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Berkeley Group: A residential housebuilder with a high percentage of its developments on brown field land. Established in 1976, the company now includes the Berkeley Homes, St George and St James brands, with important exposure to the high value London property market.
Shares in issue 131.28m (Oct '10)
Currently no dividend (Oct '10)
Forecast PE apr '11 13.2, to apr '12 11.6.

Jefferies International lifts Berkeley Group Holdings to hold from underperform, target raised from 1839p to 2681p

RBC note on friday:
"Help to Buy – The scheme was introduced in 2013 and successfully reignited the housing market. Although all political parties were said to be in favour of getting more FTBs onto the housing ladder, there was some uncertainty as funding is in place for 2015 but not beyond making it easy to scrap or introduce a different scheme. H2B makes up between 40-50 percent of sales at Barratt Development, Persimmon and Taylor Wimpey.
National Planning Policy Framework was introduced in 2012, with an emphasis on releasing both public and private land for development. We believe that planning approvals have picked up as a consequence. The local planning authorities are obliged to demonstrate a five-year supply of deliverable sites for housing with an additional 5% buffer to increase choice and competition. Planning typically slows down during an election period. The removal of the electoral uncertainty and any potential reforms around planning should be viewed positively.
Labour’s Mansion Tax – In our opinion, Berkeley Group was most at risk to an introduction of a mansion tax and any schemes to deter foreign buyers. Berkeley Group sells approximately 30% of its homes to foreign buyers, and the sales of homes over £2m represent 15% of its revenues. This compares to Barratt Development (with the second-largest exposure to London) with a 1% exposure to completions within the mansion tax bracket.
The outcome of the election is positive for the Housebuilders. The Housebuilders have underperformed going into the election. We believe that the removal of any major political uncertainty should lead to a catch-up. We believe that Berkeley Group, which has underperformed the Housebuilding sector is the largest beneficiary of the electoral outcome. The sector is trading on EV/IC/ROCE/WACC of 1.1x 2015E and 0.9x 2016E and yielding 6% on average."

StockMarketWire.com
Home-builder Berkeley Group posts pre-tax profits of £539.7m for the year ended 30 April - up from £380.0m last time.

Chairman Tony Pidgley said the result underlined the benefit of operating the right strategy consistently through the cycle.

Revenue rose to £2,120.0m (2014: £1,620.6m) included £2,020.2m of revenue from operations (2014: £1,620.6m) and £99.8m from the sale of a portfolio of ground rent assets (2014: £nil). The £2,020.2 million of revenue from operations included £1,936.2 million of residential revenue (2014: £1,605.0 million), £12.3 million from land sales on 3 sites (2014: £nil) and £71.7 million of commercial revenue (2014: £15.6 million). 3,355 new homes (2014: 3,742) were sold across London and the South of England at an average selling price of £575,000 (2014: £423,000). The increase in average selling price reflects first completions at Ebury Square, Riverlight, Fulham Reach and One Tower Bridge, all London schemes acquired in 2009/10.

The year ended 30 April 2014 included the disposal of 534 properties from Berkeley's rental fund to M&G Investments at an average selling price of £197,000 and the sale of two student developments. Revenue of £71.7 million from commercial activities (2014: £15.6 million) included the sale of some 130,000 sqft of office, retail and leisure space across a number of the Group's developments including Fulham Reach in Hammersmith, Langham Square in Putney and Royal Worcester as well as a 90,000 sqft hotel at Goodmans Fields in Central London. The £15.6 million of revenue last year was mainly from the sale of retail space on developments including Marine Wharf in Deptford, Goodmans Fields in Aldgate, Fulham Reach in Hammersmith and Imperial Wharf in Fulham. During the year, the group sold a portfolio of approximately 10,000 ground rent leases across some 60 sites for proceeds of £99.8 million and a gross profit of £85.1 million. Income and expenses associated with this sale have been recognised in the income statement through revenue and gross profit. The adjusted gross margin percentage, excluding profit from the sale of ground rent assets, has been broadly stable at 31.3% (2014: 31.4%), and reflects the mix of homes sold in the period.

Overheads of £192.7 million (2014: £134.1 million) included a charge of £47.0 million (2014: £nil) in respect of the Company's decision to settle the tax and national insurance liabilities arising on the vesting of options for participants in Part B of the 2009 LTIP scheme on 15 April 2015, in lieu of issuing shares to this value, and the intention to do the same in respect of options vesting on 15 April 2016.

