TIDMBKG
RNS Number : 3562D
Berkeley Group Holdings (The) PLC
21 June 2023
PRESS RELEASE 21 JUNE 2023
YEAR RESULTS ANNOUNCEMENT
Strong operating performance in challenging environment
On target to meet guidance for next two years and maintain
shareholder returns
86% of homes delivered on brownfield land with highest ever
investment in socio-economic benefits
Future delivery of new homes jeopardised by planning environment
and regulatory uncertainty unless urgently resolved
The Berkeley Group Holdings plc ("Berkeley") today announces its
audited results for the year ended 30 April 2023.
Rob Perrins, Chief Executive, said:
"Berkeley has delivered pre-tax profits in line with the
guidance provided at the start of the financial year, maintained
our shareholder returns programme and increased the net cash
position. This is a very strong performance by our sales and
construction teams, given market conditions and changing building
regulations, and reflects the resilience of Berkeley's business
model with its focus on the country's most undersupplied
markets.
We continue to see good levels of enquiry for well-located homes
built to a high standard of design and quality but recognise that
the market is likely to lack urgency until there is more certainty
over the trajectory of interest rates.
Berkeley's focus on regenerating long-term brownfield sites has
driven lasting positive change within some of the country's most
deprived communities and differentiates Berkeley as the only
large-scale UK developer aligned with Government's brownfield first
agenda. A deeper understanding and recognition of the benefits of,
and challenges to, this highly sustainable form of development is
required within the planning system to ensure the tremendous
opportunity it presents for society, communities and the economy is
not missed for future generations.
The challenge is increased when set alongside the uncertainty
from a continually evolving and increasingly burdensome regulatory
environment. While well-intended, this is constraining investment
into brownfield regeneration and homebuilding. If housing delivery
is to be maintained the planning system needs to respond to these
challenges and certainty is needed in the regulatory environment as
a matter of immediate priority.
Looking forward, we are well placed to meet our guidance for the
next two financial years and continue investing in our existing
regeneration sites, but will remain cautious in committing to new
investment until the conditions for growth are in place.
We remain focused on meeting our long-term pre-tax ROE target of
15% across the cycle and delivering against our shareholder returns
programme. At the same time, w e will continue to serve our
customers and the communities in which we work, delivering
individually designed, well-connected, nature-rich neighbourhoods
with quality new homes across all housing tenures."
Summary of Earnings, Shareholder Returns and Financial
Position
Change
Earnings 30-Apr-23 30-Apr-22 %
--------------------------------- ------------- ----------- -----------
Profit before tax GBP604.0m GBP551.5m +9.5%
Earnings per share - basic 426.8p 417.8p +2.1%
Pre-tax return on equity 18.7% 17.5%
---------------------------------- ------------- ----------- -----------
Shareholder Returns 30-Apr-23 30-Apr-22
--------------------------------- ------------- -----------
Share buy-backs undertaken GBP155.4m GBP63.7m
B-Share capital return - GBP451.5m
Dividends paid GBP98.5m -
Shareholder returns GBP253.9m GBP515.2m
------------- -----------
Share buy-backs - volume 4.0m 1.5m
Average price paid for GBP38.25 GBP41.81
share buy-backs
Dividends / B-Share Return GBP0.91 GBP3.71
per share
--------------------------------- ------------- ----------- -----------
As at As at Change
Financial Position 30-Apr-23 30-Apr-22 absolute
--------------------------------- ------------- ----------- -----------
Net cash GBP410m GBP269m +GBP141m
Net asset value per share GBP31.01 GBP28.18 +GBP2.83
Cash due on forward sales GBP2,136m GBP2,171m -GBP35m
(1)
Land Holdings - future GBP7,629m GBP8,258m -GBP629m
gross margin
Pipeline sites / (plots
(approx.)) 14 (14,000) 6 (8,000) +8 (6,000)
---------------------------------- ------------- ----------- -----------
(1) Cash due on private exchanged forward sales
completing within the next three years
See Note 8 of the condensed consolidated financial information
for a reconciliation of alternative performance measures
-- Forward sales sustained at a healthy GBP2.1 billion, with the
value of reservations for the financial year around 15% lower than
the comparative financial year.
-- Net cash increased to GBP410 million, with GBP1.2 billion of
borrowing capacity providing total liquidity of GBP1.6 billion.
