TIDMBKG
RNS Number : 8919U
Berkeley Group Holdings (The) PLC
08 December 2021
PRESS RELEASE 8 DECEMBER 2021
INTERIM RESULTS ANNOUNCEMENT
The Berkeley Group Holdings plc ("Berkeley") today announces its
unaudited interim results for the six months ended 31 October
2021.
Berkeley has transformed over the last five years by investing
in large-scale, complex sites in London and the South East to
create a unique and unrivalled business. It has a passion to create
new neighbourhoods which truly add to existing local communities,
and is leading on creating social value, enhancing nature and
tackling the climate and skills challenges.
Rob Perrins, Chief Executive, said:
"This is a strong set of results, including enhanced returns for
our shareholders. High standards of design and place-making
continue to differentiate our homes and neighbourhoods, excite
customers and deliver a range of positive outcomes for our
stakeholders.
The performance reflects Berkeley's conviction and investment in
its strategy over the last 18 months, which is focused on London
and the South East, the country's most under-supplied housing
markets, in spite of the challenges presented by the pandemic,
supply chain constraints and regulatory environment. Over this
time, we have continued to deliver in line with our uniquely
long-term operating model, progressing construction across our
portfolio of 64 live projects. These include 30 long-term, highly
complex regeneration sites, of which 25 are now in delivery.
The visibility this provides, coupled with a resilient sales
market, now enables Berkeley to increase its earnings guidance for
the current financial year by 5%. Thereafter, we anticipate 5%
annual pre-tax profit growth for the next three years which will
see Berkeley deliver approximately GBP625 million profit in
2024/25, by when we will have increased our volumes by 50% from
pre-pandemic levels.
Berkeley is unique in having the capital, resources and
expertise to regenerate this number of highly complex large-scale
sites, with each one requiring a bespoke and holistic place-making
strategy to stitch it back into its surrounding community and
unlock its potential in terms of economic, environmental and social
value.
The significant majority of our sites under construction (83%)
are located on brownfield land and we warmly welcome the
Government's renewed focus on supporting brownfield regeneration
through its anticipated planning reforms. To be successful, these
will need to address the regulatory barriers to brownfield
regeneration.
I am delighted to report on our progress against our industry
leading sustainable business strategy, Our Vision 2030, including
important early steps towards our 1.5 C aligned science-based
carbon reduction targets. Highlights include expanding our use of
low carbon biofuels and hybrid machinery, embedding heat pump
solutions within development design and completing our first
site-specific embodied carbon studies to help us identify and
mitigate carbon intensive processes and materials within the full
life cycle of our developments.
The period also saw the Environment Bill pass into law,
confirming the welcome news that all new developments will be
required to deliver a net biodiversity gain (NBG) of at least 10%.
Berkeley is very proud to have laid the path for this hugely
positive change, having put NBG into practice on 43 sites and
proved that homebuilding can be a powerful driver for nature's
recovery. Our first 43 NBG strategies will create around 500 acres
of new or measurably improved natural habitats, an area larger than
Hyde Park.
I would like to take this opportunity to thank all of our people
for their tremendous efforts and commitment to achieve these
results in what remains such a difficult time for all."
Summary of Earnings, Shareholder Returns and Financial
Position
HY to HY to Change
Earnings 31-Oct-21 31-Oct-20 per cent
------------------------------------ ----------- ----------- ----------
Profit before tax GBP290.7m GBP230.8m +26.0%
Earnings per share - basic 201.7p 149.6p +34.8%
Pre-tax return on equity 19.1% 14.9% -
------------------------------------- ----------- ----------- ----------
HY to HY to
Shareholder Returns 31-Oct-21 31-Oct-20
------------------------------------ ----------- -----------
Share buy-backs undertaken GBP34.7m GBP37.1m
B-Share Scheme Return /
Dividends paid GBP451.5m GBP134.3m
Shareholder returns GBP486.2m GBP171.4m
----------- -----------
Share buy-backs - volume 0.8m 0.9m
------------------------------------- ----------- ----------- ----------
As at As at Change
Financial Position 31-Oct-21 30-Apr-21
------------------------------------- ----------- ----------- ----------
Net cash GBP846m GBP1,128m -GBP282m
Net asset value per share GBP26.11 GBP26.12 -GBP0.01
Cash due on forward sales
(1) GBP1,703m GBP1,712m -GBP9m
Land Holdings - future gross
profit GBP6,944m GBP6,884m +GBP60m
------------------------------------- ----------- ----------- ----------
(1) Cash due on private exchanged forward sales completing within
the next three years
See Note 8 of the condensed consolidated financial information
for a reconciliation of alternative performance measures
INCREASING INVESTMENT AND DELIVERY
-- Investment in Berkeley's unique operating model, delivering
large, complex regeneration sites that few others have the
requisite resources, expertise and risk appetite to undertake at
scale. In the period:
o Two new regeneration sites acquired in Peckham and Woolwich
covering 1,500 homes.
o One new major planning consent obtained at St William's site
in Leyton (570 homes).
o Four sites moved into production, including two long-term
regeneration developments; Bermondsey Place in Southwark (1,300
homes) and The Eight Gardens in Watford (1,200 homes).
-- Berkeley now has 25 of its 30 long-term complex regeneration
developments in production at 31 October 2021, supporting its
anticipated 50% increase in housing delivery by 2024/25 from
2018/19 levels (around 4,000 homes, including joint ventures).
-- In addition, Berkeley has some 7,000 plots on sites it is
currently advancing that it anticipates will come into the land
holdings by the end of next financial year, providing good
visibility on achieving the long-term ambition of increasing
estimated future gross profit in the land holdings to GBP7.5
billion.
-- Berkeley issued GBP400 million of unsecured Green Bonds
maturing in 10 years in August 2031 at a coupon of 2.5% per annum,
specifically in connection with the transformation of our complex
large-scale regeneration sites and development of green buildings
(energy efficient homes).
-- In support of this issuance, Fitch Ratings Ltd published a
Long-term Issuer Default Rating and senior unsecured rating of BBB-
with a Stable Outlook, along with a BBB- rating for the Green
Bonds.
DELIVERING FOR ALL STAKEHOLDERS
-- 1,828 homes delivered (plus 395 in joint ventures) - Berkeley
is delivering some 10% of London's new private and affordable homes
- supporting approximately 28,000 UK jobs per annum directly and
indirectly throughout its supply chain over the last five
years.
-- Approximately GBP90 million of subsidies provided to deliver
affordable housing and committed to wider community and
infrastructure benefits in the period.
-- Maintained industry leading Net Promoter Score (+76.2) and customer satisfaction ratings.
-- 43 developments have committed net biodiversity gain
strategies that will deliver around 500 acres of new or measurably
improved natural habitats.
-- Berkeley is rated "A-" by CDP for its carbon climate action
and transparency and has recently once again been AAA rated in the
MSCI global ESG index.
-- More than 60 construction management apprentices and 30
graduates joined the business in the period, bringing Berkeley's
employed trainees to 298 (approximately 10%).
-- Berkeley currently has over 11,000 people working on its
construction sites, consistent with year-end and more than
pre-pandemic levels.
SHAREHOLDER RETURNS
-- Earnings expectations for the current financial year ending
30 April 2022 raised by around 5% from the current guidance which
is for pre-tax profits to be at a similar level to last financial
year (2020/21: GBP518.1 million).
-- Earnings guidance thereafter raised with pre-tax profits to
increase by 5% per annum for the next three financial years.
Berkeley to deliver approximately GBP625 million of pre-tax profit
for the year ending 30 April 2025.
-- Commitment to GBP282 million (GBP2.52 per share) per annum
ongoing Shareholder Returns up to 30 September 2025 re-affirmed,
with next GBP141 million due for the six months ending 30 September
2022.
