shareholders and not only when the shares are materially under-valued.
In total, by 30 September 2017, Berkeley will have returned £8.34 of the £16.34 target.