TIDMBKG
RNS Number : 1619Q
Berkeley Group Holdings (The) PLC
17 June 2020
PRESS RELEASE 17 JUNE 2020
THE BERKELEY GROUP HOLDINGS PLC
FINAL RESULTS ANNOUNCEMENT
The Berkeley Group Holdings plc ("Berkeley") today announces its
audited results for the financial year ended 30 April 2020.
Berkeley is the country's leading place-maker, operating
principally in London, Birmingham and the South East. We are a
proud UK business specialising in the creation of beautiful,
successful and sustainable places where communities thrive and
people of all ages and backgrounds enjoy a great quality of
life.
CURRENT STRATEGY AND GUIDANCE (reflecting Covid-19)
-- The health, safety and well-being of our people, customers,
supply chain and the communities in which we work is our main
priority. Berkeley quickly adapted its site operating procedures
and implemented remote working in line with Government and industry
guidance in response to the unprecedented challenges presented by
Covid-19
-- Continue to invest 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
-- Maintain a pre-tax ROE of at least 15% on a cumulative basis
from 1 May 2019 to 30 April 2025, which broadly equates to annual
pre-tax profits of GBP500 million for the six year period
-- Commitment to GBP280 million per annum Shareholder Return up
to 30 September 2025 re-affirmed, with next GBP140 million on track
for payment by 30 September 2020, as previously announced
-- Return of GBP455 million surplus capital deferred for up to
two years due to the volatility presented by Covid-19 and to
provide the Company with the flexibility to invest the surplus
capital in incremental new land should opportunities arise which
would lead to enhanced shareholder value over the cycle
DELIVERING FOR ALL STAKEHOLDERS
-- 2,723 homes delivered (plus 435 in joint ventures) - includes
some 10% of London's new private and affordable homes - supporting
approximately 32,000 UK jobs directly and indirectly throughout the
supply chain
-- Approximately GBP270 million of subsidies provided to deliver
affordable housing and committed to wider community and
infrastructure benefits in the year
-- Maintained Industry leading Net Promoter Score (+78.8) and customer service ratings
-- Sector leading 'A-' score for transparency and action on climate change from CDP
-- 35 sites now have net biodiversity gain strategies, which
will create approximately 450 acres of new or measurably improved
natural habitats on these developments alone
-- Delivered carbon positive business operations for a third consecutive year
-- Berkeley Foundation wins "Business of the Year" at Third
Sector's 2020 Business Charity Awards
EARNINGS AND SHAREHOLDER RETURNS
-- Pre-tax profit now returned to normal level, following
successful delivery of a number of Central London developments
acquired in the period from 2009 to 2013
-- GBP503.7 million of pre-tax profit (2019: GBP775.2 million),
with EPS down 32.5%, as anticipated
-- 3.5 million shares acquired in the year for GBP130.5 million
and dividends paid of GBP149.8 million
FINANCIAL POSITION
-- Net cash of GBP1,138.9 million (April 2019: GBP975.0
million), with total liquidity of GBP1.9 billion via banking
facilities of GBP750 million in place to November 2023
-- Net asset value per share up 7.2% to GBP24.72 (April 2019: GBP23.05)
-- Cash due on forward sales of GBP1.9 billion (April 2019: GBP1.8 billion)
-- GBP6.4 billion of estimated future gross margin in land
holdings (April 2019: GBP6.2 billion)
CHAIRMAN'S STATEMENT
These results reflect a strong performance for the year, driven
by the fantastic progress of our long-term brownfield regeneration
sites, many of which are now maturing into welcoming and popular
communities.
The onset of the Covid-19 lock-down in the last five weeks of
the period had a significant impact on our operating environment,
but Berkeley ended the year in a strong financial and operational
position as our resilient business model and agile working culture
defined our response. Berkeley's strategy is designed for a high
risk cyclical housing market, so when conditions shift for any
reason we have high liquidity, long-term cash flow visibility and
highly skilled teams with the grip to effect decisive operational
change. This means we are well placed to manage the current period
of uncertainty without call on the Government's furlough scheme or
its Covid Corporate Financing Facility.
Our agility mitigated the early impacts of Covid-19 and ensured
the safety and wellbeing of our people, customers, suppliers and
local communities, which is always our first priority. The speed
and precision of the implementation of the necessary far-reaching
changes to our working practices showed our highly skilled people
and suppliers at their very best.
The suffering and upheaval caused by Covid-19 has given cause to
reflect on what really matters and our purpose and contributions to
society. As the crisis unfolded, we were struck by the selfless
bravery of our front line public services and the kindness and
resilience of the local communities in which we work. Our local
teams have been part of this heartening response, which has
reaffirmed our core belief in the value of community-building and
supporting local people.
For us, placemaking is all about people. It's about turning
underused spaces into welcoming neighbourhoods which reflect the
local character and where people are connected to each other, proud
of their homes and feel part of community life. There is no exact
formula for achieving this, but as we are seeing at places like
Hartland Village, Woodhurst Park, Kidbrooke Village and Trent Park,
we can make fantastic progress when we listen to people and take
time to engage them in creating and managing their
neighbourhoods.
This year we have further embedded and delivered our approach to
net biodiversity gain, with 35 sites now on course to measurably
increase natural life. These projects, including Poplar Riverside,
White City Living and Southall Waterside, will deliver over 450
acres of new or measurably enhanced natural habitats and become
beautiful green landscapes where people can experience the benefits
of nature.
I am very proud that this is Berkeley's third year of delivering
carbon positive building operations, thanks to our long- term
commitments to reduce energy use and use cleaner sources of power.
We have also continued our work towards delivering net zero carbon
developments and will continue to engage with Government, the
energy sector and our World Green Building Council partners to
develop long-term solutions.
Over the last twelve months MHCLG reaffirmed Government's
commitment to improving building safety with a suite of new
measures, including guidance on cladding. While we welcome the
commitment to improving the building regulation regime, the impact
of the latest guidance on mortgage valuations and the ability of
fire engineers to provide the necessary certificates for lenders is
creating delays in the second hand housing market which seems
unlikely to ease until a collaborative regime, based on risk
assessment, is established.
The year has seen further progress in developing our own
facility for the manufacture of precision made homes using
innovative, modern methods of construction. The bespoke machinery
is being installed during the coming year prior to production
commencing. This really represents the future for our industry,
addressing many of the challenges around the supply chain, skills,
the environment and quality.
During the year, Berkeley made shareholder returns of GBP280.3
million, of which GBP130.5 million was represented by share
buy-backs and GBP149.8 million by dividends. Of the GBP140.0
million return already announced to be made by 30 September 2020,
GBP6.0 million has been made to date through share buy-backs. The
amount that will be returned as dividend will be announced on 13
August 2020 taking account of any share buy-backs in the
intervening period.
In closing, I want to express my gratitude and appreciation to
our people. They are highly skilled, hugely committed and put our
core values into practice every day. This deeply embedded culture
is what sets Berkeley apart and ensures we deliver long-term value
for all stakeholders.
Tony Pidgley CBE
Chairman
CHIEF EXECUTIVE'S STATEMENT
Summary of Performance
Berkeley has delivered pre-tax profit of GBP503.7 million for
the year. This is from the sale of 2,723 homes (2019: 3,698) at an
average selling price of GBP 677,000 (2019: GBP748,000), reflecting
the mix of properties sold in the year. The reduction in profit
before tax of 35.0% on the prior year was anticipated and reflects
the progressive completion of a number of Central London
developments acquired in the period from 2009 to 2013.
Year ended 30 April 2020 2019 Change
GBP'm GBP'm GBP'm %
------------------------------- -------- -------- --------- -------
Revenue 1,920.4 2,957.4 -1,037.0 -35.1%
Gross profit 637.4 926.2 -288.8 -31.2%
Operating expenses (167.7) (157.8) -9.9 +6.3%
------------------------------- -------- -------- --------- -------
Operating profit 469.7 768.4 -298.7 -38.9%
Net finance costs 0.7 (2.0) +2.7
Share of joint ventures 33.3 8.8 +24.5
------------------------------- -------- -------- --------- -------
Profit before tax 503.7 775.2 -271.5 -35.0%
------------------------------- -------- -------- --------- -------
Pre-Tax Return on Equity 16.6% 27.9% -11.3%
Earnings Per Share - Basic 324.9p 481.1p -156.2p -32.5%
Shareholder Returns
------------------------------- -------- -------- ---------
Dividends paid 149.8 53.0 +96.8
Share Buy-backs under Returns
Programme 130.5 198.9 -68.4
------------------------------- -------- -------- ---------
Shareholder Return in the
year 280.3 251.9 +28.4
------------------------------- -------- -------- ---------
These results represent a strong performance and are in line
with the guidance in place at the start of the year. Robust trading
during the year, with improved sentiment and gathering momentum,
following the decisive December General Election result, led to
consensus for the year increasing to around GBP550 million. The
Company was on track to meet this prior to the Covid-19 lockdown at
the end of March when guidance was revised to GBP475 million, on
concern of the ability to complete property transactions during
lockdown. Berkeley therefore surpassed its initial expectation in
this regard, in spite of the challenges of maintaining production
on site and for customers in securing mortgages and achieving legal
completions in this period.