-- Cash payment of GBP229 million, representing the first half
of GBP455 million surplus capital, made to shareholders in
September 2021. The remaining GBP226 million is expected to be
allocated to expenditure on new, including pipeline, sites and
existing land interests.
-- This GBP229 million was combined with the remaining GBP222
million of the ongoing scheduled annual return for 2021/22 to
create a GBP451 million B-share return of capital in September
2021, which was followed by a share consolidation.
-- Since September, GBP35 million of the GBP141 million to be
returned to shareholders by 30 September 2022 has been spent on
share buy-backs.
A pre-recorded presentation by the Directors of Berkeley on the
interim results will be made available on the Company's website at
11:00 today -
https://www.berkeleygroup.co.uk/about-us/investor-information/results-and-announcements
.
For further information please contact:
The Berkeley Group Holdings plc Novella Communications
R J Stearn (01932 868555) Tim Robertson (020 3151 7008)
CHIEF EXECUTIVE'S REVIEW
Strategy and Capital Allocation
Berkeley's purpose is to create quality homes, strengthen
communities and improve lives, using its sustained commercial
success to make valuable and enduring contributions to society, the
economy and natural world. To achieve this, the Company's long-term
strategy is to invest in opportunities with the right risk-adjusted
returns, while ensuring that its financial strength reflects the
prevailing macro environment, and to make returns to the
shareholders who support the Company to achieve its purpose,
through either dividends or share buy-backs.
Berkeley is the only large UK homebuilder focused on the
regeneration of complex large-scale brownfield projects at scale.
We have built up the breadth of expertise, financial strength and
holistic place-making approach needed to patiently transform these
challenging sites into highly connected, accessible and welcoming
neighbourhoods, where homes are conveniently served by a high
concentration of new and existing local infrastructure and
amenities. Reviving these under-used spaces is vital to
re-energising our cities and town centres and creates an
increasingly sustainable, socially inclusive and lower carbon model
of modern living, in which land, energy, resources and
infrastructure are used more efficiently and responsibly.
We now have 25 of our 30 long-term regeneration sites in
production which underpin delivery and shareholder returns. As we
continue to allocate capital to these sites, Berkeley will see its
housing delivery rise by 50% by 2024/25 from 2018/19 levels (around
4,000 homes, including joint ventures). In this period, Berkeley
has replaced the land used in production, maintaining the estimated
future gross profit in its land holdings at GBP6.9 billion (30
April 2021: GBP6.9 billion) across 63,302 plots (30 April 2021:
63,270 plots).
Berkeley also controls a near-term pipeline of a further 7,000
homes which includes a strategic land site in Milton Keynes, a
retail park in Kew and two St William regeneration sites in London.
This means Berkeley has the visibility to achieve its ambition of
increasing the estimated future gross profit in its land holdings
to
GBP7.5 billion by 30 April 2025.
Shareholder Returns and Surplus Capital
Berkeley has in place a long-term plan for shareholder returns,
based upon an ongoing annual return of GBP282 million planned
through to September 2025 which can be made through either
dividends or share buy-backs.
In addition, Berkeley has previously identified GBP455 million
of surplus capital to be returned by 30 April 2023 through either a
combination of enhanced cash returns to shareholders or incremental
land investment.
In September, Berkeley returned the first half (GBP228.9
million) of this surplus capital as part of a GBP451 million
B-share return to shareholders. The balance of the GBP451 million
comprised the remaining GBP222.6 million of the ongoing scheduled
annual return for 2021/22, with GBP59.3 million having already been
returned through share buy-backs in the year ended 30 April 2021.
The B-share return was equivalent to GBP3.71 per share and was
followed by a share consolidation which reduced the Company's share
capital, net of treasury and EBT shares, by 7.65% from 121.6
million to 112.3 million shares at the time of the
consolidation.
The Company has committed to the next ongoing scheduled
shareholder return which is the GBP141 million in respect of the
six months ending 30 September 2022, against which GBP34.7 million
has been spent on share buy-backs in the period, at an average
price of GBP42.89 per share.
In line with its strategy and as set out at the financial year
end, Berkeley anticipates that the second half of the surplus
capital return (a further GBP226.1 million), which is due by 30
April 2023, will be allocated to expenditure on new, including
pipeline sites, and existing land interests.
Since January 2017, when share buy-backs were first introduced,
Berkeley has acquired 19.8 million shares for GBP737.6 million, at
an average price of GBP37.23 per share and, following these
buy-backs and the recent share consolidation, the ongoing annual
return of GBP282 million currently equates to GBP2.52 per share; a
26% increase on the initial GBP2.00 per share initiated in
2016.
Summary of Performance
Berkeley has delivered pre-tax profit of GBP290.7 million for
the six month period. This is from the sale of 1,828 homes (2020:
1,104) at an average selling price of GBP 647,000 (2020:
GBP799,000), reflecting the mix of properties sold:
Six months ended 31 October 2021 2020 Change
GBP'm GBP'm GBP'm %
----------------------------------- -------- ------- ------- -------
Revenue 1,220.7 895.9 +324.8 +36.3%
Gross profit 346.5 289.2 +57.3 +19.8%
Operating expenses (75.5) (61.2) -14.3 +23.4%
----------------------------------- -------- ------- ------- -------
Operating profit 271.0 228.0 +43.0 +18.9%
Net finance costs (5.0) (3.8) -1.2
Share of joint ventures 24.7 6.6 +18.1
----------------------------------- -------- ------- ------- -------
Profit before tax 290.7 230.8 +59.9 +26.0%
----------------------------------- -------- ------- ------- -------
Pre-tax return on equity 19.1% 14.9% +4.2%
Earnings per share - basic 201.7p 149.6p +52.1p +34.8%
Shareholder Returns
----------------------------------- -------- ------- -------
B-Share Scheme Return / Dividends
paid 451.5 134.3 +317.2
Share buy-backs under the Returns
Programme 34.7 37.1 -2.4
----------------------------------- -------- ------- -------
Shareholder return in the period 486.2 171.4 +314.8
----------------------------------- -------- ------- -------
This strong performance enables Berkeley to raise its earnings
expectation for the current financial year by 5% from the current
guidance which is for pre-tax profits to be at a similar level to
last financial year (2020/21: GBP518.1 million).
The excellent visibility in our delivery pipeline, particularly
through the long-term sites in land holdings which are in
production, and the recovery of sales to pre-pandemic levels, will
see Berkeley increase its profit before tax by around 5% per annum
for the next three financial years. This sees Berkeley on a path to
delivering approximately GBP625 million of pre-tax profit for the
year ending 30 April 2025.
Berkeley remains in an investment phase as it brings forward its
portfolio of regeneration sites and anticipates a net investment of
GBP700 million into the balance sheet over the next two and a half
years, split evenly between land and work in progress.
Housing Market and Operating Environment
Sales
For Berkeley, the value of underlying sales reservations in the
last six months has been slightly ahead of the two years preceding
the pandemic. The 20% reduction experienced in sales for the
2020/21 financial year compared to 2019/20 has therefore fully
reversed in this six month period.
Consequently, notwithstanding a high period of revenue delivery,
the Group's cash due on forward sales is currently at GBP1.70
billion compared to GBP1.71 billion at 30 April 2021. These
represent the cash due on exchanged private sales contracts which
will be collected over the next three financial years. As we look
forward to our delivery programme for the next three financial
years, this level of forward sales places Berkeley in a very robust
position and supports the enhanced earnings expected during this
period.
As sentiment in London has improved, Berkeley has gradually
released more homes to the market during the first half. This
includes new developments at Poplar Riverside (St William),
Westmont (adjacent to White City), Harcourt Gardens (next building
at South Quay Plaza), as well as new phases on a number of
established developments such as Oval Village, Grand Union, Prince
of Wales Drive, Royal Exchange in Kingston and London Dock, amongst
others. Outside London we have launched Sunningdale Park in
Berkshire and Hareshill in Fleet.