Of this £47.0 million, £33.5 million is in respect of prior periods and £13.5 million in respect of the year ended 30 April 2015.

Pidgley said: "By maintaining our financial discipline Berkeley can apply its unique operating model to develop sites which are complex and where others may perceive that the risk is too great, and in doing so, we unlock land for new homes that would not otherwise come forward.

"Berkeley accepts this additional operational risk which is managed carefully and intensively to create sustainable added value returns.

"Berkeley is delivering some 10% of all new homes in London and 10% of the capital's affordable homes across our 74 sites. This creates economic value of £1.4 billion and sustains some 12,000 jobs. In addition, we remain committed to increase site-based apprenticeships and training to help address the skills shortage which our industry faces.

"We are acutely aware of the importance to our society of all forms of tenure for new housing and welcome the vision of Government, the Greater London Authority and local councils to increase the number of new homes built. For Berkeley it is equally important to ensure that we are market leaders in terms of the quality of the places and homes we create.

"We welcome the stability in Central Government following the General Election and the commitment to increase housing supply, but political uncertainty remains with the London Mayoral Election and referendum on Britain's relationship with Europe on the horizon. Berkeley is a supporter of the UK remaining in Europe as this is the best way for London to remain a world city. There is no doubt, however, that for business to thrive, we must not be bound by over-regulation, be this from our own government or from Europe."

Barclays Capital retains equal weight on Berkeley Group Holdings, target raised from 2581.2p to 3713.5p

Interim Management Statement

StockMarketWire.com
Berkeley posts adjusted pre-tax profits of £242.3m for the six months to the end of October - up 10.2% on last time - and declared a further interim dividend of 100 pence per share, payable on 22 January.

Pre-tax profits were £293.2m - down from £304.9m last time due to the impact of ground rent sales.

Berkeley says it remains ungeared with £263.1 million of net cash and cash due on forward sales over the next three years of £3.1 billion and is on track to meet its three year earnings guidance.

Chairman Tony Pidgley said: "With the strength of our recent performance and the visibility over future profitability and cash generation from our land bank and forward sales, I am delighted to confirm that we have today set out proposals to increase Berkeley's 2021 dividend return target from £13 per share to £16.34 per share. With £4.34 per share having already been paid, the remaining £12 per share is planned to be paid in annual dividends of £2 per share over the next six years. This gives a clear and steady dividend return plan for the next six years whilst also allowing for further investment in the business."

The group reports a good period of trading in the first six months of the year with adjusted pre-tax earnings coming from from the sale of 2,091 homes at an average selling price of £506,000. Together with a further £51.0 million of profit from the sale of ground rent assets, this represents total pre-tax earnings of £293.3 million.

UP 7+%

Credit Suisse today reaffirms its neutral investment rating on Berkeley Group Holdings (The) PLC (LON:BKG) and raised its price target to 3101p (from 2814p).

From the FT today:
"Hedge fund managers are taking short positions against the biggest listed provider of luxury London homes in a bet that weakening emerging markets will put the once buoyant sector into reverse. A small group of funds are targeting the shares of Berkeley Group, the main listed proxy for new high-end London property, amid signs that Asian and Russian buyers are deserting the market.
Odey Asset Management, BlueMountain Capital Management and Anchorage Capital took short positions against the FTSE 100 builder in January, worth 2.2 per cent of its share capital, according to data disclosed to the Financial Conduct Authority.
The short positions run against analysts’ consensus that Berkeley is well positioned to continue growing — and indicate the hedge funds believe pricing and transaction levels for luxury London homes have further to fall."