From the onset of Covid-19 we have focused on adapting our
activities to keep all stakeholders safe, to limit impacts on our
ongoing operations and to fulfil our commitments to our customers
and partners. Following the Government's 23 March lockdown
instruction, we worked quickly to establish safe protocols for our
site operations; always with reference to industry bodies,
including the Construction Leadership Council, and Government
guidance. After an initial reduction to around 40% of normal
production capacity, our activities have been largely restored and
stabilised through the effective implementation of these safe
working practices and, on average, our sites are currently
operating at around 80% of production capacity. This has taken a
huge amount of hard work and dedication from our experienced teams
and supply chain.
Looking forward, this response to the initial impact of Covid-19
means that the Company is still targeting a cumulative pre-tax ROE
of 15% for the six year period ending on 30 April 2025, which
broadly equates to average annual pre-tax profit of GBP500 million.
We now anticipate profit delivery in the coming year to be weighted
towards the second half of the year in an approximate one third to
two thirds ratio. This does assume no further significant
disruption from a second wave of Covid-19 or a disorderly end to
the Brexit transition period.
Berkeley's net cash of GBP1,138.9 million (April 2019: GBP975.0
million) continues to reflect the measured investment of recent
years and is commensurate with the uncertain operating environment.
Notwithstanding this, Berkeley has increased the estimated gross
profit in its land holdings to GBP6.4 billion (April 2019: GBP6.2
billion).
Strategy Update and Shareholder Returns
Berkeley's purpose is to create 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.
Since the end of the financial crisis in 2011, the Company has
acquired a number of long-term regeneration sites, some of which
are now in, or coming into, production and is in the process of
bringing forward over 25 large and complex residential-led
developments, of which 20 have been acquired since the start of
this period.
These sites typically deliver between 1,000 and 5,000 homes and
their development can take up to 30 years to complete. Their
complexity often means that it can be five or six years before the
first homes are delivered. They require significant upfront capital
investment, coupled with the unique expertise that the Group has
accumulated over the last 20 years and which is embedded throughout
its 21 autonomous operating companies. Berkeley is transforming
neglected industrial and brownfield land into thriving new
communities which deliver quality homes of all tenures, biodiverse
open spaces and a mix of shops, offices and amenities for local
people.
The successful transformation of these sites is founded on
trusted partnerships with local authorities and communities and
their development is directly aligned to the Government's strategy
for increasing the supply of good quality homes across all tenures.
The Company is now the only developer undertaking major brownfield
regeneration at scale in London and the South-East as the
increasing risk and complexity of these activities has seen those
with lesser expertise and resources leave this area of the market.
The delivery of these sites is vital to meeting the housing needs
of the country's towns and cities, while relieving pressure on
greenfield land.
Over the last two years construction has begun on over 20 new
sites giving Berkeley a firm foundation for delivering, prior to
Covid-19, an anticipated 50% increase in production over the next
five years, underpinned by a strong opening forward sales position.
While Covid-19 has caused short term delays and volatility, it does
not change the fundamental strength of the business, which is set
up in appreciation of the risks of a cyclical market.
In terms of capital allocation, the priority right now, as it is
for all responsible businesses, is on cash conservation to
safeguard the business and ensure that it is in the best possible
place once the recovery begins. Berkeley has reviewed its business
plan, eliminated non-essential expenditure, and re-profiled its
sites to focus its work in progress investment on delivering its
forward sales and where it has good visibility of the local market.
The depth and quality of the land bank means that we will only
acquire land with compelling characteristics, where we can add
value over the long-term.
Notwithstanding this, Berkeley's financial strength means that
it can continue to meet its purpose by investing in its unique
operating model to deliver large, complex regeneration sites and
help the country rebound from the impact of the pandemic and to
continue supporting approximately 32,000 UK jobs, directly and
indirectly, in its business and supply chain for the foreseeable
future.
The Company remains committed to its programme to deliver
sustainable Shareholder Returns of GBP280 million per annum up
until 2025, but will defer the previously proposed return of GBP455
million surplus capital for up to two years due to the volatility
presented by Covid-19. This will also provide the Company with the
flexibility to use the surplus capital to either make enhanced cash
returns to shareholders or to invest in incremental land interests,
should opportunities arise which would lead to enhanced shareholder
value over the cycle. The surplus capital will remain on the
balance sheet until the enhanced returns or incremental land
investment is made. Incremental land investment will be defined as
cash spent on land interests, over and above the cost of land used
in the income statement, from 1 May 2020.
In this period of uncertainty, Berkeley will continually review
its strategy and has flexibility and optionality within its
business model to adjust its plans quickly should market conditions
change; always prioritising financial strength ahead of annual
profits.
Berkeley is able to make its Shareholder Returns through either
share buy-backs or dividends. Since January 2017, when share
buy-backs were first introduced, the Company has acquired 14.6
million shares for GBP514.3 million, at an average price of
GBP35.25 per share and the annual return of GBP280 million now
equates to GBP2.23 per share; an 11% increase to the initial
GBP2.00 per share. The next six monthly return of GBP140 million is
due to be paid by 30 September 2020. Of this GBP6.0 million has
already been made via share buy backs. The amount to be returned as
dividend will be announced on 13 August 2020 and paid on 11
September 2020 to shareholders on the register on 21 August 2020,
taking account of any further share buy-backs in the intervening
period.
Housing Market
Going into the lockdown period Berkeley was experiencing a
stable and satisfactory trading environment. Sales for the 12
months were some 10% ahead of the prior year, with sentiment buoyed
by the certainty brought by the decisive December 2019 General
Election result.
This momentum also reflected both the desirability of Berkeley's
homes in under-supplied markets and increased launch activity with
a number of new developments coming to the market in 2019/20. These
included Grand Union in Brent, St William's King's Road Park and
The Cottonworks in Finsbury, Royal Exchange in Kingston and a
number of developments in the South East including Abbey Barn Park
in High Wycombe, Huntley Wharf in Reading, Hollyfields in Royal
Tunbridge Wells, St William's Courtyard Gardens in Oxted and Lumina
in Camberley. In addition, St Edward agreed to dispose of 190
retirement living apartments at Royal Warwick Square, Kensington,
through a forward sale agreement to a retirement living
provider.
Pricing remained firm throughout the financial year and Berkeley
secured prices above its business plan levels, broadly covering any
cost increases.
Sales in April and May reflected the impact of lockdown and were
around 50% below normal market conditions, with pricing remaining
above business plan levels. This is a good result given the very
significant disruption to the sales and home moving process during
this period. As the economy gradually re-opens we are seeing
activity increase, but it is too early to determine where demand
will settle over the coming months.
Fundamentally, this remains a good time to purchase in our
markets of London and the South East where supply remains well
below underlying demand. With interest rates at historically low
levels and good mortgage availability, following a temporary
interruption as the UK entered lockdown, affordability levels are
high for those who have a deposit; particularly when compared with
the cost of renting. For those who can look through the prevailing
short-term uncertainty, there are opportunities for long-term
value.
It will be important to see what measures Government puts in
place around property taxation, the speed and cost of planning and
its own direct investment in the sector (including Help To Buy), as
this will play a significant part in determining the pace of
recovery in a sector that can play a leading role in the recovery
of the wider economy.
The Group's cash due on forward sales at 30 April 2020 is at
GBP1.86 billion compared with GBP1.83 billion a year ago. The cash
due on these forward sales will be collected in the next three
financial years and it excludes sales of affordable housing and
sales by our joint ventures. Berkeley's sales continue to be split
broadly evenly between owner-occupiers and investors, with overseas
customers continuing to see value in the London market. Help To Buy
reservations accounted for a net 290 sales in the year, including
joint ventures.
Berkeley has added six new sites to its land holdings in the
year, which includes three in our joint ventures. In London, the
sites are in Old Kent Road in Southwark where we have completed a
challenging land assembly and achieved a resolution to grant
consent for up to 1,300 new homes, a site acquired conditionally in
Brentford where we will be working to deliver a scheme of over
1,000 new homes (St Edward) and in Camden where we will be
providing over 600 new homes. Outside London, we have acquired a
site unconditionally in Tonbridge, Kent for around 150 new homes
and in the St William joint venture we have conditionally
contracted sites in Brighton and Worthing.