Berkeley continues to sell at prices which are above its
business plan level. The rate of cancellations remains stable and
within the normal range. Berkeley's sales continue to be split
broadly evenly between owner occupier and investors, with both
domestic and overseas customers continuing to see the positive
long-term fundamentals of the London market.
According to the latest quarterly DLUHC data, new starts in
London for the 12 months to June 2021 are around 17,000. This is
still a third lower than the peak volumes reported in 2015 and
materially below the Mayor of London's current London Plan target
of 52,000 per annum and the Government's most recently identified
indicative local housing need of over 93,500 per annum (December
2020). Completion volumes have increased over the last year, but
will inevitably reduce in the near future as the compounding
shortfall in starts materialises through completion volumes.
Berkeley delivers around 10% of London's new homes and this is
likely to rise over time, based on current market trends.
Land and planning
Berkeley has added two new sites to its land holdings in the
period. These are both in London; firstly,
a shopping centre in Peckham acquired unconditionally where we
are targeting the delivery of over 900 new homes and a new
supermarket and secondly, a conditional site adjacent to Royal
Arsenal Riverside where we will seek consent to develop over 500
new homes.
On the planning front Berkeley has secured one new major consent
in the period; at St William's site in Leyton where we will be
delivering 570 homes and we continue to work towards concluding
section 106 agreements on two long-term regeneration sites in our
joint ventures where we have received resolutions to grant consent
at Committee. We have obtained over 25 revisions to existing
consents as we continue to evolve our sites, most notably at Grand
Union (Brent), Beaufort Park (Hendon) and The Green Quarter
(Ealing) in the period.
Berkeley is at appeal at two sites outside London and is
anticipating two further sites going to appeal in the second half
of the year. In London, we have two sites that are subject to
call-ins. The planning system is under pressure from a lack of
resources which is causing delays in processing time. This, coupled
with the debate around the proposed changes to the National
Planning framework and difficulties in preparing local five-year
plans, is resulting in a hiatus in new planning consents being
granted.
We have moved four new sites into production in the period which
include two long-term regeneration sites; at Bermondsey Place in
Southwark (1,300 homes) and Eight Gardens in Watford (1,200
homes).
Construction
Throughout this period we have seen build cost rises of around
5% per annum. These have centred on materials, however we have
begun to see a gradual easing of the supply constraints for most
materials with lead times stabilising. Shipping and transport
constraints represent ongoing challenges for the supply chain
alongside the recent increase in wholesale gas and electricity
prices. Berkeley continues to have sufficient labour, with over
11,000 people working on our sites during October. Overall,
Berkeley's secured sales pricing is offsetting the impact of cost
increases.
Berkeley is very supportive of the Government in its
determination both to ensure buildings are safe for the people that
live in them and to implement the recommendations of Dame Judith
Hackitt's review of building safety. The Fire Safety Act 2021
amends the Regulatory Reform (Fire Safety) Order 2005 and, along
with the Building Safety Bill, which is not expected to come into
force until 2023, is intended to strengthen and improve different
elements of the building safety regime. The Group is ensuring that
its procedures are compliant with the new legislation and it
continues to engage with DLUHC and other stakeholders to identify a
stable, holistic and comprehensive long-term process that will
allow the safety of buildings to be assessed, based upon science
and risk assessment. This will ensure the housing market can
operate efficiently, effectively and is fair for all.
With effect from April 2022, the Government has introduced a new
4% tax on the profits of large residential property developers to
help fund the removal of unsafe cladding as part of the
Government's Building Safety Package. This is in addition to the 6%
increase in corporation tax that applies to all companies with
effect from 1 April 2023.
Our Vision 2030: Transforming Tomorrow
Earlier this year Berkeley unveiled its new strategy for the
business, Our Vision 2030, which sets a holistic approach to its
activities, while maximising the Group's positive impacts on
society, the economy and natural world.
Driving ambitious carbon action
We have continued to drive our holistic climate action programme
designed to progress us towards our 1.5 C aligned science-based
carbon reduction targets. This includes driving down our direct
emissions through procuring 100% renewable electricity in the UK
and increasing the use of biofuels, as well as electric and hybrid
machinery, as lower carbon alternatives to gas oil. A recent
four-month trial of Hydro-treated Vegetable Oil (HVO) fuel at
Kidbrooke Village delivered an 89% reduction in emissions compared
to gas oil.
Reducing embodied carbon is a key challenge for the built
environment sector and we have undertaken detailed Life Cycle
Assessments to measure the embodied emissions within nine pilot
sites. This has created development-specific insights targeting the
most carbon intensive materials and processes.
We continue to focus on the energy efficiency of our homes,
drawing reference from the emerging Future Homes Standard. We take
a fabric-first design approach, in combination with the most
appropriate technology and infrastructure solution for each site.
We are now trialling exhaust air heat pumps and air source heat
pumps, with heat exchangers transferring waste heat within the
home, which has the potential to reduce emissions and lower energy
costs.
Our leading approach to climate action is reflected in our CDP
Climate Action and Transparency Leadership level rating of "A-" and
membership of the UN backed Race to Zero campaign.
Supporting nature's recovery
We have continued to champion net biodiversity gain within the
development industry, with 43 sites now committed to measurably
enhancing nature. In total, these projects will create around 500
acres of new or measurably improved natural habitats.
As we look to evolve our approach we have commissioned the
Wildfowl and Wetlands Trust (WWT) to create best practice design
guidance on incorporating blue and green infrastructure into our
developments and we are also commencing a water neutrality
trial.
We continue to engage local communities in the design,
management and stewardship of the natural landscapes we create,
with 200 children from local primary schools visiting The Green
Quarter in July to learn about the new public park. In partnership
with the London Wildlife Trust we held an event at Kidbrooke
Village to explain how 86 acres of biodiverse parkland is helping
nature to recover. We have also joined the Get Nature Positive
campaign, led by the Council for Sustainable Business (CSB) and
DEFRA, to champion nature recovery alongside other leading UK
businesses.
Communities and social value
We remain focused on regenerating brownfield land, with 83% of
live developments involving the revival of previous developed
sites, which are being patiently revived and stitched back into the
communities around them.
We have continued to evolve our holistic placemaking model
through the roll out of our unique social value tool, which enables
our teams to quantify and compare the relative benefits of
different development features and design decisions. The tool,
which is gradually being applied to all new developments, considers
more than 30 indicators, around five central themes: the build
form; active and sustainable transport; community and public
spaces; improving access to nature; and developments with low
environmental impact.
Modernising production
After an extensive period of prototyping and testing, Berkeley
Modular has very recently begun to produce its first modules for
our Kidbrooke Village development. Our manufacturing process is
digitally enabled and highly automated, turning raw materials and
components into fitted and finished housing modules.
We are focused on increasing digitalisation throughout our
business, with work progressing with our new project collaboration
tool which aims to digitally capture the Golden Thread of safety
and quality information from pre-construction to
post-completion.
Future skills
In September, we welcomed more than 60 new construction
management apprentices to the business, representing one of our
largest ever single intakes of trainees. Our bespoke apprenticeship
programme, delivered in partnership with two training
organisations, has attracted a diverse cohort; one quarter are
women and more than a third are from ethnic minority backgrounds.
Berkeley currently employs 147 direct apprentices.
30 new graduates also joined the business in September and in
June 2021 we were named by The JobCrowd as one of the 50 best
companies for graduates to work for. Through our membership of 'The
5% Club' we commit to developing at least 5% of our workforce as
either graduates, apprentices or sponsored students. Over the last
six months we have averaged 7% and currently have 298 employees
(10%) in these earn and learn roles. In addition, there are 236
trainees working on Berkeley's sites through our supply chain.
