TIDMBKG
RNS Number : 8277E
Berkeley Group Holdings (The) PLC
15 March 2022
This announcement contains inside information for the purposes
of article 7 of the Market Abuse Regulation (EU) 596/2014 as
amended by regulation 11 of the Market Abuse (Amendment) (EU Exit)
Regulations 2019/310. With the publication of this announcement,
this information is now considered to be in the public domain.
15 March 2022
The Berkeley Group Holdings plc
("Berkeley" or the "Company")
St William Acquisition
Berkeley acquires the outstanding 50% interest in its St William
joint venture from National Grid plc ("National Grid")
Details of the Transaction
Berkeley announces that it has today acquired National Grid's
50% interest in its St William Homes LLP ("St William") joint
venture, which is now a wholly owned subsidiary of the Company, for
cash consideration of GBP412.5 million.
Berkeley grows its land holdings through both direct
acquisitions and land-led partnerships and joint ventures. St
William formed in 2014 as a 50:50 joint venture to bring forward
former gasworks sites owned by National Grid that it no longer
required for its own business activities to create mixed-use
residential developments. Its formation followed Berkeley's
acquisition of the former National Grid gasworks at Southall's
Green Quarter where Berkeley has now delivered the first 550 homes
on this 86-acre 3,750 home mixed-use regeneration site.
Through the acquisition of National Grid's interest in St
William, Berkeley is gaining full control of:
-- 19 sites already in its land holdings (12,600 homes),
-- Two sites already in its near-term pipeline (2,600 homes), and
-- Three new long-term sites that will be included in the
near-term pipeline (approximately 5,000 homes).
In total, this represents over 20,000 future homes across 24
sites, which constitute the significant majority of those
identified at the inception of St William, which has already
delivered approximately 1,100 homes and completed three small
sites.
All of these sites are now either owned or unconditionally
contracted by St William. There are approximately GBP500 million of
outstanding land payments to make to National Grid in respect of
these sites, payable over the next ten years.
The GBP412.5 million consideration for National Grid's interest
in St William and the concurrent refinancing of its bank facility
has been funded from Berkeley's existing cash reserves. St
William's net debt at the end of February 2022 was approximately
GBP170 million.
Including the already wholly owned Green Quarter site at
Southall referred to above, and the three small sites already
completed, Berkeley's relationship with National Grid will see some
25,000 new homes delivered across London and the South East that
would not otherwise have come forward. The regeneration of these
vast, brownfield spaces, once cut off from their local communities,
to create new urban neighbourhoods with the right mix of homes,
public amenities, parks and open spaces is inherently
sustainable.
Berkeley's investment reflects its expertise and long-term
commitment to London. This transaction will continue to sustain
28,000 UK jobs directly and indirectly through Berkeley's supply
chain. Starts in London have been falling for the last few years as
many others refrain from allocating capital to this market.
Impact on Strategy and Shareholder Returns
Through the transaction announced today, Berkeley has achieved
its objective of securing at least GBP7.5 billion of estimated
future gross margin in its land holdings well ahead of its 30 April
2025 target, with the gross margin percentage maintained at around
27%. In addition, the near-term pipeline now comprises around
12,000 homes with a potential estimated future gross margin of
approximately GBP1.3 billion across seven sites.
The acquisition further underpins earnings for the next three
years, and Berkeley now anticipates achieving the existing pre-tax
profit guidance for the financial years ending 30 April 2024 and
2025 a year earlier in each case. Net cash is now expected to be
around GBP250 million at 30 April 2022, with cash due on forward
sales increasing to over GBP2.0 billion following the
acquisition.
Following the transaction, Berkeley will now only acquire new
land very selectively. Investment over the next two years will
therefore be focused on bringing the Group's regeneration sites
into delivery, as previously indicated, and Berkeley now
anticipates being cash neutral over this period. Once this
investment programme is complete, the focus will shift to returning
surplus capital over and above the scheduled annual returns of
GBP281 million to shareholders, through either dividends or share
buybacks. Return on equity, rather than annual profit will be the
principal financial metric for the business. This reflects
Berkeley's long-held prioritisation of quality of profit and
financial soundness, ahead of annual profit targets, as well as the
lumpiness of delivery of profit on regeneration developments.
In respect of the GBP455 million surplus capital identified in
2020, Berkeley committed to return this to shareholders either
through enhanced cash returns or through investment in incremental
land interests, or a combination of the two. The first GBP229
million of this surplus capital was returned to shareholders in
September 2021 as part of a B-share return and the remaining GBP226
million is satisfied by today's transaction.
The next scheduled shareholder return is the GBP141 million for
the six months ended 30 September 2022 which has been approved and
is unaffected by this transaction, of which GBP35 million has been
spent on share buy-backs to date.
Rob Perrins, Berkeley's Chief Executive said:
"This is a fantastic transaction for Berkeley and National Grid.
The vision of our innovative partnership was to take National
Grid's redundant gasholder sites and stitch them back into their
local communities; transforming them into well-connected, nature
rich, beautiful places with low carbon homes and new amenities.
With 24 sites now in St William, this is the natural time for
National Grid to realise its investment and for Berkeley to focus
on bringing all of these sites into delivery and helping meet the
housing need of London and the South East. I would like to thank
John and the team at National Grid who have been outstanding
partners over the last eight years.
The acquisition continues Berkeley's philosophy of investing at
the right time in the cycle for the long-term, securing unrivalled
land holdings in London and the South-East."
END
For further information please contact:
The Berkeley Group Holdings plc Novella Communications
R J Stearn Tim Robertson
T: 01932 868 555 T: 020 3151 7008
LEI: 2138009OQSSLVVHQAL78
Notes on The Berkeley Group Holdings plc:
Berkeley has transformed over the last five years by investing
in large-scale, complex sites in London and the South East. We are
unique in having the capital, resources and expertise to regenerate
this number of highly complex large-scale sites, with each one
requiring a bespoke and holistic place-making strategy to stitch it
back into its surrounding community and unlock its potential in
terms of economic, environmental and social value.
Reviving these under-used spaces is vital to re-energising our
cities and town centres and creates an increasingly sustainable,
socially inclusive and lower carbon model of modern living, in
which land, energy, resources and infrastructure are used more
efficiently and responsibly.
Berkeley is now the only large UK homebuilder focused on the
regeneration of complex large-scale brownfield projects at scale in
London as other large house-builders have left the capital over
recent years due to its relative complexity and cost.
Notes on St William Homes LLP:
St William's gross assets at 31 March 2021, being the date of
the most recently audited financial statements, were GBP870 million
and profit before taxation for the year ended 31 March 2021 was
GBP8 million. The acquisition of National Grid's partnership
interest in St William will be accounted for as an asset purchase
by Berkeley, rather than a business combination. Accordingly, there
is no goodwill and Berkeley anticipates the entire purchase price
is deductible for corporation tax purposes.
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