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Berkeley Group says profits on track but sees spiralling costs

·2-min read
Berkeley is a London-focused construction company (Victoria Jones/PA) (PA Wire)
Berkeley is a London-focused construction company (Victoria Jones/PA) (PA Wire)

Builder Berkeley Group announced it is “on track” to meet its profit guidance in the year ending next April as it said it expected most of the profit will fall in the second half of the year.

The business said it would deliver between £600 million and £625 million in pre-tax profit over the year to April 30 2024.

It would be a significant step up from the £551.5 million that the company delivered in the previous 12 months.

Berkeley is one of several housebuilders to report this week at a tough time for the sector. Share prices have been dropping significantly in recent months amid worries of a housing market squeeze.

The good level of demand continues to support pricing above business plan levels

Berkeley Group

As the cost of living soars to unprecedented heights, potential future house buyers are unable to put aside savings towards a deposit.

So although house prices remain high at the moment, investors worry that demand might dry up and prices fall in the years ahead.

But for Berkeley it appears that this change might still be in the future.

“Berkeley has continued to trade well during the first four months of the new financial year, with the value of underlying sales ahead of the financial year ended April 30 2022,” it said on Tuesday.

“The good level of demand continues to support pricing above business plan levels, which is sufficient to cover cost increases on a blended basis across Berkeley’s developments.”

It said that around 55% of its profit will come in the second half of the year because of the way its production is scheduled.

The business is also facing increased costs, which are rising between 5% and 10% across its portfolio.

“The operating environment remains volatile and little changed over the couple of months since the June results announcement, with overall cost inflation continued at the rates noted therein,” it said.

“In this context, Berkeley’s current strategy focuses on ensuring each site has the most appropriate development solution reflective of prevailing requirements, whilst new land will only be added to the land holdings very selectively.”

FTSE 100 listed Berkeley is a London-focused housebuilder which develops somewhat higher-end newbuilds across the capital.