We continue to encourage aspiring young people to join our
industry, opening up several of our sites for the Open Doors
initiative in early October, run by Build UK and CITB. A group of
students from Langley College saw first-hand the wide range of
expertise needed on a regeneration site like the Horlicks Quarter
in Slough. In May 2021, a New Community Training Hub opened at
Hartland Village in Fleet, serving the local community as a new
teaching centre for construction skills.
The Berkeley Foundation
The Berkeley Foundation (the "Foundation") is the registered
charity established to support young people and their communities
in the areas where we work. The Foundation enables Berkeley to
channel its skills, resources and fundraising efforts towards
ambitious, impactful voluntary sector partnerships.
The Foundation continues to develop and deepen its charity
partnerships. In the period, the Foundation renewed its support for
MyBnk, committing a further GBP1 million to the award-winning Money
House programme, which prevents homelessness by helping young
people leaving care to build the skills for independent living. It
has also renewed its partnership with the Street Elite programme in
Birmingham, which helps marginalised young people find pathways
into employment, education or training. Berkeley directly employed
a further three Street Elite graduates within the business this
year.
In October 2021, the Foundation launched its new Resilience Fund
which aims to support small-to-medium sized charities to develop
their organisational resilience in the wake of the pandemic.
GBP900,000 will be invested in voluntary sector resilience, through
this fund, over the next four years.
Outlook
Berkeley has an ambitious plan, articulated through "Our Vision
2030: Transforming Tomorrow" that will yield valuable benefits for
all of our stakeholders, whilst seeing the number of homes we
deliver increase significantly. Our strategy is firmly focussed on
brownfield regeneration within urban areas which is inherently
sustainable, due to the proximity to public transport and local
amenities.
Our commitment to London is undimmed and has been rewarded as
the initial impact of the pandemic has been tempered by people's
natural desire to enjoy the benefits and enduring attributes that
London, as a truly global city, has to offer. London is the engine
room of the nation's economy and its strength and global attraction
a pre-requisite of recovery from the pandemic and the broader
levelling up the country needs. London requires many thousands more
quality homes to be delivered over the next decade than are
currently being started. This in turn requires collaboration and
trust between the public and private sectors in a supportive
operating and regulatory environment that encourages the necessary
investment in planning, infrastructure, transport and
amenities.
Berkeley is in a great position to deliver on its ambitions with
land holdings covering 94 sites, including 30 long-term
regeneration sites, with a combined GBP6.9 billion of future gross
profit and a near-term pipeline of a further 7,000 homes that will
see Berkeley achieve its objective of growing the land holdings to
GBP7.5 billion of future gross profit.
These land holdings, and specifically the progress we have made
in recent years in bringing our regeneration sites through planning
and into production, provide Berkeley with fantastic visibility
over delivery. Sales have recovered to pre-pandemic levels and this
performance has enabled Berkeley to increase its earnings guidance
for this financial year by 5%, and anticipate 5% annual profit
growth for the next three years.
The wider operating environment remains complex with a number of
regulatory and other headwinds, not least the challenges in the
supply chain and continued uncertainty presented by the pandemic.
Berkeley therefore expects the operating environment to remain
volatile. However, it is assured in its ability to navigate through
and deliver its business plan and committed shareholder returns,
against the backdrop of the deeply under-supplied London and South
East markets in which it operates, its significant and
differentiated land holdings, skilled and experienced operating
teams and financial strength.
Rob Perrins
Chief Executive
TRADING AND FINANCIAL REVIEW
Trading performance
Revenue of GBP1,220.7 million in the period (2020: GBP895.9
million) arose primarily from the sale of new homes in London and
the South East. This included GBP1,199.7 million of residential
revenue (2020: GBP894.8 million) and GBP21.0 million of commercial
revenue (2020: GBP1.1 million).
1,828 new homes (2020: 1,104) were sold across London and the
South East at an average selling price of GBP647,000 (2020:
GBP799,000) reflecting the mix of developments and varying stages
thereon. Revenue of GBP21.0 million from commercial property
includes the sale of retail, office and leisure space primarily at
Oval Village, Grand Union and Beaufort Park in the period. There
were no significant commercial sales in the comparative period.
The gross margin percentage is 28.4% (2020: 32.3%), reflecting
the mix of properties sold in the period, and compares to 28.8%
delivered for the financial year ended 30 April 2021. Overheads of
GBP75.5 million (2020: GBP61.2 million) increased by GBP14.3
million in the period. The comparative period benefitted from
reduced LTIP charges. Consequently, the Group's operating margin
has decreased to 22.2% from 25.4% in the equivalent period last
year. Berkeley's share of the results of joint ventures is a profit
of GBP24.7 million (2020: GBP6.6 million).
The Group has remained cash positive on a net basis throughout
the period. Net finance costs totalled
GBP5.0 million for the period (2020: GBP3.8 million) due to
facility fees, interest on borrowings and imputed interest on land
creditors, which continues to outweigh interest income on cash
deposits.
Pre-tax return on equity for the period is 19.1%, compared to
14.9% for the comparative period. Basic earnings per share has
increased by 34.8% from 149.6 pence to 201.7 pence, which takes
into account the share consolidation undertaken in the period as
well as the share buy-backs of 0.8 million shares at a cost of
GBP34.7 million under the Shareholder Returns Programme.
Financial Position
Net assets decreased over the six month period by GBP251.3
million, or 7.9%, to GBP2,924.1 million
(2021: GBP3,175.4 million). The profit after tax for the period
of GBP239.8 million is more than outweighed by the cash return of
GBP451.5 million to shareholders via a B-Share scheme, the GBP34.7
million of share buy-backs and other small movements.
The net asset value per share is 2,611 pence at 31 October 2021
and remains in line with the 2,612 pence at 30 April 2021, due to
the impact of the share consolidation undertaken in the period and
share buy-backs which reduced the number of shares in issue, net of
shares held in treasury and by the EBT, from 121.6 million at the
start of the financial year to 112.0 million.
Summarised balance 31-Oct-21 30-Apr-21 Change
sheet as at
GBP'm GBP'm GBP'm
------------------------- ---------- ---------- -------
Non-current assets 436.0 388.2 +47.8
Inventories 3,710.0 3,652.5 +57.5
Debtors 84.9 83.3 +1.6
Creditors (2,152.3) (2,076.8) -75.5
---------- ---------- -------
Capital employed 2,078.6 2,047.2 +31.4
Net cash 845.5 1,128.2 -282.7
Net assets 2,924.1 3,175.4 -251.3
---------- ---------- -------
Shares, net of treasury
and EBT 112.0m 121.6m -9.6m
Net asset value per
share 2,611p 2,612p -1p
Inventories total GBP3,710.0 million at 31 October 2021, up
GBP57.5 million from GBP3,652.5 million at the recent year end.
Inventories include GBP396.8 million of land not under development
(30 April 2021: GBP331.4 million), GBP3,157.0 million of work in
progress (30 April 2021: GBP3,215.7 million) and GBP156.2 million
of completed stock (30 April 2021: GBP105.4 million).
The increase in land not under development reflects the addition
of new sites acquired in the period and previously conditional
sites that completed, represented by cash and new land creditors,
which has outweighed sites moved into production in the first half.
Completed stock is spread across a number of sites and is within a
normal historical range, most recently at this level in 2019.
Total creditors are GBP2,152.3 million at 31 October 2021, up
GBP75.5 million from GBP2,076.8 million at the recent year end.
These include GBP777.5 million of on-account receipts from
customers (30 April 2021: GBP790.6 million) and land creditors of
GBP367.5 million (30 April 2021: GBP388.2 million), with the
reduction reflecting settlement during the period. Of the total
GBP367.5 million land creditor balance, GBP47.3 million is
short-term and GBP320.2 million is spread over future financial
years. Creditors also include provisions of GBP128.7 million (30
April 2021: GBP128.1 million) which represents post-completion
development obligations and other provisions.