These new sites are fantastic additions to our land holdings and
provide Berkeley with the opportunity to add value over time. We
continue to appraise new land opportunities, but in the current
environment with heightened risk, a key factor will be the extent
to which both vendors and planning authorities recognise the
development risk. This complexity means acquiring and bringing
forward new sites remains challenging and a slow process, however,
Berkeley is in a strong position having brought through planning
and into development a significant number of long-term schemes in
the last few years.
On the planning front we have secured eight new consents in the
year, including St William's development in Poplar for up to 2,800
new homes and the former Horlicks factory redevelopment in Slough
for 1,300 new homes, and we also obtained 58 revisions to existing
consents.
Build cost rises continued at around 4% until the end of 2019.
From the beginning of this calendar year build costs have been
neutral. As the UK emerges from lockdown, and we assess medium-term
demand levels, we anticipate further deflationary pressure on costs
in the short-term as activity levels are uncertain.
Our Vision
Through the 'Our Vision' strategy for the business we aim to
generate long-term value and have a positive impact on our
employees, customers, the environment and society.
The strategy has now been in place for a decade and we have set
commitments every two years under our five strategic focus areas:
Customers, Homes, Places, Operations and Our People. The
achievements and advances set out below are now embedded in
Berkeley's day-to-day operations and, during the coming financial
year, we will put in place a new set of stretching targets for the
future. Performance highlights include:
-- Putting customers at the heart of our decisions: We maintain
an Investor in Customers Gold rating across all operating
companies. Our Net Promoter Score of 78.8 (on a scale of -100 to
+100) and Recommend To A Friend score of 98.5% are both
significantly higher than the industry averages of 39 and 89%,
respectively (HBF, March 2020 figures).
-- Taking action on climate change: We incorporate adaptation
measures for future weather patterns into the homes and
developments we build and are the first homebuilder to produce zero
carbon transition plans for all new developments. These will enable
the homes to operate at zero carbon from 2030, taking into account
how the design, specification and infrastructure we provide can
reduce the carbon emissions of home owners both now and in the
future. We have maintained our award-winning carbon positive
approach within our operations since 2017/18, and received a sector
leading 'A-' score for transparency and action on climate change
from CDP.
-- Building communities: Our projects are large scale and
long-term, giving us greater scope to involve local people,
understand their priorities and make lasting contributions to the
local community's strength, wellbeing and quality of life. This
enables us to create welcoming and inclusive neighborhoods with
homes of all tenures and a mix of beautiful public spaces, natural
landscapes and amenities that bring people together to enjoy
community life. Once residents start to move in we use Community
Development Plans to get neighbours talking and create social
connections across the wider area. We have now trialled a Social
Value Toolkit on three sites, which helps our teams to quantify and
maximise the social benefits of our holistic regeneration and
placemaking strategies.
-- Pioneering approach to nature: Our leading approach to
achieve a net biodiversity gain on each and every site we develop
has been commended by Natural England and echoed in the
Government's Environment Bill which sets out the intention to
mandate net biodiversity gain for new developments. We have
committed to create or enhance around 450 acres since we
implemented the commitment. Nature is just one area for which we
were recognised as Sustainable Housebuilder of the Year at the
Housebuilder Awards 2019.
-- Championing health, safety and wellbeing: Our latest 12 month
rolling Annual Injury Incidence Rate (AIIR) is 1.17 reportable
incidents for every 1,000 people working on our sites and in our
offices (2019: 1.14). This is testament to the dedication of our
teams in focusing on behavioural safety in addition to adhering to
stringent standards. This year we have developed a network of more
than 220 mental health first aiders and have signed up to the
Building Mental Health Charter and Framework.
-- Considerate construction: We are proud to run our sites with
consideration to local communities and the environment. Our 12
month rolling average Considerate Constructors Scheme score of
43/50 is significantly above the industry average for the same
period (37/50) and demonstrates the care we take on each
development under construction to limit our impact on our
surroundings.
-- Nurturing careers and improving the industry's image: A focus
on emerging talent as a means of helping to address the industry
skills shortage has resulted in an increase in the proportion of
our workforce being an apprentice, graduate or training (9% in
2019/20). The REACH Apprenticeship Scheme was named CITB's Large
Apprentice Employer of the Year 2019 and we held the fourth
Berkeley Group Apprenticeship Awards in autumn 2019 to celebrate
the efforts of our supply chain, who supported more than 500
apprentices working on our sites during the year.
-- Promoting diversity and inclusion: We continue to prioritise
and promote diversity within our workforce and the wider industry
through our Diversity and Inclusion strategy. Measures include an
enhanced maternity policy, in-house diversity awareness training
programmes, recruitment and training programmes targeting
underrepresent groups and expanding our partnership with Women in
Construction (WIC). This is an area upon which we will continue to
focus.
The Berkeley Foundation
The Berkeley Foundation (the "Foundation"), a registered
charity, works in partnership with the voluntary sector to focus
the skills, resources and fundraising efforts of the Berkeley Group
on helping young people overcome barriers, improve their lives and
build a fairer society.
Performance highlights from the year include the launch of a new
GBP350,000 funding programme to support young women from
marginalised communities into work, extending our Super 1's
disability cricket partnership with the Lord's Taverners and
awarding GBP200,000 in emergency grants to support our local
charity partners to maintain their vital services in the wake of
Covid-19.
Over the course of the year the Foundation committed GBP3
million to good causes across London, Birmingham and the South of
England, supporting more than 4,600 people through its programmes
and partnerships. This contribution was made possible through the
generosity and commitment of Berkeley Group staff, with 63% of our
people directly contributing to the Foundation and volunteering
more than 10,000 hours of their time. Berkeley Group maintained its
Diamond Payroll Giving Award in 2019 and the Foundation's impacts
were recognised with four major accolades at the Third Sector
Business Charity Awards, including the Corporate Foundation award
and the overall Business of the Year prize.
Outlook
The UK economy has experienced almost four years of uncertainty
since the referendum on leaving the European Union in 2016. While
the decisive December 2019 General Election result saw an
improvement in sentiment at the start of the year, the risks and
opportunities around the nature of our future trade agreements with
the EU and other countries still remain. Covid-19 has now
introduced a new set of unprecedented challenges and is
indiscriminately questioning the resilience of individual sectors
and companies in the most searching way.
Berkeley starts the coming year from a position of relative
strength, with net cash of GBP1,138.9 million, forward sales of
GBP1.9 billion and an estimated GBP6.4 billion of gross profit in
our land holdings. Our unique operating model, with financial
strength and agility at its heart, has enabled us to act quickly to
review our business plan in light of the risks presented by
Covid-19 and continue investing in our brand, delivering homes on
our large, complex, regeneration sites, putting people at the heart
of placemaking.
This puts Berkeley in a position from which it can continue to
deliver for all its stakeholders during these unprecedented times,
helping the country rebound from the impact of the pandemic and to
continue supporting approximately 32,000 UK jobs, directly and
indirectly, in its business and supply chain for the foreseeable
future.
Underpinning this investment for Berkeley, is the under-supply
of quality new homes in London and South East. Beyond the immediate
tragic human impact, Covid-19 will undoubtedly have a profound
impact on how we work, how we live and how we spend our leisure.
Berkeley's focus on the quality of life on its developments,
prioritising nature, connectivity and the well-being of its
customers will be an advantage as the market recovers. London
remains a fantastic global city and with interest rates at an
all-time low, the cost of buying a home for those who can afford a
deposit is low, compared with the alternative of renting.
Housebuilding and construction can play a vital role in the
broader economic recovery following Covid-19. This will require
Government support, similar to that seen following the 2008/09
financial crisis, including: the reversal of the property tax
increases seen since 2014; a reduction in the bureaucracy and cost
of planning; and direct investment into affordable housing.
In closing, it is important to return to the human cost of this
terrible pandemic and our first priority remains the health, safety
and wellbeing of our people, our customers and our supply chain,
whose response over recent weeks has been remarkable, and I
sincerely thank them all.
Rob Perrins
Chief Executive
TRADING AND FINANCIAL REVIEW
Trading performance
Revenue of GBP1,920.4 million in the year (2019: GBP2,957.4
million) arose primarily from the sale of new homes in London and
the South East. This included GBP1,883.7 million of residential
revenue
(2019: GBP2,797.0 million) and GBP36.7 million of commercial
revenue (2019: GBP160.4 million). There were no ground rent or land
sales in the year (2019: GBPnil).