-- Sales pricing remains firm and above business plan levels
with build cost inflation moderating.
-- Berkeley reiterates its guidance of delivering pre-tax
profits of at least GBP1.05 billion across its next two financial
years (FY24 and FY25) combined, which is likely to be slightly
weighted to the FY24, in line with market consensus and the
objective of delivering a sustainable pre-tax ROE of 15% through
the cycle.
-- Berkeley reaffirms its commitment to GBP283 million (GBP2.63
per share) per annum Shareholder Returns up to 30 September
2025.
-- Berkeley will continue to be cautious on new investment and
sales launches given the volatile operating environment, which
includes the current macro-economic, political and regulatory
environments.
-- One site added to the long-term pipeline and approximately
5,500 plots on future sites transferred from the land holdings to
the long-term pipeline due to uncertainty in the planning system;
the majority of these sites are at appeal or subject to a
call-in.
-- 26 of 32 long-term complex regeneration sites in production,
sustaining delivery profile for the next 10 years.
DELIVERING FOR ALL STAKEHOLDERS
-- 4,043 homes delivered, plus 594 in joint ventures (2022:
3,760, plus 872) - 86% of which are on regenerated brownfield
land.
-- Approximately GBP560 million of subsidies provided to deliver
affordable housing and committed to wider community and
infrastructure benefits in the year.
-- Berkeley is delivering some 10% of London's new private and
affordable homes - supporting an average of approximately 27,000 UK
jobs per annum directly and indirectly through its supply chain
over the last five years.
-- Industry leading Net Promoter Score (> 70) and customer satisfaction ratings maintained.
-- Since 2017/18 all new planning applications have committed to
biodiversity net gain, in total 54 developments which together will
create more than 550 acres of new or measurably improved natural
habitats.
-- Scopes 1 and 2 emissions reduction target met well ahead of
the 2030 science-based target and 23 embodied carbon assessments
completed as we progress our Climate Action programme and journey
towards net zero.
-- Rated "A-" by CDP for climate action and transparency and AAA
rated in the MSCI global ESG index.
-- Gold membership of The 5% Club, with 10% of direct employees
in 'earn and learn' positions as graduates, apprentices or
sponsored students within the year.
Investor and Analyst Presentation:
A pre-recorded presentation by the Directors of Berkeley on the
results will be made available on the Company's website at 11:00
today -
https://www.berkeleygroup.co.uk/investors/results-and-announcements
.
For further information please contact:
The Berkeley Group Holdings plc Novella Communications
R J Stearn (01932 868555) Tim Robertson (020 3151 7008)
CHIEF EXECUTIVE'S REVIEW
Purpose, Long-term Strategy and Capital Allocation
Berkeley's purpose is to build quality homes, strengthen
communities and improve lives, using its sustained commercial
success to make valuable and enduring contributions to society, the
economy and natural world.
Berkeley is the only large UK homebuilder to align with
Government on prioritising brownfield land, as we progress 32 of
the country's most challenging regeneration projects, 26 of which
are in delivery. Each of these neighbourhoods is uniquely designed
in partnership with local councils and communities and includes
valuable public amenities alongside tenure-blind private and
affordable homes.
It has been hugely exciting to see more of these complex sites
transform into popular, inclusive and low carbon communities,
including Oval Village in Lambeth, an 8-acre brownfield site which
brings together four derelict gasholders and an adjacent
supermarket and warehouse. We welcomed our first residents to this
emerging mixed use neighbourhood in 2022, which will grow to
provide more than 1,300 private and affordable homes and over 1,000
permanent jobs across 160,000 square feet of commercial and
community space. All this is set around car-free streets, public
squares and biodiverse landscaping. The development was awarded
Housing Scheme of the Year at the 2023 Planning Awards.
White City Living also made great progress in the year, where St
James has transformed an 11-acre isolated warehouse site into a
beautiful open neighbourhood, with a hugely popular community park,
pedestrian routes to Westfield Shopping Centre and an Amazon Fresh
convenience store. The site will deliver around 2,500 private and
affordable homes, with more than 950 delivered so far, of which 400
are affordable homes. The development won Best Regeneration Scheme
at the 2022 WhatHouse? Awards.