The Group ended the period with net cash of GBP845.5 million (30
April 2021: GBP1,128.2 million) which consists of cash holdings of
GBP1,245.5 million, net of GBP400 million of long-term debt from
the issue of Green Bonds during the period. During the period,
Berkeley repaid its GBP300 million term loan.
There is a decrease in net cash of GBP282.7 million during the
period (2020: GBP184.6 million) as a result of GBP265.7 million of
cash generated from operations (2020: GBP217.5 million) and a net
inflow of GBP21.1 million in working capital (2020: outflow of
GBP178.1 million), before tax and other net cash outflows of
GBP83.3 million (2020: net inflows GBP52.6 million), share
buy-backs of GBP34.7 million (2020: GBP37.1 million) and cash
returns to shareholders of GBP451.5 million (2020: GBP134.3
million).
Funding
Berkeley started the financial year with banking facilities
totaling GBP750 million, comprising a drawn GBP300 million term
loan and a GBP450 million undrawn revolving credit facility
(RCF).
In the period, the Group issued GBP400 million of unsecured
Green Bonds maturing in 10 years in August 2031 at a coupon of 2.5%
per annum. Berkeley has allocated the proceeds of the Green Bonds
to its ongoing development activities in accordance with its Green
Bond Framework (available on its website); specifically in
connection with the development of green buildings (energy
efficient homes) on its complex large-scale regeneration sites.
In support of the issuance, Fitch Ratings Ltd published a
Long-term Issuer Default Rating and senior unsecured rating of BBB-
with a Stable Outlook, along with a BBB- rating for the Green
Bonds.
Following the issuance of the Green Bonds, Berkeley repaid its
GBP300 million term loan and increased its RCF from GBP450 million
to GBP750 million, which is in place to November 2023. The RCF
facility is undrawn at
31 October 2021.
The Group's cash holdings are placed on deposit with its
relationship banks.
Joint Ventures
Investments accounted for using the equity method have increased
from GBP281.7 million at 30 April 2021 to GBP333.1 million at 31
October 2021. Berkeley's joint ventures include St Edward, a joint
venture with M&G, and St William, a joint venture with National
Grid plc. The increase in joint venture investments during the
period reflects Berkeley's share of undistributed joint venture
profits of GBP24.7 million and contributions to joint ventures of
GBP26.7 million.
In St Edward, 109 homes were completed in the period at an
average selling price of GBP889,000
(2020: 60 homes at GBP591,000). The completions occurred at
Royal Warwick Square in London, Hartland Village in Fleet, Green
Park Village in Reading and Highcroft in Wallingford.
In total, 5,030 plots (30 April 2021: 5,139 plots) in Berkeley's
land holdings relate to six St Edward developments, three in London
(Westminster, Kensington and Brentford) and three outside the
Capital as set out above. All of the sites are in production apart
from Brentford, which is contracted on a subject to planning basis
and is part of the Group's 30 long-term regeneration
developments.
In St William, 286 homes were completed in the period at an
average selling price of GBP432,000 (2020: 85 homes at GBP916,000).
The completions were at Prince of Wales Drive and Clarendon in
London, Courtyard Gardens in Oxted, and The Arches in Watford .
St William has committed banking facilities of GBP360 million
through to March 2024, with one remaining option over an additional
year. Borrowings under the facility totalled GBP170 million at 31
October 2021.
In total, 12,814 plots (30 April 2021: 13,056 plots) in
Berkeley's land holdings relate to 19 ongoing St William
developments which are contracted in the joint venture. 11 of these
sites are included in Berkeley's conditional land holdings. A
further two sites are included within Berkeley's near-term pipeline
of around 7,000 homes. Berkeley continues to work closely with
National Grid to identify further sites from across its portfolio
to bring through into the joint venture.
Land
Berkeley's land holdings comprise 63,302 plots at 31 October
2021 (30 April 2021: 63,270 plots), including joint ventures. Of
these land holdings, 55,020 plots (30 April 2021: 52,080) are on 80
sites that are owned and included on the balance sheet of the Group
or its joint ventures and 8,282 plots (30 April 2021: 11,190) are
on 14 contracted sites which either do not yet have a planning
consent or have another conditional element such as vacant
possession.
The Group expects a number of development opportunities to come
into the land holdings over the business plan period from its
near-term pipeline which represent a further 7,000 homes and also
holds a strategic pipeline of long-term options for in excess of
5,000 plots.
The plots in the land holdings at 31 October 2021 have an
estimated future gross profit of GBP6.94 billion
(30 April 2021: GBP6.88 billion), which includes the Group's 50%
share of the anticipated profit on any joint venture development.
The land holdings future gross profit has increased slightly in the
period as the impact of new sites added, coupled with optimisation
and market movements, has exceeded the gross profit taken through
the Income Statement.
Of Berkeley's 80 owned sites, 64 sites (plots: 46,449) have an
implementable planning consent and are in construction. A further
nine sites (plots: 4,420) have a consent which is not yet
implementable; due to practical technical constraints and
challenges surrounding, for example, vacant possession, CPO
requirements or utilities provision. This means Berkeley has just
seven sites (plots: 4,151) which it owns unconditionally that do
not have a planning consent.
Of the 14 contracted sites, one has a planning consent whilst
three have achieved resolutions to grant consent by 31 October
2021, but remain subject to section 106 agreements. Given the
conditional nature of all of these sites, there is low financial
risk on the balance sheets of the Group or its joint ventures.
The estimated future gross margin represents management's
risk-adjusted assessment of the potential gross profit for each
site, taking account of a wide range of factors, including: current
sales and input prices; the political and economic backdrop; the
planning regime; and other market forces; all of which could have a
significant effect on the eventual outcome.
Principal risks and uncertainties
The principal business risks and uncertainties facing Berkeley
for the next six months are the same as those set out on pages 78
to 95 of The Berkeley Group Holdings Annual Report for the year
ended 30 April 2021. These comprise the impact of COVID-19 on the
business, economic and political outlook, the impact of regulation
on the business and the wider industry, the availability of land,
the planning process, retention of our people, securing sales,
liquidity and working capital management, mortgage availability,
climate change and sustainability considerations, health and safety
on the Group's developments, product quality, control of build
costs and maintaining programmes, and cyber and data risk. In
preparing this interim report, full account has been taken of this
risk profile and the future outlook for the Group's developments as
embraced within the Group's strategy and outlook.
- End -
Statement of Directors' Responsibilities
This statement, which should be read in conjunction with the
independent review of the auditors set out at the end of these
condensed interim financial statements (the "interim financial
statements"), is made to enable shareholders to distinguish the
respective responsibilities of the Directors and the auditors in
relation to the interim financial statements which the Directors
confirm have been presented on a going concern basis. The Directors
consider that the Group has used appropriate accounting policies,
consistently applied and supported by reasonable and appropriate
judgements and estimates.
A copy of the interim financial statements of the Group is
placed on the website of The Berkeley Group Holdings plc:
www.berkeleygroup.co.uk. The Directors are responsible for the
maintenance and integrity of the information on the website.
Information published on the internet is accessible in many
countries with different legal requirements. Legislation in the
United Kingdom governing the preparation and dissemination of the
financial statements may differ from legislation in other
jurisdictions.
The Directors confirm that this condensed set of interim
financial statements has been prepared in accordance with
International Accounting Standard 34, "Interim Financial
Reporting", as adopted by the European Union and that the interim
management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
The Directors of The Berkeley Group Holdings plc are listed in
the Annual Report of The Berkeley Group Holdings plc for the period
ended 31 October 2021. A list of current Directors is maintained on
The Berkeley Group Holdings plc's website.