2,723 new homes (2019: 3,698) were sold across London and the
South East at an average selling price of GBP677,000 (2019:
GBP748,000) reflecting the mix of developments and varying stages
thereon, particularly in London.
Revenue of GBP36.7 million from commercial property includes the
disposal of mainly retail and leisure space across a number of our
London developments. In the comparative year revenue of GBP160.4
million included two significant disposals of a 190-bed hotel at
250 City Road and 71,000 sq ft of office, retail and leisure space
at One Tower Bridge.
The gross margin percentage has increased to 33.2% (2019:
31.3%), reflecting the mix of properties sold in the year.
Overheads of GBP167.7 million (2019: GBP157.8 million) increased by
GBP9.9 million in the year. This is predominantly due to an
increase in the charge to the Income Statement for the Group's
share schemes following the changes to the 2011 LTIP approved at
the September 2019 AGM. Consequently, the Group's operating margin
has decreased to 24.5% from 26.0% last year.
Berkeley's share of the results of joint ventures was a profit
of GBP33.3 million (2019: GBP8.8 million). St William delivered its
first profits in the year resulting from the completions across
four developments; Prince Of Wales Drive in Battersea, Elmswater in
Rickmansworth, Fairwood Place in Borehamwood and The Cottonworks in
Highbury. The stage of delivery on St Edward developments means the
current completions are predominately at Green Park Village in
Reading.
The Group has remained cash positive on a net basis throughout
the year. Net finance income totaled
GBP0.7 million for the year (2019: GBP2.0 million net finance
costs) due to interest income on cash deposits which outweighed
facility fees, interest on drawn borrowings and imputed interest on
land creditors.
Pre-tax return on equity for the year is 16.6%, compared to
27.9% last year reflecting the return of profitability to normal
levels. Basic earnings per share has decreased by 32.5% from 481.1
pence to 324.9 pence, which takes into account the buy-back of 3.5
million shares at a cost of GBP130.5 million under the Shareholder
Returns programme.
Financial Position
Net assets increased over the course of the year by GBP138.3
million, or 4.7%, to GBP3,101.6 million
(2019: GBP2,963.3 million). This is after payment of GBP149.8
million of dividends and the GBP130.5 million of share buy-backs.
This equates to a net asset value per share of 2,472 pence, up 7.2%
from 2,305 pence at 30 April 2019, given the share buy-backs
undertaken in the year.
Inventories have increased by GBP440.2 million from GBP3,114.7
million at 30 April 2019 to GBP3,554.9 million at 30 April 2020.
Inventories include GBP519.7 million of land not under development
(30 April 2019: GBP395.2 million), GBP2,895.7 million of work in
progress (30 April 2019: GBP2,584.7 million) and GBP139.5 million
of completed stock (30 April 2019: GBP134.8 million).
The increase in land not under development reflects the
combination of new sites acquired as well as previously conditional
sites which have completed during the year represented by cash and
new land creditors. This increase outweighed the land cost moved
into production which was across seven non-joint venture sites.
These sites moved into production, coupled with further investment
in build on a number of forward sold London developments, led to
the increase in work in progress inventory in the year. Completed
stock is spread across a number of sites and remains at comfortable
levels.
Trade and other payables are GBP1,931.8 million at 30 April 2020
(30 April 2019: GBP1,595.5 million). These include GBP783.5 million
of on-account receipts from customers (30 April 2019: GBP686.1
million) and land creditors of GBP372.7 million (30 April 2019:
GBP92.6 million). The significant increase reflects the new sites
brought onto the balance sheet with a corresponding increase in
inventory. The new land creditors include TwelveTrees Park in
Newham, which became unconditional during the year, and the site
acquired at Camden, amongst others. Of the total GBP372.7 million
land creditor balance, GBP109.0 million is short-term and GBP263.7
million is spread over future financial years. Provisions of
GBP114.9 million (30 April 2019: GBP79.1 million) include
post-completion development obligations and other provisions.
The Group ended the year with net cash of GBP1,138.9 million (30
April 2019: GBP975.0 million) which consists of cash holdings of
GBP1,638.9 million and GBP500 million of debt drawn under the
Group's banking facilities. This debt consists of a long-term
GBP300 million term loan and a short-term GBP200 million revolving
credit facility loan which was drawn in March 2020. There is a
further undrawn GBP250 million available to the Group under its
revolving credit facility.
This is an increase in net cash of GBP163.9 million during the
year (2019: GBP287.7 million) as a result of GBP470.5 million of
cash generated from operations (2019: GBP767.2 million) and a net
outflow of GBP75.1 million in working capital (2019: net inflow of
GBP22.0 million), before tax and other net cash inflows of GBP48.8
million (2019: net outflow GBP249.6 million), share buy-backs of
GBP130.5 million (2019: GBP198.9 million) and dividends of GBP149.8
million (2019: GBP53.0 million).
Banking
The Group has banking facilities which total GBP750 million,
currently comprising a drawn GBP300 million term loan, and a GBP450
million revolving credit facility of which GBP200 million is drawn.
The Group has clarity of financing with the facilities in place to
November 2023. The Group's cash holdings are currently placed on
deposit with its relationship banks.
Joint Ventures
Investments accounted for using the equity method have decreased
from GBP374.7 million at 30 April 2019 to GBP261.8 million at 30
April 2020. Berkeley's joint ventures include St Edward, a joint
venture with M&G, and St William, a joint venture with National
Grid plc. The decrease in joint venture investments during the year
reflects Berkeley's share of undistributed joint venture profits of
GBP33.3 million, further funding into St William of GBP2.5 million,
settlement of St Edward loans of GBP29.0 million offset by a
dividend distribution from St Edward of GBP177.7 million.
In St Edward, 64 homes were sold in the year at an average
selling price of GBP768,000
(2019: 255 at GBP469,000). The majority of completions occurred
at Green Park Village, complimented by further completions at the
Kensington development.
In total, 5,310 plots (30 April 2019: 3,736 plots) in Berkeley's
land holdings relate to six St Edward developments, three in London
(Westminster, Kensington and Brentford which was acquired in the
year) and three outside the Capital (Reading, Fleet, and
Wallingford). The joint venture will not be proceeding with a
conditional site in Queensway, Birmingham which has been removed
from the land holdings in the year.
In St William, 371 homes were sold in the year at an average
selling price of GBP716,000 (2019: six at GBP709,000). These
completions were across four developments: Prince Of Wales Drive,
Elmswater, Fairwood Place and The Cottonworks .
During the year, St William reviewed its banking arrangements,
having regard to the size of the business and its land holdings. As
a consequence, St William increased its committed banking
facilities to GBP360 million from GBP150 million in March 2020. The
agreement has a three year term, with options over an additional
two years.
In total, 10,945 plots (30 April 2019: 9,812 plots) in
Berkeley's land holdings relate to 18 St William developments which
are contracted in the joint venture. St William has completed the
purchase of ten of these sites which include the long-term
regeneration developments of Prince of Wales Drive (over 950
homes), Clarendon in Hornsey (over 1,700 homes), King's Road Park
in Fulham (over 1,800 homes) and Poplar (over 2,800 homes). The
remaining eight St William sites are included in Berkeley's
conditional land holdings. 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 58,413 plots at 30 April 2020
(30 April 2019: 54,955 plots), including joint ventures. Of these
land holdings, 50,558 plots (30 April 2019: 41,639) are on 86 sites
that are owned and included on the balance sheet of the Group or
joint ventures and 7,855 plots
(30 April 2019: 13,316) are on 12 contracted sites which either
do not yet have a planning consent or have another conditional
element such as vacant possession. The Group also holds a strategic
pipeline of long-term options for in excess of 5,000 plots.
The plots in the land holdings at 30 April 2020 have an
estimated future gross profit of GBP6,417 million
(30 April 2019: GBP6,247 million), which includes the Group's
50% share of the anticipated profit on any joint venture
development. The increase in the year is due to a combination of
new sites acquired, new or revised planning consents and market
movements, which has more than offset the gross profit taken
through the income statement.
Berkeley has obtained eight new planning consents in the year:
Abbey Barn Park in High Wycombe, 17-51 London Road in Staines, the
St William sites in Poplar and Hertford, Sunningdale Park, Eastside
Locks in Birmingham, Centre House in White City and the former
Horlicks factory in Slough. In addition, there have been over 55
revised consents which have sought to improve the development
solution for each scheme to add value and/or reduce risk.