Jefferies response to the above:
"Perhaps the box office hit 'The 'Big Short' is spurring investors to short Berkeley group in what some perceive as an overheated London housing market. We would not short Berkeley Group as its investment case is based on strong foundations, solid ground and physical properties rather than intangible synthetic mortgage products. We still believe cash is king and Berkeley will meet its promises to return cash to shareholders; go long not short.
Press reports that several investors are shorting Berkeley Group It appears to us that some investors are worried about over heating in certain 'high end' pockets of the London housing market and are using Berkeley as a proxy to bet against this market.
In our view Berkeley is the wrong vehicle: Much like in 'The Big Short' those initially wanting to bet against the US housing market did not have a vehicle to go short against, so they had to create one, however we do not believe that Berkeley Group is the appropriate vehicle. With ASPs of £550,000 this year and £650,000 next Berkeley hardly, in our view, provides a playground in which the rich and famous play at property developing and speculating. Mention trophy assets to Mr Pidgley and he is likely to explain in words that will leave no room for ambiguity that he does not invest in trophy assets. Mr Pidgley also has, in our view, a rather enviable track record in calling the London housing market.
Help to Buy London: Interestingly the evening papers yesterday (Evening Standard - West End Final) ran with the headline 'Renters rush for Help to Buy Loans', suggesting that 15,000 first time buyers have applied for the new scheme in the first 7 days since its launch. Equity investors will of course be aware that Berkeley is the natural beneficiary here. We have a shortage of homes across London, over the last 20 years production has averaged less than 20,000 homes a year, compared to household population growth of 50,000 pa. Over the next 10 years the population in London is expected to grow by 1 million and yet to the total planning pipeline for new homes (even if there was sufficient labour to build these homes) is around 240,000.
Help to Rent London: The capital is crying our for rental properties and if Berkeley's overseas investor demand were to wane we know of around 20 funds raising but struggling to invest money in the fast growing private rented market.
The £175m question: Let us not forget that Mr Perrins and Mr Pidgley are seeking at their upcoming EGM to adjust their LTIP, to limit their payout to £175m each should they return the £16.34p per share to investors. If the London market does slow, we are sure they reduce or stop buying land, so cash generation remains strong and dividends are very likely, in our view, to get paid. With a yield of 6.4% we see attractions at these levels. Leave (most of) the rest of the sector out of this Quite how concerns over high end London should impact the national and 'non-London' regional listed housebuilders escapes us. We are not aware of any 'perceived' bubbles outside of London and the South East we doubt their (Help to Buy aided) returns are under threat. However one listed London housebuilder (Telford Homes TEF LN, N/R) seems to have been neglected by the shorting parties, shouldn't they short that London housebuilder as well?
Valuation: At 3129p Berkeley trades on a CY2016 P/B of 2.15x and offers a yield of 6.4%. Our 4650p PT is based on the simple average of a P/B multiple of 1.75x and a PER of 14x applied to our CY2016 estimates plus dividend probability weighted across our Neutral Case (50%), Upside Case (45%) and Downside Case (5%). Risks: Berkeley's fortunes are linked to the underlying UK housing market significant reductions in UK house prices, mortgage availability or material changes to the supply chain may lead us to reduce our estimates.

down £5.00 or 14% in just a day or two ...... pretty shitty if you're a holder!

Nice little buy by BlackRock, Inc..

See RNS

.

The number of British property funds suspended following the country's vote to leave the EU doubled to six on Wednesday, leaving 15 billion pounds ($19.4 billion) frozen in the biggest seizing up of investment funds since the 2008 financial crisis.

The funds pulled down the shutters after a wave of investors asked for their money back amid speculation about a possible drop in commercial property prices in reaction to the result of the June 23 referendum.

That in turn has raised concerns about the outlook for the broader financial system, given the risk of investors bailing out of other asset classes in a panic and of lenders to the sector such as banks suffering fresh balance sheet stress.

Henderson Global Investors, part of Henderson Group , said on Wednesday it had temporarily suspended trading in its 3.9 billion pound UK Property PAIF and PAIF feeder funds due to "exceptional liquidity pressures" given uncertainty after the Brexit vote and the other suspensions.

It was followed within the hour by Columbia Threadneedle, part of the Ameriprise Group, which said it had suspended trading in its Threadneedle UK Property Fund.

Canada Life said it had also suspended its Canlife Property and Canlife UK property funds, describing this as a deferral of requests to withdraw investments. "The deferral can be for up to six months, enabling the funds to ensure property values reflect market conditions," it said in a statement.

They joined rival funds managed by M&G Investments, Aviva Investors and Standard Life Investments which suspended trading on Monday and Tuesday.

"Over half of the property fund sector is now on ice, and will remain so until managers raise enough cash to meet redemptions. To do that they need to sell properties, and as any homeowner knows, that is not a quick or painless procedure," said Laith Khalaf, senior analyst at fund supermarket Hargreaves Lansdown.