On behalf of the Board
R C Perrins
Chief Executive
8 December 2021
R J Stearn
Finance Director
8 December 2021
Condensed Consolidated Income Statement
Six months Six months Year ended
ended ended
31 October 31 October 30 April
2021 2020 2021
Unaudited Unaudited Audited
Notes GBPm GBPm GBPm
----------------------------- ------ ----------- ----------- -----------
Revenue 1,220.7 895.9 2,202.2
Cost of sales (874.2) (606.7) (1,566.9)
----------------------------- ------ ----------- ----------- -----------
Gross profit 346.5 289.2 635.3
Net operating expenses (75.5) (61.2) (133.0)
----------------------------- ------ ----------- ----------- -----------
Operating profit 271.0 228.0 502.3
Finance income 3 0.7 1.9 3.0
Finance costs 3 (5.7) (5.7) (9.6)
Share of results of joint
ventures using the equity
method 24.7 6.6 22.4
----------- ----------- -----------
Profit before taxation for
the period 290.7 230.8 518.1
Income tax expense 4 (50.9) (43.1) (95.4)
----------------------------- ------ ----------- ----------- -----------
Profit after taxation for
the period 239.8 187.7 422.7
----------------------------- ------ ----------- ----------- -----------
Earnings per share (pence):
Basic 5 201.7 149.6 339.4
Diluted 5 197.9 146.2 332.5
----------------------------- ------ ----------- ----------- -----------
Condensed Consolidated Statement of Comprehensive Income
Six months Six months Year ended
ended ended
31 October 31 October 30 April
2021 2020 2021
Unaudited Unaudited Audited
GBPm GBPm GBPm
Profit after taxation for
the period 239.8 187.7 422.7
-------------------------------------- ----------- ----------- -----------
Other comprehensive income
Items that will not be reclassified
to profit or loss
Actuarial gain recognised
in the pension scheme 0.7 1.4 2.7
Total items that will not
be reclassified to profit
or loss 0.7 1.4 2.7
-------------------------------------- ----------- ----------- -----------
Other comprehensive income
for the period 0.7 1.4 2.7
-------------------------------------- ----------- ----------- -----------
Total comprehensive income
for the period 240.5 189.1 425.4
-------------------------------------- ----------- ----------- -----------
Condensed Consolidated Statement of Financial Position
31 October 31 October 30 April
2021 2020 2021
Unaudited Unaudited Audited
As at Notes GBPm GBPm GBPm
---------------------------------- ------ ----------- ----------- ----------
Assets
Non-current assets
Intangible assets 17.2 17.2 17.2
Property, plant and equipment 42.2 47.2 46.0
Right-of-use assets 2.8 3.1 3.2
Investments accounted for
using the equity method 333.1 268.4 281.7
Deferred tax assets 40.7 42.6 40.1
436.0 378.5 388.2
---------------------------------- ------ ----------- ----------- ------------
Current assets
Inventories 6 3,710.0 3,884.3 3,652.5
Trade and other receivables 74.1 61.6 75.4
Current tax assets 10.8 19.4 7.9
Cash and cash equivalents 7 1,245.5 1,254.3 1,428.2
---------------------------------- ------ ----------- ----------- ------------
5,040.4 5,219.6 5,164.0
---------------------------------- ------ ----------- ----------- ------------
Total assets 5,476.4 5,598.1 5,552.2
---------------------------------- ------ ----------- ----------- ------------
Liabilities
Non-current liabilities
Borrowings 7 (400.0) (300.0) (300.0)
Trade and other payables (320.2) (338.3) (330.8)
Lease liability (1.2) (1.4) (1.7)
Provisions for other liabilities
and charges (66.9) (55.4) (62.3)
---------------------------------- ------ ----------- ----------- ------------
(788.3) (695.1) (694.8)
---------------------------------- ------ ----------- ----------- ------------
Current liabilities
Trade and other payables (1,700.6) (1,727.6) (1,614.7)
Lease liability (1.6) (1.6) (1.5)
Provisions for other liabilities
and charges (61.8) (68.6) (65.8)
---------------------------------- ------ ----------- ----------- ------------
(1,764.0) (1,797.8) (1,682.0)
Total liabilities (2,552.3) (2,492.9) (2,376.8)
---------------------------------- ------ ----------- ----------- ------------
Total net assets 2,924.1 3,105.2 3,175.4
---------------------------------- ------ ----------- ----------- ------------
Equity
Shareholders' equity
Share capital 6.6 6.8 6.6
Share premium 49.8 49.8 49.8
Capital redemption reserve 25.0 24.7 24.9
Other reserve (961.3) (961.3) (961.3)
Retained earnings 3,804.0 3,985.2 4,055.4
---------------------------------- ------ ----------- ----------- ----------
Total equity 2,924.1 3,105.2 3,175.4
---------------------------------- ------ ----------- ----------- ----------
Condensed Consolidated Statement of Changes in Equity
Capital
Share Share redemption Other Retained Total
capital premium reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------------------------- -------- -------- ----------- -------- --------- --------
Unaudited
At 1 May 2021 6.6 49.8 24.9 (961.3) 4,055.4 3,175.4
Profit after taxation for the period - - - - 239.8 239.8
Other comprehensive income for the period - - - - 0.7 0.7
Purchase of own shares (0.0) - 0.1 - (34.7) (34.6)
Transactions with shareholders:
- Charge in respect of employee share schemes - - - - (8.3) (8.3)
- Deferred tax in respect of employee share schemes - - - - 2.6 2.6
- Dividends to equity holders of the Company - - - - (451.5) (451.5)
--------------------------------------------------------- -------- -------- ----------- -------- --------- --------
At 31 October 2021 6.6 49.8 25.0 (961.3) 3,804.0 2,924.1
--------------------------------------------------------- -------- -------- ----------- -------- --------- --------
Unaudited
At 1 May 2020 6.8 49.8 24.7 (961.3) 3,981.6 3,101.6
Profit after taxation for the period - - - - 187.7 187.7
Other comprehensive income for the period - - - - 1.4 1.4
Purchase of own shares (0.0) - 0.0 - (37.1) (37.1)
Transactions with shareholders:
- Charge in respect of employee share schemes - - - - (13.3) (13.3)
* Deferred tax in respect of employee share schemes - - - - (0.8) (0.8)
* Dividends to equity holders of the Company - - - - (134.3) (134.3)
--------------------------------------------------------- -------- -------- ----------- -------- --------- --------
At 31 October 2020 6.8 49.8 24.7 (961.3) 3,985.2 3,105.2
--------------------------------------------------------- -------- -------- ----------- -------- --------- --------
Audited
At 1 May 2020 6.8 49.8 24.7 (961.3) 3,981.6 3,101.6
Profit after taxation for the year - - - - 422.7 422.7
Other comprehensive income for the year - - - - 2.7 2.7
Purchase of own shares (0.2) - 0.2 - (188.6) (188.6)
Transactions with shareholders:
* Charge in respect of employee share schemes - - - - (11.9) (11.9)
* Deferred tax in respect of employee share schemes - - - - (5.6) (5.6)
* Dividends to equity holders of the Company - - - - (145.5) (145.5)
* At 30 April 2021 6.6 49.8 24.9 (961.3) 4,055.4 3,175.4
--------------------------------------------------------- -------- -------- ----------- -------- --------- --------
Condensed Consolidated Cash Flow Statement
Six months Six months Year ended
ended ended
31 October 31 October 30 April
2021 2020 2021
Unaudited Unaudited Audited
Notes GBPm GBPm GBPm
----------------------------------- ------ ----------- ----------- -----------
Cash flows from operating
activities
Cash generated from operations 7 286.8 39.4 419.4
Interest received 0.7 1.9 3.0
Interest paid (4.0) (5.7) (8.1)
Income tax paid (51.7) (47.1) (90.1)
----------------------------------- ------ ----------- ----------- -----------
Net cash flow from operating
activities 231.8 (11.5) 324.2
----------------------------------- ------ ----------- ----------- -----------
Cash flows from investing
activities
Purchase of property, plant
and equipment (0.8) (1.2) (2.4)
Proceeds on disposal of property,
plant and equipment - 0.5 0.8
Dividends from joint ventures - - 7.5
Movements in loans with joint
ventures (26.7) - (5.0)
Net cash flow from investing
activities (27.5) (0.7) 0.9
----------------------------------- ------ ----------- ----------- -----------
Cash flows from financing
activities
Lease capital repayments (0.9) (1.1) (1.8)
Proceeds associated with
settlement of share options 0.1 0.1 0.1
Purchase of own shares (34.7) (37.1) (188.6)
Increase in borrowings 400.0 - -
Decrease in borrowings (300.0) (200.0) (200.0)
Dividends paid to Company's
shareholders (451.5) (134.3) (145.5)
----------------------------------- ------ ----------- ----------- -----------
Net cash flow from financing
activities (387.0) (372.4) (535.8)
----------------------------------- ------ ----------- ----------- -----------
Net decrease in cash and
cash equivalents (182.7) (384.6) (210.7)
Cash and cash equivalents
at the start of the financial
period 1,428.2 1,638.9 1,638.9
----------------------------------- ------ ----------- ----------- -----------
Cash and cash equivalents
at the end of the financial
period 1,245.5 1,254.3 1,428.2
----------------------------------- ------ ----------- ----------- -----------
1 General information
The Berkeley Group Holdings plc (the "Company") is a public
limited company incorporated and domiciled in the United Kingdom.
