Investors look towards margins as housebuilder Berkeley set to update market

Investors will be waiting to see if housebuilder Berkeley Group is on track to meet its upped profit guidance as the company releases a trading update on Friday.

The business is widely expected to show some of the boom that the housing industry has seen in recent months.

The results will come a week after a widely watched survey of purchasing managers found that housebuilders boomed in February.

But they are still facing increasing costs – albeit at the lowest rate in many months – so analysts will be looking out for how much the company makes per house.

“That gave management the confidence to raise guidance, with pre-tax profits expected to come in around £544 million,” said Matt Britzman, equity analyst at Hargreaves Lansdown.

Analysts on average expect the company’s pre-tax profit to come in at just under that, around £543 million for the 12 months ending April 30.

It would be ahead of the £518 million that it made in the preceding year.

Mr Britzman said: “We’ll have our eyes on profits and margins, but also any commentary or guidance on how cost inflation is set to impact 2022 trading.

“It’s been a headwind for the sector, and not one we expect to go away anytime soon.

“The other important piece of information will be news on forward sales, given interest rates are higher which increases the cost of mortgages.

“That should help gauge how demand for new houses is holding up in the current, evolving climate.”

AJ Bell investment director Russ Mould said Berkeley’s shares are still around 12% lower than a year ago despite management having ambitious plans.

He said investors were worried over what might happen in the housing market after interest rates start to rise, the impact of the company’s green plans, and the flight of homebuyers during Covid from big cities such as London.

“No doubt longstanding chief executive Rob Perrins will address all these issues alongside the results for the nine months to the end of January.

“Analysts and investors will also study these figures from the perspective of the guidance for both full-year profits and capital return plans provided alongside last June’s full-year results.”