Of Berkeley's 86 owned sites, 70 sites (plots: 37,671) have an
implementable planning consent and are in construction. A further
11 sites (plots: 10,634) 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
five sites (plots: 2,253) which it owns unconditionally that do not
have a planning consent.
Of the 12 contracted sites, one site has a planning consent and
two have achieved resolutions to grant consent but are subject to
section 106 agreements. Given the contracted 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.
- End -
For further information please contact:
The Berkeley Group Holdings plc Novella Communications
R C Perrins / R J Stearn Tim Robertson
T: 01932 868555 T: 020 3151 7008
Principal Risks and Uncertainties
The assessment of risk and embedding risk management throughout
Berkeley is a key element of setting and delivering the Group's
strategy.
Berkeley's approach allows management to focus on making the
right long-term decisions to deliver long-term value, whilst
retaining the flexibility to take advantage of opportunities which
arise in the short and medium term.
Through our strong financial position we are able to take, under
normal circumstances, increased operational risk to deliver
sustainable risk-adjusted returns, within the parameters of our
business model.
A description of the principal risks and uncertainties faced by
the Group, together with an assessment of their impact and
Berkeley's approach to mitigating them, are set out on the
following pages.
We also face a number of uncertainties that have the potential
to be materially significant to our long-term strategy but cannot
be fully defined as a specific risk at present, and therefore
cannot be fully assessed or managed. These emerging risks typically
have a long time horizon and are discussed and agreed by the Board
on a regular basis.
The Covid-19 pandemic is a unique and unprecedented risk that
has very quickly elevated from being an emerging risk in early 2020
. It is having, and will continue to have, an impact across our
entire risk landscape. We have included a separate new Covid-19
risk which gives an overview of the related uncertainties,
potential impacts on the Group and our approach to mitigating the
risk.
Whilst we consider there has been no material change to the
nature of the Group's principal risks, not surprisingly, the
potential impact and likelihood of them arising has increased as a
result of the challenging external environment and significant
ongoing uncertainty arising from Covid-19.
Financial Risk
In light of these operating risks, Berkeley aims to keep
financial risk low, and finances its operations through a
combination of shareholders' funds, deposits and on-account
receipts and borrowings, where appropriate. The financial risks to
which Berkeley is exposed include:
-- Liquidity risk - the risk that the funding required for the
Group to pursue its activities may not be available.
-- Market credit risk - the risk that counterparties (mainly
customers) will default on their contractual obligations resulting
in a loss to the Group. The Group's exposure to credit risk is
comprised of cash and cash equivalents and trade and other
receivables.
-- Market interest rate risk - the risk that Group financing
activities are affected by fluctuations in market interest
rates.
-- Other financial risks - Berkeley contracts all of its sales
and the vast majority of its purchases in sterling and so has no
significant exposure to currency risk, but does recognise that its
credit risk includes receivables from customers in a range of
jurisdictions who are themselves exposed to currency risk in
contracting in sterling.
Management of financial risks
Berkeley adopts a prudent approach to managing these financial
risks.
-- Treasury policy and central overview - the Board approves
treasury policy and senior management control day-to-day
operations. Relationships with banks and cash management are
coordinated centrally as a Group function. The treasury policy is
intended to maintain an appropriate capital structure to manage the
financial risks identified and provide the right platform for the
business to manage its operating risks.
-- Low gearing - the Group is currently financing its operations
through shareholder equity, supported by GBP1,139 million of net
cash on the balance sheet. This in turn has mitigated its current
exposure to interest rate risk.
-- Headroom provided by bank facilities - the Group has GBP750
million of committed credit facilities maturing in November 2023.
This comprises a term loan of GBP300 million and the revolving
credit facility of GBP450 million. Berkeley has a strong working
partnership with the six banks that provide the facilities and is
key to Berkeley's approach to mitigating liquidity risk.
-- Forward sales - Berkeley's approach to forward selling new
homes to customers provides good visibility over future cash flows,
as expressed in cash due on forward sales which stands at GBP1.86
billion at 30 April 2020. It also helps mitigate market credit risk
by virtue of customers' deposits held from the point of
unconditional exchange of contracts with customers.
-- Land holdings - by investing opportunistically in land at the
right point in the cycle, holding a clear development pipeline in
our land holdings and continually optimising our existing holdings,
we are not under pressure to buy new land when it would be wrong
for the long-term returns for the business.
-- Detailed appraisal of spending commitments - a culture which
prioritises an understanding of the impact of all decisions on the
Group's spending commitments and hence its balance sheet, alongside
weekly and monthly reviews of cash flow forecasts at operating
company, divisional and Group levels, recognises that cash flow
management is central to the continued success of Berkeley.
Risk Description and Impact Approach to Mitigating Risk
Covid-19
The Covid-19 pandemic has been a focus
Covid-19 is impacting all areas for the Board over the last few months.
of our operations, including The extensive experience and skill
our employees, purchasers and set of the Executive and Non-executive
supply chain. Directors, coupled with the resilience
of our business model, has enabled
The extent of the impact will us to weather the initial impact.
be heavily dependent on factors
including, but not limited to, The health and safety of our employees
the length of UK and international and contractors has been paramount,
lockdowns, the nature and extent with office based staff transitioning
of any government interventions, to home working, and strict social
the severity of economic effects distancing rules, following government
and the speed and nature of and public health guidance, being implemented
the recovery. on all our sites.
The Company is also mindful We have been working closely with all
of the risks presented by a elements of our supply chain to monitor
potential second wave of Covid-19, both materials and labour levels in
which would clearly exacerbate order to ensure we can keep our sites
the eventual impact of the pandemic. operating.
Whilst our sales offices were closed
from the second half of March until
the middle of May, we have been utilising
digital channels to maintain contact
with our domestic and overseas customers.
We have also been providing virtual
tours for prospective customers.
Economic Outlook
Recognition that Berkeley operates
As a property developer, Berkeley's in a cyclical market is central to
business is sensitive to wider our strategy and maintaining a strong
economic factors such as changes financial position is fundamental to
in interest rates, employment our business model and protects us
levels and general consumer against adverse changes in economic
confidence. conditions.
Some customers are also sensitive Land investment in all market conditions
to changes in the sterling exchange is carefully targeted and underpinned
rate in terms of their buying by demand fundamentals and a solid
decisions or ability to meet viability case, respecting the cyclical
their obligations under contracts. nature of the property industry.
Changes to economic conditions Levels of committed expenditure are
in the UK, Europe and worldwide carefully monitored against forward
may lead to a reduction in demand sales secured, cash levels and headroom
for housing which could impact against our available bank facilities,
on the Group's ability to deliver with the objective of keeping financial
its corporate strategy. risk low to mitigate the operating
risks of delivery in uncertain markets.
Production programmes are continually
assessed, depending upon market conditions.
The business is committed to operating
at an optimal size, with a strong balance
sheet, through autonomous businesses
to maintain the flexibility to react
swiftly, when necessary, to changes
in market conditions.
Political Outlook
Whilst we cannot directly influence
Significant political events, political events, the risks are taken
including the impact of leaving into account when setting our business
the EU, may impact Berkeley's strategy and operating model.
business through, for instance,
the reluctance of buyers to In addition, we actively engage in
make investment decisions due the debate on policy decisions.
to political uncertainty and,
subsequently, specific policies
and regulation may be introduced
that directly impact our business
model.
Regulation
Berkeley is primarily focused geographically
Adverse changes to Government on London, Birmingham and the South
policy on areas such as taxation, East of England, which limits our risk
housing and the environment when understanding and determining
could restrict the ability of the impact of new regulation across
the Group to deliver its strategy. multiple locations and jurisdictions.
Failure to comply with laws The effects of changes to Government
and regulations could expose policies at all levels are closely
the Group to penalties and reputational monitored by operating businesses and
damage. the Board, and representations made
to policy-setters where appropriate.
We welcome the proposed changes
to building regulations following Berkeley's experienced teams are well
the Hackett Review. placed to interpret and implement new
regulations at the appropriate time
through direct lines of communication
across the Group, with support from
internal and external legal advisors.
Detailed policies and procedures are
in place where appropriate to the prevailing
regulations and these are communicated
to all staff.
Land Availability
Understanding the markets in which
An inability to source suitable we operate is central to Berkeley's
land to maintain the Group's strategy and, consequently, land acquisition
land holdings at appropriate is primarily focused on Berkeley's
margins in a highly competitive core markets of London, Birmingham
market could impact on the Group's and the South East of England, markets
ability to deliver its corporate in which it believes that the demand
strategy . fundamentals are strong.
Berkeley has experienced land teams
with strong market knowledge in their
areas of focus, which gives us the
confidence to buy land without an implementable
planning consent and, with an understanding
of local stakeholders' needs, positions
Berkeley with the best chance of securing
a viable planning consent.