"These funds are therefore likely to be closed for weeks and months rather than simply a matter of days," he wrote in a note to clients.

Britain's Financial Ombudsman Service said it had begun to receive calls from retail investors worried about the closures and the potential hit to their savings. "Although the decision to suspend redemptions was expected, the extent of the suspensions by the three funds so far is quite troubling," a spokeswoman said shortly before Wednesday's fund announcements.

Keenan Vyas, Director in the Real Estate Advisory Group at Duff & Phelps in London, said the consequences could be profound.

Deutsche Bank today reaffirms its buy investment rating on Berkeley Group Holdings (The) PLC (LON:BKG) and cut its price target to 3829p (from 3981p).

Did I read BKG is likely to fall-out of the FTSE 100 - or is this another Post-Brexit scare story? . . . . although it's possible some other Stocks are to enter, due to their recent rise, perhaps.... that might be the "push-factor"
Still, with a Yield of nearly 7.5% - , this is still a "Keeper" -IMHO.
EDIT ( 28Nov2016)- sp 2420p so maybe a tiny slippage...

StockMarketWire.com
Berkeley Group Holdings is re-iterating its guidance for the delivery of £2.0 billion of pre-tax profit over the three year period ending on 30 April 2018, having delivered the first £0.5 billion of this in the year ended 30 April 2016.

Shareholders at today's annual general meeting will be told that Berkeley entered 2016/17 with record cash due on forward sales of £3.25 billion and future estimated land bank gross margin of £6.15 billion, respectively. This is a consequence of Berkeley operating its added value strategy which manages risk through the cycle.

The update will say: "In particular, this involves selling properties early in the development cycle where possible and ensuring land with implementable planning consent is in place to underpin production.

The forward sales provide good visibility over the next two years and Berkeley re-iterates its guidance for the delivery of £2.0 billion of pre-tax profit over the three year period ending on 30 April 2018, having delivered the first £0.5 billion of this in the year ended 30 April 2016.

"This visibility of cash flow and earnings also underpins the Company's dividend plan, of which the next £1.00 interim dividend per share is payable to shareholders on 15 September 2016 (£137 million), bringing the total returns paid to shareholders since 2011 to £6.34, with a further £10 per share to be paid evenly over the remaining 5 years to September 2021.

"Following the dividend payment and taking into account the £20 million spent on acquiring the Company's shares on 24 June, Berkeley expects to remain ungeared at the 31 October 2016 half year, with the actual level of cash dependent on the extent and timing of land and build investment.

"Berkeley reported in its full year results in June that reservations were some 20% lower in the first five calendar months of the year, compared to the same period in 2015, as customers adjusted to higher property taxes and the uncertainty surrounding the UK Referendum, with Berkeley deferring the release of new product to the market.

"After an hiatus either side of the Referendum, the market in August, traditionally a quiet month, has returned to the relative levels reported for the first five months of the year; approximately 20% down on August 2015, reflecting the lower levels of available product, as well as the broader market conditions.

"Importantly, throughout 2016, site visitor numbers and enquiries have been at similar levels to the same period last year demonstrating the strength of underlying demand, although customers are taking longer to commit. Pricing has remained resilient and above business plan levels with reservation cancellation rates at normal levels, following a temporary and expected increase after the UK Referendum result

"The focus for Berkeley is on delivering the high quality homes and places for our customers during this financial year and 2017/18, whilst closely matching its capital investment into new phases and developments, which are for delivery from 2018/19 onwards, to the market demand, as it has always done."

Berkeley says it has been selective in the land market, acquiring just two sites in the period, both unconditionally, with planning advanced on a number of existing sites.

"What is increasingly clear is that Government policy, which has been helpful outside London, has had a negative effect on the capital. Transaction taxes are now too high and this is restricting both mobility in the second hand market and the pace of supply and delivery of new homes in London and the South East.

"There is also a tension between the national policy on Starter Homes and the London Mayor's ambition to build more affordable housing, while the very high rates of the Community Infrastructure Levy adopted by local authorities now pose a significant threat to development viability.