Alongside this, Berkeley's financial strategy reflects the
cyclical nature and complexity of brownfield development,
protecting and enhancing long-term value for shareholders and using
its development expertise to maximise the returns from its assets,
creating the right development solution for each site. Our capital
allocation policy is therefore clear and remains unchanged: first,
ensure financial strength is appropriate to the prevailing
operating environment; second, invest in the business (land and
work-in-progress) at the right time; and third, make returns to
shareholders through dividends and share buy-backs.
This disciplined approach allows Berkeley to deliver
sustainable, risk-adjusted returns over the cycle, targeting a
sustained pre-tax return on equity of 15%.
Strategy positioning for today's environment
From the strong trading period that followed the Global
Financial Crisis, Berkeley invested strongly in its land holdings,
which will sustain the Group's delivery profile for the next ten
years, spending some GBP6 billion on its development activities in
the last three years alone. We are forecast to continue investing
in our existing regeneration sites with implementable planning
consents.
In the near-term, Berkeley has a clear strategy to focus on
matching production on existing sites to demand and delivering its
forward sales whilst protecting operating margins. We will only
invest in new sites very selectively or in partnership with
landowners, such as retailers, utilities, local authorities and
housing associations or with its joint venture partners. This
strategy is centred on cash generation that will provide the
optionality to invest further in the business or reassess the level
of returns to shareholders, depending upon the characteristics of
the prevailing operating environment.
Beyond the near-term, the current operating environment,
characterised by record levels of planning tariff within an
increasingly complex, uncertain and slow planning system, at a time
of high build costs, increased regulation and higher corporation
tax, alongside the Residential Property Developer Tax ("RPDT") and
proposed new Building Safety Levy, will inevitably continue to see
a reduction in supply of new homes in London and the South
East.
The delivery of new homes during a year in which there were no
new land additions, coupled with the transfer of 5,500 plots to
Berkeley's pipeline, offset to some degree by new planning consents
and market movements, has led to a reduction in the land holdings
future gross margin from GBP8.26 billion to GBP7.63 billion at 30
April 2023. This is likely to further moderate in the near-term as
Berkeley continues to deliver new homes, without new investment
fully replacing production.
Shareholder Returns
Berkeley has in place a shareholder returns programme, based
upon an ongoing annual return of GBP283 million planned through to
September 2025. This is delivered through two equal tranches of
GBP141.4 million in the six month periods from 1 October to 31
March and 1 April 30 September each year. It is measured on a
cumulative basis and can be made through either dividends or share
buy-backs. Shareholder returns during the financial year totalled
GBP253.9 million:
Shareholder Returns 2023 2022
GBP'm GBP'm
---------------------------- ------ ------
Dividends paid 98.5 -
B-Share capital return - 451.5
Share buy-backs undertaken 155.4 63.7
---------------------------- ------ ------
Shareholder return in the
financial year 253.9 515.2
============================ ====== ======
Dividends paid during the financial year (from 1 May to 30
April) of GBP98.5 million comprised:
-- A GBP23.3 million dividend in September 2022 (21.25 pence per
share) which completed the return of GBP141.4 million that was due
in respect of the six months ended 30 September 2022; and
-- A GBP75.2 million dividend in March 2023 (69.44 pence per
share) which completed the return of GBP141.4 million that was due
in respect of the six months ended 31 March 2023.
Berkeley has committed to the next ongoing scheduled shareholder
return, which is GBP141.4 million in respect of the six months
ending 30 September 2023, against which GBP35.2 million has been
returned via share buy-backs to date. The total amount returned via
share buy-backs in the year is GBP155.4 million across 4.0 million
shares, at an average price of GBP38.25 per share.
The ongoing annual return of GBP283 million currently equates to
GBP2.63 per share compared to the initial GBP2.00 per share
initiated in 2016.