Berkeley acquires land, where it meets
its internal criteria for purchase,
and considers joint ventures in particular
as a vehicle to work with the right
partners who bring good quality land
complemented by Berkeley's expertise.
Each land acquisition is subject to
a formal internal appraisal and approval
process prior to the submission of
a bid and again prior to exchange of
contracts to give the Group the greatest
chance of securing targeted land.
Berkeley's land holdings mean that
it has the land in place for its immediate
business plan requirements and can
therefore always acquire land at the
right time in the cycle.
Planning Process
The Group's strategic geographical
Delays or refusals in obtaining focus and expertise places it in the
commercially viable planning best position to conceive and deliver
permissions could result in the right consents for the land acquired.
the Group being unable to develop
its land holdings. Full detailed planning and risk assessments
are performed and monitored for each
This could have a direct impact site without planning permission, both
on the Group's ability to deliver before and after purchase.
its product and on its profitability.
Our assessment of the risk profile
dictates whether sites are acquired
either conditionally or unconditionally.
The planning status of all sites is
reviewed at both monthly divisional
Board meetings and Main Board meetings.
The Group works closely with local
communities in respect of planning
proposals and strong relationships
are maintained with local authorities
and planning officers.
Retaining People
An inability to attract, develop, We have developed a series of commitments
motivate and retain talented within Our Vision, our plan for the
employees could have an impact business, to ensure that we retain
on the Group's ability to deliver and develop the best people to support
its strategic priorities. the business in the long-term. This
includes a talent management programme,
Failure to consider the retention investment in training and the implementation
and succession of key management of health and wellbeing initiatives.
could result in a loss of knowledge
and competitive advantage. Succession planning is regularly reviewed
at both divisional and Main Board level.
Close relationships and dialogue are
maintained with key personnel.
Remuneration packages are constantly
benchmarked against the industry to
ensure they remain competitive.
Securing Sales
An inability to match supply The Group has experienced sales teams
to demand in terms of product, both in the UK and within our overseas
location and price could result sales offices, supplemented by market
in missed sales targets and/or leading agents.
high levels of completed stock
which in turn could impact on Detailed market demand assessments
the Group's ability to deliver of each site are undertaken before
its corporate strategy. acquisition and regularly during delivery
of each scheme to ensure that supply
is matched to demand in each location.
Design, product type and product quality
are all assessed on a site-by-site
basis to ensure that they meet the
target market and customer aspirations
in that location.
The Group has a diverse range of developments
with homes available across a broad
range of property prices to appeal
to a wide market.
The Group's ability to forward sell
reduces the risk of the development
cycle where possible, thereby justifying
and underpinning the financial investment
in each of the Group's sites. Completed
stock levels are reviewed regularly.
The Group has adapted its sales strategy
to the Covid-19 pandemic, with increased
use of digital channels and virtual
tours.
Liquidity
Reduced availability of the The Board approves treasury policy
external financing required and senior management control day-to-day
by the Group to pursue its activities operations. Relationships with banks
and meet its liabilities. and cash management are coordinated
centrally as a Group function.
Failure to manage working capital
may constrain the growth of The treasury policy is intended to
the business and ability to maintain an appropriate capital structure
execute the business plan. to manage the Group's financial risks
and provide the right platform for
the business to manage its operating
risks.
Cash flow management is central to
the continued success of Berkeley,
and is particularly important as a
consequence of the Covid-19 crisis
and remains a key focus for management.
There is a culture which prioritises
an understanding of the impact of all
decisions on the Group's spending commitments
and hence its balance sheet, alongside
weekly and monthly reviews of cash
flow forecasts at operating company,
divisional and Group levels.
Mortgage Availability
An inability of customers to Berkeley has a broad product mix and
secure sufficient mortgage finance customer base which reduces the reliance
now or in the future could have on mortgage availability across its
a direct impact on the Group's portfolio.
transaction levels.
The Group participates in the Government's
Help to Buy scheme, which provides
deposit assistance to first-time buyers,
and has participated in other Government
schemes historically.
Deposits are taken on all sales to
mitigate the financial impact on the
Group in the event that sales do not
complete due to a lack of mortgage
availability.
Climate Change
The effects of climate change The Group Sustainability Team identifies
could directly impact Berkeley's strategic climate change risks and
ability to deliver its product opportunities facing the business through
through disruptions to programme the regular review of issues and trends,
and supplies of materials. Scenario along with active collaboration with
analysis indicates that homes external experts. These are shared
and developments in London and with the Chief Executive and Board
the South East of England could Director Responsible for Sustainability.
be adversely affected through
overheating, water shortages Climate change is a key theme within
or flooding. our business strategy, Our Vision,
with commitments to both mitigate and
There is also an increased level adapt to climate change.
of interest in disclosures on
climate change management and By taking action under our operational
action. Failure to improve reporting carbon emissions reduction target our
and performance in line with sites, offices and sales suites are
evolving regulations, investor identifying and investing in energy
requests and societal expectations efficiency measures. We also look to
could expose Berkeley to penalties reduce the impact of our homes and
and reputational damage. places when in use and are taking action
to contribute to a zero carbon built
environment.
To build resilience into our homes
and developments, we consider climate
change risks and incorporate measures
to reduce these. This includes undertaking
an overheating risk assessment pre-planning
and incorporating relevant measures
to improve thermal comfort.
We welcome the recommendations from
the Financial Stability Board's Task
Force on Climate related Financial
Disclosures (TCFD) and are taking action
to implement these over time through
the evolvement of our processes and
reporting.
Sustainability
Berkeley is aware of the environmental The strategic direction for sustainability
and social impact of the homes is set at a Group level and is integrated
and places that it builds, both within our business strategy, Our Vision.
throughout the development process We have specific commitments to enhance
and during occupation and use environmental and social sustainability
by customers and the wider community. considerations in the operation of
our business and the delivery of our
Failure to address sustainability homes and places.
issues could affect the Group's
ability to acquire land, gain Operational procedures and processes
planning permission, manage are regularly reviewed to ensure high
sites effectively and respond standards and legal compliance are
to increasing customer demands maintained.
for sustainable homes
and communities. Dedicated sustainability teams are
in place within the business and at
Group, providing advice, monitoring
performance and driving improvement.
Health and Safety
Berkeley's operations have a Berkeley considers this to be an area
direct impact on the health of critical importance. Berkeley's
and safety of its people, contractors health and safety strategy is set by
and members of the public. the Board. Dedicated health and safety
teams are in place in each division
A lack of adequate procedures and at Head Office.
and systems to reduce the dangers
inherent in the construction Procedures, training and reporting
process increases the risk of are all regularly reviewed to ensure
accidents or site-related catastrophes, high standards are maintained and comprehensive
including fire and flood, which accident investigation procedures are
could result in serious injury in place. Insurance is held to cover
or loss of life leading to reputational the risks inherent in large-scale construction
damage, financial penalties projects.
and disruption to operations.
The Group continues to implement initiatives
to improve health and safety standards
on-site.
Product Quality and Customers
Berkeley has a reputation for Detailed reviews are undertaken of
high standards of quality in the product on each scheme both during
its product. the acquisition of the site and throughout
the build process to ensure that product
If the Group fails to deliver quality is maintained.
against these standards and
its wider development obligations, The Group has detailed quality assurance
it could be exposed to reputational procedures in place surrounding both
damage, as well as reduced sales design and build to ensure the adequacy
and increased cost. of build at each key stage of construction.
Customer satisfaction surveys are undertaken
on the handover of our homes, and feedback
incorporated into the specification
and design of subsequent schemes.
Build cost and programme
Build costs are affected by A procurement and programming strategy
the availability of skilled for each development is agreed by the
labour and the price and availability divisional Board before site acquisition,
of materials, suppliers and whilst a further assessment of procurement
contractors. and programming is undertaken and agreed
by the divisional Board prior to the
Declines in the availability commencement of construction.
of a skilled workforce, and
changes to these prices could Build cost reconciliations and build
impact on our build programmes programme dates are presented and reviewed
and the profitability of our in detail at divisional cost review
schemes. meetings each month.
The Group monitors its development
obligations and recognises any associated
liabilities which arise.
Our Vision includes ongoing commitments
to promote apprenticeships and training
across both our employees and our indirect
workforce and the Group works closely
with contractors, schools, colleges
and training providers to promote the
industry, reach talent and up-skill
our workforce through the completion
of relevant qualifications.
