Profits Fall, Strategy Shifts
Berkeley Group's Annual Profits Decline 14.7% As Rising Costs Prompt Strategic Shift
Anonymous
Key Points
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Full-year revenue declined 4.1% to 2.383 billion pounds, with earnings of 318.3 million pounds and EPS of 3.311 pounds (331.1 pence) versus 382.0 million and 3.700 pounds (370 pence) a year earlier.
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Net asset value per share rose to about 39.17 pounds, and 4,076 homes were completed at an average selling price of 546,000 pounds, compared with 4,047 homes at 593,000 pounds last year.
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The company is on track to deliver a further 528 million pounds of shareholder returns by September 30, as part of its cash-generation and buyback strategy when the stock trades below NAV.
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Berkeley purchased only three sites in the latest year, financing acquisitions through non-core disposals as it prioritises margins amid macroeconomic and regulatory headwinds.
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Analysts’ forecast for pretax profit was around 457.03 million pounds, but the company reported 451.4 million pounds, with higher build costs and weaker demand amid geopolitical tensions weighing on margins.
Berkeley Group reported a 14.7% drop in full-year pretax profit to £451.4 million, missing analyst expectations of £457 million. Revenue fell 4.1% to £2.383 billion, and earnings per share slid from 370 pence to 331.1 pence, according to Nasdaq.
The London-focused housebuilder completed 4,076 homes at an average price of £546,000 — down from £593,000 the year before. Despite the weaker numbers, Berkeley shares rose after management said profit had edged past its own internal guidance, MarketScreener reported.
Rising Build Costs and Weak Demand Squeeze Margins
Berkeley blamed a tough mix of pressures for the profit drop. Higher building costs, energy-price swings, and geopolitical tensions all weighed on margins. Buyer confidence also weakened, slowing sales and pushing average selling prices nearly 8% lower than the prior year, according to Traders Union.
The company's operating margin target has been revised down to a range of 17.5% to 19.5% — well below the 20%-plus margins Berkeley historically achieved. Forward sales dropped 28% year-on-year, TradingView reported, a signal that the near-term pipeline is under real pressure.
Berkeley Buys Only Three Sites, Hoards Cash Instead
In a striking sign of caution, Berkeley purchased just three new sites during the year. The company funded those deals through the sale of non-core assets rather than taking on debt. Analysts at MarketScreener noted this is close to a historic low for a builder of Berkeley's scale.
Chief Executive Rob Perrins said Berkeley will "prioritize the strength of our balance sheet and the maximization of margins" rather than chase volume. The company cited the UK's planning system and regulatory hurdles — including the Building Safety Act and environmental rules — as making many new sites economically unworkable.
£528 Million Buyback Plan Rewards Shareholders Over Growth
Instead of expanding its land bank, Berkeley is sending cash back to investors. The company is on track to deliver £528 million in shareholder returns by September 30, 2026. When the stock trades below its net asset value — currently £39.17 per share — Berkeley buys back its own shares, according to Nasdaq.
Net asset value per share actually rose slightly, from around £38.20 to £39.17. That means the balance sheet remains solid even as profits fell. Some analysts see this as smart capital allocation. Others worry Berkeley is "shrinking to greatness" — buying back stock instead of securing the land pipeline needed for future growth.
London Housing Supply Could Thin Out Through 2030
Berkeley's decision to phase projects to match demand — rather than build ahead of it — has real consequences for London's housing supply. The company has reaffirmed a £1.4 billion pretax profit target for the 2027–2030 period, TradingView reported, but getting there depends on the market recovering.
With only three sites bought this year, the future pipeline is thinner than it has been in years. Berkeley stressed London's long-term appeal, but acknowledged it will slow delivery if demand stays soft. Housing campaigners note that even the lower average selling price of £546,000 remains far out of reach for most Londoners.
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