"While these challenges persist, and the barriers to entry for small builders remain high, London will fall well short of its targets for new homes. This is not just a problem for business and ordinary people in the capital but for the country as a whole. London is the engine of our national economy and the principal driver of fiscal revenues. So this is not just a question of housing Londoners - important though that is. It poses a risk to deficit reduction and the prosperity of the whole country.

"With its strong balance sheet, forward sales, high quality land bank and leading brand and customer service, Berkeley is well positioned to deliver its earnings and dividend guidance and optimise shareholder returns in the current market conditions, whilst retaining sufficient capital to be flexible should suitable new investment opportunities arise."

StockMarketWire.com
Berkeley Group posts pre-tax profits of £392.7 million for the six months to the end of October - up 33.9% on last time.

This is from the sale of 2,076 homes (2015: 2,091) at an average selling price of £655,000 (2015: £506,000), reflecting the mix of properties sold in the year.

TYhe group says: "Having delivered pre-tax profits of £0.5 billion for the year ended 30 April 2016, these results mean that the Company remains firmly on target to deliver pre-tax profits of £2.0 billion over the three year period ending 30 April 2018.

"The remaining 18 month period is underpinned by forward sales. In total, Berkeley has £2.9 billion of cash on exchanged sales contracts which is due over the next three years. As always, the scale of the regeneration schemes from which we expect to generate the remaining earnings makes the delivery of profit in specific annual periods sensitive to timing and we prioritise quality ahead of individual period financial targets. The strength of this position gives Berkeley confidence to announce a new five year target to deliver at least £3.0 billion of pre-tax profits in the five years beginning 1 May 2016.

"Excluding an hiatus around Brexit, reservations for the six months remain in line with the beginning of the calendar year and are approximately 20% down on the same period last year as a result of the market adjusting to increased stamp duty and the economic uncertainty arising from the EU Referendum result. The underlying market has begun to adjust to these events and Berkeley plans to launch new product in the New Year which will be delivered in financial years beyond the period to April 2018."

Highlights:
- Net asset value per share - up 7.9% to 1,418 pence (April 2016: 1,314 pence)

- Forward sales - £2.90 billion (April 2016: £3.25 billion)

- Land bank - £5.9 billion of estimated future gross margin (April 2016: £6.1 billion) across 42,125 plots (April 2016: 42,858 plots)

- Market conditions - Excluding an hiatus around Brexit, reservations are 20% down on the same period last year, as a result of the market adjusting to increased stamp duty and the economic uncertainty arising from the result of the EU Referendum

- People - Over 15,000 people working across our sites, an increase of some 8.7% since April 2016, with 603 apprenticeships in the six months.

Numis today upgrades its investment rating on Berkeley Group Holdings (The) PLC (LON:BKG) to buy (from add) and left its price target at 3844p.

Deutsche Bank today reaffirms its buy investment rating on Berkeley Group Holdings (The) PLC (LON:BKG) and cut its price target to 3599p (from 3876p).

StockMarketWire.com
Berkeley Group's underlying reservations in the seven months since the immediate Brexit referendum effect were down 16% but the last two months were ahead of last year.

It said pre-tax profits for the year ended 30 April were expected to be at the top end of analysts' expectations, with the actual outturn dependent upon completion timing on Berkeley's larger developments.

A similar level of profitability was anticipated for the year ending 30 April 2018.

The group said the housing market in London and the South East had now stabilised and enquiry levels remained robust, cancellation rates were at normal levels and pricing continued to be resilient and above business plan levels.

It said: "The reduction in reservations is across all price points and reflects the ongoing impact of both Brexit uncertainty and the changes in recent years to SDLT and mortgage interest deductibility.

"This has been partly offset by the continued availability of mortgage finance at low interest rates, favourable currency exchange rates and the quality of Berkeley's well-presented and well-located homes.

"When coupled with the planning environment and increased demands from the combination of affordable housing, CIL, Section 106 obligations and review mechanisms, this has resulted in new starts in London falling by some 30%."

Berkeley said it was concerned by this under-supply and the knock-on effect it had on the provision of housing of all tenures which, if not addressed, represented a threat to London remaining the inclusive and open global city which was so important to London and the UK's growth and prosperity.

It added: "We therefore welcome the Government's White Paper and the Mayor's continued focus on housing but note that these will take time to effect change, given the competing priorities."

Berkeley said it was uniquely placed to maintain its high levels of production in London and the South East.