Summary of Performance
Berkeley has delivered pre-tax profits of GBP604.0 million for
the year:
Year ended 30 April 2023 2022 Change
GBP'm GBP'm GBP'm %
---------------------------- -------- -------- ------- -------
Revenue 2,550.2 2,348.0 +202.2 +8.6%
---------------------------- -------- -------- ------- -------
Gross profit 696.8 664.8 +32.0 +4.8%
Operating expenses (178.5) (156.9) -21.6 +13.8%
---------------------------- -------- -------- ------- -------
Operating profit 518.3 507.9 +10.4 +2.0%
Net finance costs (10.6) (12.5) +1.9
Share of joint ventures 96.3 56.1 +40.2
---------------------------- -------- -------- ------- -------
Profit before tax 604.0 551.5 +52.5 +9.5%
============================ ======== ======== ======= =======
Pre-tax return on equity 18.7% 17.5% +1.2%
Earnings per share - basic 426.8p 417.8p +9.0p +2.1%
Based upon current trading, Berkeley reiterates its guidance of
delivering pre-tax profits of at least GBP1.05 billion across its
next two financial years (FY24 and FY25) combined, which is likely
to be slightly weighted to the FY24, in line with market consensus.
Operating margins are expected to be at normal historical
levels.
Housing Market and Operating Environment
Sales
Overall, the value of Berkeley's underlying private sales
reservations for 2022/23 was around 15% lower than 2021/22 on a
like-for-like basis, assuming St William had been owned throughout
2021/22. Berkeley's sales were strong during the first part of the
financial year, slightly ahead of the levels secured throughout
2021/22. However, the market weakened markedly following the sharp
rise in interest rates in September 2022.
We immediately positioned the business for the prevailing market
conditions, adopting a more considered approach to new sales
launches and being more cautious on the pace of investment in our
ongoing sites. We have been disciplined on pricing, which has
remained above business plan levels as we protect operating margins
in what has been a highly inflationary cost environment for the
past two years.
More recently we have seen expectations for the pace of
reduction in inflation and interest rates slow with a consequential
rise to mortgage rates. The near-term market outlook is therefore
uncertain, much the same as it has been since September 2022. In
this type of market there is a lack of urgency and transactions
typically stem from owner occupiers with a current motivation to
move or investors with immediately available funds, with demand
therefore weighted to product which is closer to delivery, as
opposed to off-plan sales that do not complete for two to four
years. On this basis, at current sales rates, sales for 2023/24
will be around 20% lower than 2022/23.
Berkeley's response to the rapid change to market conditions is
facilitated by the healthy forward sales position which, at GBP2.14
billion at 30 April 2023 (2022: GBP2.17 billion), is anticipated to
moderate over the coming twelve months until sales rates return to
more normal levels.
Berkeley has continued to sell to both owner occupiers and
investors throughout the year, with investors benefitting from
strong rental growth. Cancellation rates have been in the normal
range, apart from in the couple of months after September 2022.
The long-term fundamentals of the housing sector and, more
importantly, Berkeley's core markets in London and the South East
remain compelling. Key to this are London's position as a leading
global city and the systemic under-supply in our markets. The
latest quarterly Department for Levelling Up, Housing and
Communities ("DLUHC") data show new starts in London for the
calendar year 2022 of just over 20,000 (including private, PRS and
affordable homes), which is broadly consistent with the long-run
average over the last ten years. This is substantially below both
the current London Plan target of 52,000 new homes per annum and
the Government's identified local housing need of 94,000 per
annum.
Land and planning
Berkeley has not added any new sites to its land holdings during
the year, while one long-term site contracted on a conditional
basis in Motspur Park has been added to the pipeline.
On the planning front, Berkeley has secured one new consent in
the year, at our site in Worthing, Sussex for around 190 homes and
has achieved a number of revisions to existing consents in the year
as we continue to progress our sites; most notably at The Green
Quarter (Ealing), White City Living, Hartland Village (Fleet),
Hareshill (Crookham), The Eight Gardens (Watford) and Lombard
Square (Plumstead).
The Levelling Up and Regeneration Bill is now in its final
stages, having evolved as it progressed through Parliament with a
number of significant amendments tabled in December 2022. These
amendments were tabled alongside a commitment from the Secretary of
State to launch a review into what further measures could help
prioritise the use of brownfield land for housing development and
we look forward to seeing these.
We support the core aims of the Government's reform agenda,
which are to improve the quality of new homes and places, better
engage communities in plans for their area, as well as a renewed
focus on brownfield housing delivery. These aims do need to be
balanced with the societal need for more homes and the wider
benefits they bring.
Like many, we are concerned that December's proposed changes to
the NPPF would weaken the presumption in favour of sustainable
development and the status of five-year land supply targets will
materially reduce the pace of delivery of new homes. Sadly, this
has already come to fruition with 55 Local Authorities pausing or
abandoning their local plan making process as a consequence of the
uncertainty within the planning process.
