Berkeley Group to reveal extent of City exodus

Housebuilder Berkeley is set to reveal whether the much-hyped exodus from City centres has been overplayed at its full year results on Wednesday.

The company had held back on some new developments in the year, to wait for lockdown restrictions to ease.

But the decision may have backfired, with long delays now facing the construction sector and the prospect of price rises on raw materials potentially impacting the group and industry more widely.

Suppliers have been reporting long delays at ports, and raw materials, particularly timber, rising in price as pent-up demand from the pandemic outstripped supply.

The housing sector has managed to hold up well during the pandemic thanks, in part, to the prolonged stamp duty holiday announced by the Government.

Analysts at JP Morgan certainly believe recent worries of “de-urbanisation” alongside the ongoing cladding crisis engulfing the sector have been overplayed and believe profits could be at the top end of current guidance.

A consensus of analysts predict pre-tax profits will come in at £516 million, up from £503.7 million a year earlier but still well down on the £775.2 million recorded in 2019.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, also pointed out that the cost of materials rising may not be quite so challenging for Berkeley due to its properties being at the premium end of the market.

He said: “That’s a headwind facing the whole industry, but Berkeley may actually be better insulated than many.

“Its relatively high price point and specialism in complex sites mean materials account for a smaller proportion.”

The analyst added: “With the pandemic and remote working driving wealthy city dwellers out into the country, the main question facing Berkeley this year was how well demand for its London-centric homes (including flats) was holding up.

“So far the group has performed remarkably well, and is on track to deliver a similar level of profit to last year with forward sales also looking healthy. We don’t expect that to have changed now the economy is gradually unlocking.”

Berkeley shareholders will also be keen to hear how boardroom plans to hand back £280 million of cash a year to investors in dividends or share buybacks are also playing out.

In March the company said forward sales are set to rise above £1.7 billion by the end of the financial year, although the total value of homes customers had already reserved was expected to be down by a fifth.