Cyber and Data Risk
Berkeley's systems and control procedures
The Group acknowledges that are designed to ensure that data confidentiality
it places significant reliance and integrity are not compromised.
upon the availability, accuracy
and confidentiality of all of Our Information Security Programme
its information systems, and focuses primarily on the detection
the data contained therein. and prevention of security incidents
and potential data breaches. Ongoing
The Group could suffer significant monitoring and scanning are conducted
financial and reputational damage to detect vulnerabilities in a timely
because of the corruption, loss manner. We also work closely with our
or theft of data, whether inadvertent suppliers and partners to improve understanding
or via a deliberate, targeted of security best practices.
cyber attack.
An IT Security Committee meets monthly
to address all cyber security matters.
The Group has Cyber Essentials Plus
certification and a Group-wide security
awareness programme, which is refreshed
on a regular basis to update employees
on current cyber security trends.
The Group operates multiple data centres,
thereby ensuring that there is no centralised
risk exposure and the adequacy of the
IT disaster recovery plan is regularly
assessed.
The Group has Cyber insurance in place
to mitigate against any financial impact.
Consolidated Income Statement
For the year ended 30 April 2020 2019
Notes GBPm GBPm
------------------------------------------ ------ ---------- ----------
Revenue 1,920.4 2,957.4
Cost of sales (1,283.0) (2,031.2)
------------------------------------------ ------ ---------- ----------
Gross profit 637.4 926.2
Net operating expenses (167.7) (157.8)
------------------------------------------ ------ ---------- ----------
Operating profit 469.7 768.4
Finance income 3 12.4 10.7
Finance costs 3 (11.7) (12.7)
Share of results of joint ventures using
the equity method 33.3 8.8
---------- ----------
Profit before taxation for the year 503.7 775.2
Income tax expense 4 (93.6) (147.8)
------------------------------------------ ------ ---------- ----------
Profit after taxation for the year 410.1 627.4
------------------------------------------ ------ ---------- ----------
Earnings per share (pence):
Basic 5 324.9 481.1
Diluted 5 313.4 469.9
------------------------------------------ ------ ---------- ----------
Consolidated Statement of Comprehensive Income
For the year ended 30 April 2020 2019
GBPm GBPm
------------------------------------------- ------ ---------
Profit after taxation for the year 410.1 627.4
-------------------------------------------- ------ ---------
Other comprehensive (expense)/income
Items that will not be reclassified
to profit or loss
Actuarial (loss)/gain recognised in
the pension scheme (1.7) 1.6
Total items that will not be reclassified
to profit or loss (1.7) 1.6
-------------------------------------------- ------ ---------
Other comprehensive (expense)/income
for the year (1.7) 1.6
-------------------------------------------- ------ ---------
Total comprehensive income for the year 408.4 629.0
-------------------------------------------- ------ ---------
Consolidated Statement of Financial Position
As at 30 April 2020 2019
Notes GBPm GBPm
---------------------------------- ------ ---------- ----------
Assets
Non-current assets
Intangible assets 17.2 17.2
Property, plant and equipment 48.5 42.5
Right-of-use assets 2.5 -
Investments accounted for using
the equity method 261.8 374.7
Deferred tax assets 53.6 45.8
383.6 480.2
---------------------------------- ------ ---------- ----------
Current assets
Inventories 3,554.9 3,114.7
Trade and other receivables 68.3 65.5
Current tax assets 5.1 2.5
Cash and cash equivalents 6 1,638.9 1,275.0
---------------------------------- ------ ---------- ----------
5,267.2 4,457.7
---------------------------------- ------ ---------- ----------
Total assets 5,650.8 4,937.9
---------------------------------- ------ ---------- ----------
Liabilities
Non-current liabilities
Borrowings 6 (300.0) (300.0)
Trade and other payables (263.7) (40.5)
Lease liability (1.3) -
Provisions for other liabilities
and charges (60.0) (59.1)
---------------------------------- ------ ---------- ----------
(625.0) (399.6)
---------------------------------- ------ ---------- ----------
Current liabilities
Borrowings 6 (200.0) -
Trade and other payables (1,668.1) (1,555.0)
Lease liability (1.2) -
Provisions for other liabilities
and charges (54.9) (20.0)
---------------------------------- ------ ---------- ----------
(1,924.2) (1,575.0)
Total liabilities (2,549.2) (1,974.6)
---------------------------------- ------ ---------- ----------
Total net assets 3,101.6 2,963.3
---------------------------------- ------ ---------- ----------
Equity
Shareholders' equity
Share capital 6.8 7.0
Share premium 49.8 49.8
Capital redemption reserve 24.7 24.5
Other reserve (961.3) (961.3)
Retained earnings 3,981.6 3,843.3
---------------------------------- ------ ---------- ----------
Total equity 3,101.6 2,963.3
---------------------------------- ------ ---------- ----------
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
--------------------------------------------------------- -------- -------- ----------- -------- --------- --------
At 1 May 2019 7.0 49.8 24.5 (961.3) 3,843.3 2,963.3
IFRS 16 application adjustment at 1 May 2019 - - - - (0.2) (0.2)
Profit after taxation for the year - - - - 410.1 410.1
Other comprehensive income for year - - - - (1.7) (1.7)
Purchase of own shares (0.2) - 0.2 - (130.5) (130.5)
Transactions with shareholders:
* Charge in respect of employee share schemes - - - - (3.9) (3.9)
* Deferred tax in respect of employee share schemes - - - - 14.3 14.3
* Dividends to equity holders of the Company - - - - (149.8) (149.8)
--------------------------------------------------------- -------- -------- ----------- -------- --------- --------
At 30 April 2020 6.8 49.8 24.7 (961.3) 3,981.6 3,101.6
--------------------------------------------------------- -------- -------- ----------- -------- --------- --------
At 1 May 2018 7.0 49.8 24.5 (961.3) 3,471.2 2,591.2
Profit after taxation for the year - - - - 627.4 627.4
Other comprehensive income for year - - - - 1.6 1.6
Purchase of own shares - - - - (198.9) (198.9)
Transactions with shareholders:
* Charge in respect of employee share schemes - - - - (3.9) (3.9)
* Deferred tax in respect of employee share schemes - - - - (1.1) (1.1)
* Dividends to equity holders of the Company - - - - (53.0) (53.0)
At 30 April 2019 7.0 49.8 24.5 (961.3) 3,843.3 2,963.3
--------------------------------------------------------- -------- -------- ----------- -------- --------- --------
Consolidated Cash Flow Statement
For the year ended 30 April 2020 2019
Notes GBPm GBPm
------------------------------------------- ------ -------- ----------
Cash flows from operating activities
Cash generated from operations 6 395.4 789.2
Interest received 12.4 10.7
Interest paid (9.1) (8.8)
Income tax paid (89.8) (178.8)
------------------------------------------- ------ -------- ----------
Net cash flow from operating activities 308.9 612.3
------------------------------------------- ------ -------- ----------
Cash flows from investing activities
Purchase of property, plant and equipment (9.7) (19.5)
Proceeds on disposal of property, plant
and equipment 0.6 0.3
Dividends from joint ventures 177.7 -
Movements in loans with joint ventures (31.5) (54.0)
Net cash flow from investing activities 137.1 (73.2)
------------------------------------------- ------ -------- ----------
Cash flows from financing activities
Lease capital repayments (2.0) -
Proceeds associated with settlement
of share options 0.2 0.5
Purchase of own shares (130.5) (198.9)
Net increase in borrowings 200.0 -
Dividends paid to Company's shareholders (149.8) (53.0)
------------------------------------------- ------ -------- ----------
Net cash flow from financing activities (82.1) (251.4)
------------------------------------------- ------ -------- ----------
Net increase in cash and cash equivalents 363.9 287.7
Cash and cash equivalents at the start
of the financial year 1,275.0 987.3
------------------------------------------- ------ -------- ----------
Cash and cash equivalents at the end
of the financial year 1,638.9 1,275.0
------------------------------------------- ------ -------- ----------
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.
The financial information set out above does not constitute the
Group's statutory accounts for the years ended 30 April 2020 or
2019, but is derived from those accounts. Statutory accounts for
2019 have been delivered to the Registrar of Companies, and those
for 2020 will be delivered in due course. The auditor has reported
on those accounts; their reports were (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and
(iii) did not contain statements under Section 498(2) or (3) of the
Companies Act 2006.
2 Basis of preparation
Going concern
The Directors have assessed the business plan and future funding
requirements of the Group over the medium term and compared these
to the level of committed loan facilities and existing cash
resources. As at 30 April 2020, the Group has net cash of GBP1,139
million and total liquidity of GBP1,889 million when this net cash
is combined with banking facilities of GBP750 million which are in
place until November 2023. Furthermore, the Group has cash due on
forward sales of GBP1,858 million, around 50% of which is expected
to be collected in the next 12 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 financial statements. For this reason it continues to
adopt the going concern basis of accounting in preparing its
Consolidated Financial Statements.