While the Government's "brownfield first" strategy is
unquestionably the right way to deliver the homes the country needs
where they are needed most, the planning system is yet to recognise
the challenges of this most sustainable form of home-building and
is not taking account of today's evolving regulatory
environment.
Construction
Build cost inflation has peaked and is beginning to moderate,
despite certain materials and trades remaining under pressure,
particularly where energy costs are a high component of the input
cost. There is improved competition in the supply chain, especially
on larger packages, and we continue to anticipate build cost
inflation falling to negligible levels by the end of the year, but
remain mindful of the cost of ongoing regulatory change.
We are seeing signs of some financial distress in the supply
chain as contractors continue to deal with the tail of impacts from
Brexit, the pandemic and the ongoing conflict in Ukraine, as well
as the current economic backdrop. We are actively working with and
supporting our established supply chain partners to ensure
sustainability of the supply chain and delivery on our development
sites.
The manufacture of Berkeley Modular's first modules for the
urban house at Kidbrooke Village is complete with all 96 modules
installed on-site. Noting the decision of other parties to exit the
industry due to the costs and efficiency impact of regulatory and
planning uncertainty on a stable production pipeline, Berkeley's
immediate focus is on evolving the product to remove cost, weight
and complexity whilst continuing to work with the numerous
statutory bodies to achieve the various regulatory approvals
required for efficient future delivery. We will not be putting the
factory into full production until this is achieved.
Fire Safety
Berkeley has been very supportive of Government in its
determination both to ensure buildings are fire-safe for people to
live in and mortgageable so they can move home and re-mortgage
their properties when they wish. Historically, Berkeley's focus in
this area has been on ensuring its buildings achieve the required
EWS 1 form certification for mortgage purposes and it has obtained
this on 99% of its relevant freehold buildings. Further, on 5(th)
April 2022, Berkeley signed the Pledge Letter prepared by
DLUHC.
On 13(th) March 2023 Berkeley entered into the Self-Remediation
Terms and Contract with DLUHC. This formalised the Pledge
commitments, requiring signatories to assume responsibility for
remediating relevant life critical fire-safety matters in buildings
they had constructed over the previous 30 years and to meet certain
historic funding commitments made by Government, even where these
funded works exceed those necessary to remediate life critical
fire-safety matters. It is Berkeley's preference to take full
responsibility for all its relevant buildings and to complete any
required works itself as this will speed up the overall process of
remediation.
Government has undertaken to ensure that all developers and
house-builders are treated equally and that all parties involved in
the development process are held to account and pay their fair
share. Berkeley believes this is fair and equitable, is fully
supportive of this approach and looks forward to seeing its
implementation. By their commitments under the Self-Remediation
Terms and Contract and 4% RPDT Berkeley believes that UK
house-builders have played a very full part in resolving this issue
and further levies on the industry would be unjust and constrain
delivery and innovation. We are therefore concerned that Government
is still considering plans to introduce an additional Building
Safety Levy with the target of raising an additional GBP3 billion
from the industry.
Looking forward, Berkeley is ensuring its procedures are
compliant with new legislation and is supportive of the Building
Safety Act which, together with the actions taken to date, should
restore trust and confidence to the housing market, enabling it to
operate efficiently, effectively and be fair for all.
Pace and impact of regulatory change
We remain concerned over the extent and pace with which new
regulation is being consulted upon and subsequent regulatory
changes, are being made. These cover important and complex areas,
such as planning (NPPF revisions and the Levelling Up and
Regeneration Bill), building regulations (including new Parts F, L,
O and S) and carbon reduction, which have multiple
inter-dependencies. While well-intended, all aspects must be fully
considered and balanced with the objective of increasing the supply
of quality new homes. The current position is creating uncertainty
and delays in the construction of much needed homes, delays for
people trying to move and increased barriers to entry for SME
developers.
Most recently, the consultation on the incorporation of second
staircases into buildings over 30 metres lacked detail on the
technical parameters of how this is to be achieved and is requiring
many tall buildings, yet to be put into construction, to be
redesigned. While the consultation document notes that there is no
evidence that existing tall buildings are unsafe, it also notes
that this redesign will affect the viability of certain buildings,
which will result in lower levels of affordable housing.