The address of its registered office is Berkeley House, 19
Portsmouth Road, Cobham, Surrey, KT11 1JG. The Company and its
subsidiaries (together the "Group") are engaged in residential led,
mixed-use property development.
This condensed consolidated half-yearly financial information
was approved for issue on 8 December 2021. It does not comprise
statutory accounts within the meaning of Section 434(3) of the
Companies Act 2006. Statutory accounts for the year ended 30 April
2021 were approved by the Board of Directors on 23 June 2021 and
delivered to the Registrar of Companies. The report of the auditors
on those accounts was unqualified, did not include reference to any
matters to which the auditor drew attention by way of emphasis
without qualifying their audit report, and did not contain a
statement under Section 498 (2) or (3) of the Companies Act 2006.
The Condensed Consolidated Financial Statements have been reviewed,
not audited.
2 Basis of preparation
2.1 Introduction
This condensed consolidated interim financial report for the six
months ended 31 October 2021 has been prepared in accordance with
IAS 34 'Interim Financial Reporting' as adopted for use in the UK
and the Disclosure Guidance and Transparency Rules of the UK's
Financial Conduct Authority.
The comparative figures for the year ended 30 April 2021 do not
constitute statutory accounts as defined in Section 434 of the
Companies Act 2006 and have been extracted from the statutory
accounts, which were prepared in accordance with International
Accounting Standards (IAS) in conformity with the requirements of
the Companies Act 2006 and EU-adopted International Financial
Reporting Standards (IFRS) and were delivered to the Registrar of
Companies.
On 31 December 2020, EU-adopted IFRS was brought into UK law and
became UK-adopted International Accounting Standards, with future
changes to IFRS being subject to endorsement by the UK Endorsement
Board. The consolidated financial statements transitioned to
UK-adopted international accounting standards for the financial
period beginning 1 May 2021. There were no impact or changes in
accounting policies from the transition. UK adopted International
Accounting Standards differs in certain respects from International
Financial Reporting Standards as adopted by the EU. The differences
have no material impact on the Group's condensed financial
statements for the periods presented, which therefore also comply
with International Reporting Standards as adopted by the EU.
The accounting policies, presentation and method of computations
adopted in the preparation of the interim 2021 Condensed
Consolidated Financial Statements are consistent with those
followed in the preparation of the Group's annual financial
statements for the year ended 30 April 2021 except in respect of
taxation which is based on the expected effective tax rate for the
year ending 30 April 2021.
The following amendments to standards and interpretations are
applicable to the Group and are mandatory for the first time for
the financial year beginning 1 May 2021:
- Amendments to IFRS 16, 'Leases' for Covid Related Rent Concessions
- Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
The Group did not have to change its accounting policies or make
retrospective adjustments as a result of these amendments.
2.2 Going concern
The Directors have assessed the business plan and future funding
requirements of the Group over the medium-term and compared these
with the level of committed loan facilities, listed debt and
existing cash resources. As at 31 October 2021, the Group has net
cash of GBP845.5 million and total liquidity of GBP1,995.5 million,
when this net cash is combined with undrawn banking facilities of
GBP750 million (which expire in November 2023) and GBP400 million
green listed bonds (with a term to August 2031). Furthermore, the
Group has cash due on forward sales of
GBP1.70 billion, a significant proportion of which covers
delivery for the next 18 months .
In making this assessment, consideration has been given to the
uncertainty inherent in future financial forecasts and where
applicable, severe but plausible sensitivities have been applied to
the key factors affecting the financial performance of the Group.
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future period, and not less than 12 months from the
date of these Condensed Consolidated Financial Statements. For this
reason, they continue to adopt the going concern basis of
accounting in preparing the Group's Condensed Consolidated
Financial Statements.
3 Net finance costs
Six months Six months Year ended
ended ended
31 October 31 October 30 April
2021 2020 2021
Unaudited Unaudited Audited
GBPm GBPm GBPm
--------------------------------- ----------- ----------- -----------
Finance income 0.7 1.9 3.0
--------------------------------- ----------- ----------- -----------
Finance costs
Interest payable on bank loans,
bond and non-utilisation fees (4.8) (4.1) (7.7)
Amortisation of facility fees (0.6) (0.5) (0.9)
Other finance costs (0.3) (1.1) (1.0)
--------------------------------- ----------- ----------- -----------
(5.7) (5.7) (9.6)
--------------------------------- ----------- ----------- -----------
Net finance costs (5.0) (3.8) (6.6)
--------------------------------- ----------- ----------- -----------
Finance income predominantly represents interest earned on cash
deposits.
Other finance costs represent imputed interest on taxation, on
land purchased on deferred settlement terms and lease interest.
4 Income tax expense
Six months Six months Year ended
ended ended
31 October 31 October 30 April
2021 2020 2021
Unaudited Unaudited Audited
GBPm GBPm GBPm
------------------------------------ ----------- ----------- -----------
Current tax
UK corporation tax payable (53.6) (37.1) (93.1)
Adjustments in respect of previous
years - 0.4 1.9
(53.6) (36.7) (91.2)
Deferred tax
Deferred tax movements 2.7 (7.1) (5.4)
Adjustments in respect of previous
years - 0.7 1.2
------------------------------------ ----------- ----------- -----------
2.7 (6.4) (4.2)
(50.9) (43.1) (95.4)
------------------------------------ ----------- ----------- -----------
5 Earnings per share
Basic earnings per share are calculated as the profit for the
financial period attributable to shareholders of the Group divided
by the weighted average number of shares in issue during the
period.
Six months Six months Year ended
ended ended
31 October 31 October 30 April
2021 2020 2021
Unaudited Unaudited Audited
-----------
Profit attributable to shareholders
(GBPm) 239.8 187.7 422.7
Weighted average no. of shares
(m) 118.9 125.5 124.6
Basic earnings per share (p) 201.7 149.6 339.4
------------------------------------- ----------- ----------- -----------
For diluted earnings per ordinary share, the weighted average
number of shares in issue is adjusted to assume the conversion of
all potentially dilutive ordinary shares.
At 31 October 2021, the Group had one (2020: two) category of
potentially dilutive ordinary shares: 1.9 million (2020: 2.6
million) share options under the 2011 LTIP (2020: 29,873 share
options under the 2015 Bonus Banking plan).
A calculation is undertaken to determine the number of shares
that could have been acquired at fair value based on the aggregate
of the exercise price of each share option and the fair value of
future services to be supplied to the Group, which is the
unamortised share-based payments charge. The difference between the
number of shares that could have been acquired at fair value and
the total number of options is used in the diluted earnings per
share calculation.