Basis of consolidation
This information, including the comparative information for the
year ended 30 April 2019, has been prepared in accordance with EU
endorsed International Financial Reporting Standards ("IFRSs"),
International Financial Reporting Interpretations Committee
("IFRIC") interpretations and in accordance with the listing rules
of the Financial Conduct Authority and consistently in accordance
with the accounting policies set out in the 2019 Annual Report.
However, this announcement does not itself contain sufficient
information to comply with IFRS.
The following new standards, amendments to standards and
interpretations are applicable to the Group and are mandatory for
the first time for the financial year beginning 1 May 2019:
IFRS 16 'Leases' replaces IAS 17 'Leases' and IFRIC 4
'Determining whether an Arrangement contains a Lease' setting out
criteria for recognition, measurement and disclosure of leases. The
standard is effective for periods beginning on or after 1 January
2019 and has been implemented by the Group from 1 May 2019. The
Group has applied IFRS 16 using the modified retrospective
approach, under which the cumulative effect of the initial
application is recognised in retained earnings at 1 May 2019.
Comparative information has therefore not been restated and is
reported under the previous accounting policies.
Under IFRS 16, most leases previously classified as operating
leases under IAS 17 are recognised on the Statement of Financial
Position as a right-of-use asset along with a corresponding lease
liability.
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 1 May 2019. The associated right-of-use assets for the
Group's leases were measured on a prospective basis, applying the
new rules from 1 May 2019.
Impact on the financial statements
On transition to IFRS 16, the Group recognised an additional
GBP3.3 million of right-of-use assets and GBP3.5 million of lease
liabilities. The net difference of GBP0.2 million was recognised in
retained earnings.
The lease liability is initially measured at the present value
of the remaining lease payments, discounted using the Group's
incremental borrowing rate. The lease term comprises the
non-cancellable period of the contract, together with periods
covered by an option to extend the lease where the Group is
reasonably certain to exercise that option. Subsequently, the lease
liability is measured by increasing the carrying amount to reflect
interest on the lease liability, and reducing it by the lease
payments made. The lease liability is remeasured when the Group
changes its assessment of whether it will exercise an extension or
termination option.
Right-of-use assets are initially measured at cost, comprising
the initial measurement of the lease liability, plus any initial
direct costs and an estimate of asset retirement obligations, less
any lease incentives. Subsequently, right-of-use assets are
measured at cost, less any accumulated depreciation and any
accumulated impairment losses, and are adjusted for certain
remeasurements of the lease liability. Depreciation is calculated
on a straight-line basis over the length of the lease.
The Group has elected to apply exemptions for short-term leases
and leases for which the underlying asset is of low value. For
these leases, payments are charged to the Income Statement on a
straight-line basis over the term of the relevant lease. For the
year ended 30 April 2020, payments charged to the Income Statement
related to low value and short-term leases were insignificant.
Right-of-use assets are presented separately in non-current
assets on the face of the Statement of Financial Position and lease
liabilities are shown separately on the Statement of Financial
Position in current liabilities and non-current liabilities
depending on the length of the lease term.
Amendment to IAS 28 'Investments in Associates and joint
ventures' and IFRIC 23 'Uncertainty over income tax treatments',
which have both not had a significant impact on reported results or
position.
3 Net finance costs
For the year ended 30 April 2020 2019
GBPm GBPm
------------------------------------ ------- ----------
Finance income 12.4 10.7
------------------------------------ ------- ----------
Finance costs
Interest payable on bank loans and
non-utilisation fees (9.1) (8.6)
Amortisation of facility fees (1.8) (1.8)
Other finance costs (0.8) (2.3)
------------------------------------ ------- ----------
(11.7) (12.7)
------------------------------------ ------- ----------
Net finance costs 0.7 (2.0)
------------------------------------ ------- ----------
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
For the year ended 30 April 2020 2019
GBPm GBPm
------------------------------------ -------- --------
Current tax
UK corporation tax payable (93.3) (132.4)
Adjustments in respect of previous
years 2.8 0.3
(90.5) (132.1)
Deferred tax
Deferred tax movements (0.9) (15.0)
Adjustments in respect of previous
years (2.2) (0.7)
------------------------------------ -------- --------
(3.1) (15.7)
(93.6) (147.8)
------------------------------------ -------- --------
5 Earnings per share
Basic earnings per share are calculated as the profit for the
financial year attributable to shareholders of the Group divided by
the weighted average number of shares in issue during the year.
For the year ended 30 April 2020 2019
Profit attributable to shareholders
(GBPm) 410.1 627.4
Weighted average no. of shares (m) 126.2 130.4
Basic earnings per share (p) 324.9 481.1
------------------------------------- ------ ----------
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 30 April 2020, the Group had two (2019: two) categories of
potentially dilutive ordinary shares:
4.4 million (2019: 2.9 million) share options under the 2011
LTIP and 30,788 (2019: 22,000) 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.
For the year ended 30 April 2020 2019
-------------------------------------- -------- ----------
Profit used to determine diluted EPS
(GBPm) 410.1 627.4
-------------------------------------- -------- ----------
Weighted average no. of shares (m) 126.2 130.4
Adjustments for:
Share options - 2011 LTIP 4.6 3.1
Shares used to determine diluted EPS
(m) 130.8 133.5
-------------------------------------- -------- ----------
Diluted earnings per share (p) 313.4 469.9
-------------------------------------- -------- ----------
6 Notes to the Consolidated Cash Flow Statement
For the year ended 30 April 2020 2019
GBPm GBPm
------------------------------------------------ -------- ----------
Net cash flows from operating activities
Profit for the financial year 410.1 627.4
Adjustments for:
Taxation 93.6 147.8
Depreciation 4.7 2.4
Loss on sale of PPE 0.2 0.2
Finance income (12.4) (10.7)
Finance costs 11.7 12.7
Share of results of joint ventures
after tax (33.3) (8.8)
Non-cash charge in respect of pension
deficit - 0.6
Non-cash charge in respect of share
awards (4.1) (4.4)
Changes in working capital:
(Increase)/decrease in inventories (440.2) 181.9
Increase in trade and other receivables (3.8) (20.9)
Increase/(decrease) in trade and other
payables 369.9 (138.4)
Decrease in employee benefit obligations (1.0) (0.6)
------------------------------------------------ -------- ----------
Cash generated from operations 395.4 789.2
------------------------------------------------ -------- ----------
Reconciliation of net cash flow to
net cash
Net increase in net cash and cash equivalents,
including bank overdraft 363.9 287.7
Increase in borrowings (200.0) -
------------------------------------------------ -------- --------
Movement in net cash in the financial
year 163.9 287.7
Opening net cash 975.0 687.3
------------------------------------------------ -------- --------
Closing net cash 1,138.9 975.0
------------------------------------------------ -------- --------
Net cash
Cash and cash equivalents 1,638.9 1,275.0
Current borrowings (200.0) -
Non-current borrowings (300.0) (300.0)
------------------------------------------------ -------- --------
Net cash 1,138.9 975.0
------------------------------------------------ -------- --------
7 Related party transactions
The Group has entered into the following related party
transactions:
Transactions with Directors
During the year, Mr A W Pidgley paid GBP65,598 (2019:
GBP225,188), Mr R C Perrins paid GBP120,601 (2019: GBP90,981), Mr S
Ellis paid GBP208,046 (2019: GBP107,039) and Mr P Vallone paid
GBP811,191 (2019: GBP490,576) 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 year end.
Berkeley Homes plc has an agreement with Langham Homes, a
company controlled by Mr T K Pidgley who is the son of the Group's
Chairman, under which Langham Homes will be paid a fee for a land
introduction on an arm's length basis. A fee of GBP300,000 has been
made under this agreement in the year (2019: GBPnil) and there were
no outstanding balances at the year-end (2019: GBPnil) and there
are no contingent fees outstanding. Langham Homes has not
introduced any new land to the Group in the year. In the event that
any further land purchases are agreed, further fees may be payable
to Langham Homes in future years.
Transactions with Joint Ventures
During the financial year there were no transactions with joint
ventures other than movements in loans. The outstanding loan
balances with joint ventures at 30 April 2020 total GBP177.2
million
(30 April 2019: GBP156.7 million).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FFMLTMTMBBPM
(END) Dow Jones Newswires
June 17, 2020 02:00 ET (06:00 GMT)
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