Last checked at 16 Sep 2008 07:00
For Immediate Release 16 September 2008
The Berkeley Group Holdings plc
Interim Management Statement
Period from 1st May 2008 to 31st August 2008
The Berkeley Group Holdings plc (“Berkeley”) today announces its Interim Management Statement, which covers the period from 1st May 2008 to 31st August 2008, as required by the UK Listing Authority’s Disclosure and Transparency Rules.
After a period of favourable conditions for the housing market, November 2007 saw the onset of a particularly challenging trading environment and this has continued unabated during 2008. The reasons for this are well documented and go beyond the housing market. The reduced availability of mortgage finance has been compounded by concerns over the wider economy, including inflationary pressure from oil and food prices, and security of employment.
Property development has always been cyclical and this drives Berkeley's strategy which is to concentrate on balance sheet strength before the income statement. This strategy ensured that Berkeley entered the current financial year in a very strong position with forward sales of £1.2 billion, a well-bought land bank and gearing of less than 1%.
Our shareholders have again demonstrated their support for Berkeley and our strategy by agreeing to restructure the final £3 per share (£363 million) of the Scheme of Arrangement payments; the first £9 per share (£1,088 million) having been paid in a little over three years. The final £3 per share will now be returned as a series of dividend payments and opportunistic share buy-backs (which will not include shares acquired by the Group's Employee Benefit Trust), as opposed to a single B share payment, with the target end-date deferred from January 2011 to January 2014. This provides Berkeley with the flexibility to take advantage of the opportunities that emerge in times of weaker market conditions.
Berkeley's flexible operating model means that the Group can match supply to demand and maximise returns in all market conditions. Since the beginning of its current financial year, Berkeley has experienced sales levels approximately 50% below the historical average. This is a level that, with the benefit of the strong opening forward sales position, will enable the Group to meet its strategic objectives. At the same time, Berkeley is confident of its ability to maintain operating margins within its historic range through a combination of efficiency measures and adding value to its sites through new planning consents. As a result, the performance of the Group is in line with the Board's expectations for both the six months ending 31st October 2008, the results for which will be announced on 5th December 2008, and the full year ending 30th April 2009.
Most importantly in these market conditions, cash generation has been ahead of plan. At the end of August, the Group had increased its net cash position to £71 million, compared to net debt of £4.5 million at the start of the year, and this is after having acquired 2.4 million shares into the Group's Employee Benefit Trust in the 1st quarter at a cost of £15.4 million (£6.39 per share).
Berkeley's strong cash position enables it to take advantage of the numerous land opportunities that are coming to the market. These are being rigorously appraised to identify those to which Berkeley can add maximum value for shareholders, with acquisitions only being made on a selective and opportunistic basis.
Looking forward, we welcome the Government's initiatives in respect of first time buyers; however, the two critical factors required to provide the stimulus for the housing market to return to more normal levels of activity and release the undoubted underlying demand, are the return of liquidity to the mortgage market and the return of the feel-good factor, which is closely linked to the wider economy and, in particular, job security. In the meantime, Berkeley is well placed to take advantage of prevailing market conditions.
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For further information please contact:
The Berkeley Group Holdings plc Cardew Group
A W Pidgley Tim Robertson
R C Perrins Sofia Rehman
T: 01932 868555 T: 0207 930 0777