Six months Six months Year ended
ended ended
31 October 31 October 30 April
2021 2020 2021
Unaudited Unaudited Audited
-----------
Profit used to determine diluted
EPS (GBPm) 239.8 187.7 422.7
---------------------------------- --------------- ----------- -----------
Weighted average no. of shares
(m) 118.9 125.5 124.6
Adjustments for:
Share options - 2011 LTIP 2.3 2.9 2.5
Shares used to determine diluted
EPS (m) 121.2 128.4 127.1
---------------------------------- --------------- ----------- -----------
Diluted earnings per share (p) 197.9 146.2 332.5
---------------------------------- --------------- ----------- -----------
6 Inventories
Six months Six months Year ended
ended ended
31 October 31 October 30 April
2021 2020 2021
Unaudited Unaudited Audited
-----------
Land not under development 396.8 340.1 331.4
Work in progress: Land cost 1,076.4 1,270.5 1,134.7
------------------------------ ----------- ----------- -----------
Total land 1,473.2 1,610.6 1,466.1
Work in progress: Build cost 2,080.6 2,200.4 2,081.0
Completed units 156.2 73.3 105.4
------------------------------ ----------- ----------- -----------
Total inventories 3,710.0 3,884.3 3,652.5
------------------------------ ----------- ----------- -----------
7 Notes to the Condensed Consolidated Cash Flow Statement
Six months Six months Year ended
ended ended
31 October 31 October 30 April
2021 2020 2021
Unaudited Unaudited Audited
GBPm GBPm GBPm
---------------------------------------- ----------- ----------- -------------
Profit for the financial period 239.8 187.7 422.7
Adjustments for:
Taxation 50.9 43.1 95.4
Depreciation 2.8 3.1 5.9
Loss on sale of PPE - 0.1 -
Finance income (0.7) (1.9) (3.0)
Finance costs 5.7 5.7 9.6
Share of results of joint ventures
after tax (24.7) (6.6) (22.4)
Non-cash charge in respect of pension
scheme - - 0.7
Non-cash charge in respect of share
awards (8.1) (13.7) (12.3)
Changes in working capital:
Increase in inventories (54.8) (329.4) (97.6)
Decrease/(Increase) in trade and
other receivables 2.2 8.2 (5.1)
Increase in trade and other payables 74.1 143.4 25.5
Net change in employee benefit
obligations (0.4) (0.3) -
---------------------------------------- ----------- ----------- -----------
Cash generated from operations 286.8 39.4 419.4
---------------------------------------- ----------- ----------- -----------
Reconciliation of net cash flow
to net cash
Net decrease in net cash and cash
equivalents, including bank overdraft (182.7) (384.6) (210.7)
Net (increase)/decrease in borrowings (100.0) 200.0 200.0
----------------------------------------- ------------ -------- --------
Movement in net cash in the financial
period (282.7) (184.6) (10.7)
Opening net cash 1,128.2 1,138.9 1,138.9
----------------------------------------- ------------ -------- --------
Closing net cash 845.5 954.3 1,128.2
----------------------------------------- ------------ -------- --------
Net cash
Cash and cash equivalents 1,245.5 1,254.3 1,428.2
Non-current borrowings (400.0) (300.0) (300.0)
----------------------------------------- ------------ -------- --------
Net cash 845.5 954.3 1,128.2
----------------------------------------- ------------ -------- --------
8 Alternative performance measures
Berkeley uses a number of alternative performance measures
(APMs) which are not defined by IFRS. The Directors consider these
measures useful to assess the underlying performance of the Group
alongside the relevant IFRS financial information. They are
referred to as Financial KPIs throughout the interim results. The
information below provides a definition of APMs and reconciliation
to the relevant IFRS information, where required:
Net cash
Net cash is defined as cash and cash equivalents, less total
borrowings. This is reconciled in note 7.
8 Alternative performance measures (continued)
Net assets per share attributable to shareholders (NAVPS)
This is defined as net assets attributable to shareholders
divided by the number of shares in issue, excluding shares held in
treasury and shares held by the employee benefit trust.
Six months
Six months ended ended Year ended
31 October 30 April
31 October 2021 2020 2021
Unaudited Unaudited Audited
----------------------------------- ---------------- ---------- ----------
Net assets (GBPm) 2,924.1 3,105.2 3,175.4
Total shares in issue (million) 121.3 135.8 132.2
Less:
----------------------------------- ---------------- ---------- ----------
Treasury shares held (million) (9.2) (10.6) (10.5)
----------------------------------- ---------------- ---------- ----------
Employee benefit trust shares held
(million) (0.1) (0.1) (0.1)
----------------------------------- ---------------- ---------- ----------
Net shares used to determine NAVPS
(million) 112.0 125.1 121.6
----------------------------------- ---------------- ---------- ----------
Net asset per share attributable
to shareholders (pence) 2,610.7 2,482.4 2,612.1
----------------------------------- ---------------- ---------- ----------
Return on equity (ROE) before tax
This measures the efficiency of returns generated from
shareholder equity before taxation and is calculated as profit
before taxation attributable to shareholders as a percentage of the
average of opening and closing shareholders' funds.
Six months Six months
ended ended Year ended
31 October 31 October 30 April
2021 2020 2021
Unaudited Unaudited Audited
-------------------------------- ---------- ---------- ----------
Opening shareholders equity 3,175.4 3,101.6 3,101.6
Closing shareholders equity 2,924.1 3,105.2 3,175.4
-------------------------------- ---------- ---------- ----------
Average shareholders' equity 3,049.7 3,103.4 3,138.5
Return on equity before tax:
-------------------------------- ---------- ---------- ----------
Profit before tax 290.7 230.8 518.1
-------------------------------- ---------- ---------- ----------
Return on equity before tax (%) 19.1% 14.9% 16.5%
-------------------------------- ---------- ---------- ----------
Cash due on forward sales
This measures cash still due from customers, with a risk
adjustment, at the relevant Balance Sheet date during the next
three years under unconditional contracts for sale. It excludes
forward sales of affordable housing and commercial properties and
forward sales within the Group's joint ventures.
Future gross margin in land holdings
This represents management's risk-adjusted assessment of the
potential gross profit for each of the Group's sites, including the
proportionate share of its joint ventures, taking account of a wide
range of factors, including: current sales and input prices; the
economic and political backdrop; the planning regime; and other
market factors; all of which could have a significant effect on the
eventual outcome.
9 Related party transactions
The Group has entered into the following related party
transactions:
Transactions with Directors
During the period, Mr R C Perrins paid GBP21,792 (2020:
GBP178,278) and Mr S Ellis paid GBP19,922 (2020: GBP26,426) to the
Group in connection with works carried out at their respective
homes at commercial rates in accordance with the relevant policies
of the Group. There were no balances outstanding at the period
end.
Transactions with Joint Ventures
During the financial period the joint ventures paid management
fees and other recharges to the Group of GBP22.7 million (2020:
GBP20.9 million). Other transactions in the period include the
movements in loans of
GBP26.7 million (2020: GBPnil).
The outstanding loan balances with joint ventures at 31 October
2021 total GBP208.9 million (30 April 2021: GBP182.2 million).
INDEPENDENT REVIEW REPORT TO THE BERKELEY GROUP HOLDINGS PLC
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 October 2021 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated statement of
financial position, the condensed consolidated statement of changes
in equity, the condensed consolidated cash flow statement and the
related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
October 2021 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting and the
Disclosure Guidance and Transparency Rules ("the DTR") of the UK's
Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards. The
directors are responsible for preparing the condensed set of
financial statements included in the half-yearly financial report
in accordance with IAS 34.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
INDEPENDENT REVIEW REPORT TO THE BERKELEY GROUP HOLDINGS PLC
(continued)
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Michael Harper
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
8 December 2021
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END
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