Outlook
Berkeley ends the year in a robust position with good visibility
of earnings for the next two years, underpinned by GBP2.1 billion
of cash due on secured private sales. We have unrivalled land
holdings in the most fantastic city in the world that suffers from
a systemic under-supply of new homes, providing resilience to the
sales market.
In these uncertain times, Berkeley has a very clear strategy:
realising its forward sales; matching supply to demand; adding
value to its existing land holdings and pipeline sites; protecting
operating margins; and focusing on cash generation ahead of the
Income Statement.
These results underline the essential role brownfield land has
to play in solving the housing crisis, tackling inequality and
re-energising our towns and cities to meet the challenges of
tomorrow. The delivery of new private and affordable homes on these
sites is a force for good, generating better health outcomes, new
jobs and skills, economic growth and social mobility which benefits
the whole of society. We are proud to be the country's leading
regeneration specialist and I want to thank our fantastic people
and partners for their commitment over the last 12 months.
At a time when our colleagues, customers and communities
continue to be faced with ongoing volatility in the domestic and
international economy and political landscape, the business is well
placed to continue serving all our stakeholders in the years to
come.
Rob Perrins
Chief Executive
TRADING AND FINANCIAL REVIEW
Trading performance
Revenue of GBP2,550.2 million in the year (2022: GBP2,348.0
million) arose primarily from the sale of new homes in London and
the South East. This included GBP2,508.3 million of residential
revenue (2022: GBP2,302.0 million) and GBP41.9 million of
commercial revenue (2022: GBP46.0 million).
4,043 new homes (2022: 3,760) were sold across London and the
South East at an average selling price of GBP608,000 (2022:
GBP603,000) reflecting the mix of properties sold in the year.
The gross margin percentage is 27.3% (2022: 28.3%), reflecting
the mix of developments on which homes were completed in the year.
Overheads of GBP178.5 million (2022: GBP156.9 million) include St
William overhead following the acquisition in March 2022. The
operating margin has decreased to 20.3% (2022: 21.6%), which is
within the historic range.
Berkeley's share of the results of joint ventures is a profit of
GBP96.3 million (2022: GBP56.1 million), with St Edward's profits
arising predominately from completions at Royal Warwick Square and
Millbank.
Berkeley has remained cash positive on a net basis throughout
the year. Interest earned from gross cash holdings slightly
outweighed the interest cost of borrowings, with the net finance
costs of GBP10.6 million for the year (2022: GBP12.5 million)
arising due to amortisation of borrowing fees and imputed interest
on land creditors.
The taxation charge for the year is GBP138.3 million (2022:
GBP69.1 million) at an effective tax rate of 22.9% (2022: 12.5%),
which incorporates the additional 4% RPDT and the increase to
corporation tax from 19% to 25% from 1 April 2023.
Pre-tax return on equity for the year is 18.7% (2022: 17.5%), in
line with Berkeley's objective of delivering a sustainable 15%
through the cycle.
Basic earnings per share has increased by 2.1% from 417.8 pence
to 426.8 pence, which takes account of the buy-back of 4.0 million
shares at a cost of GBP155.4 million under the Shareholder Returns
Programme.
Financial Position
The Group's net assets increased by GBP196.2 million during the
year to GBP3,332.3 million (2022: GBP3,136.1 million):
Summarised Balance Sheet
as at 30 April 2023 2022 Change
GBP'm GBP'm GBP'm
---------- ---------- -------
Non-current assets 394.9 374.6 +20.3
Inventories 5,302.1 5,134.0 +168.1
Debtors 92.3 150.2 -57.9
Creditors (2,867.4) (2,791.6) -75.8
------------------------------ ---------- ---------- -------
Capital employed 2,921.9 2,867.2 +54.7
Net cash 410.4 268.9 +141.5
------------------------------ ---------- ----------
Net assets 3,332.3 3,136.1 +196.2
============================== ========== ========== -------
Shares, net of treasury and
EBT 107.5m 111.3m -3.8m
Net asset value per share 3,101p 2,818p +283p
Inventory
Inventories of GBP5,302.1 million include GBP927.1 million of
land not under development (2022: GBP738.1 million), GBP4,249.2
million of work in progress (2022: GBP4,255.1 million) and GBP125.8
million of completed stock (2022: GBP140.8 million).
The increase in land not under development in the year arises
primarily from the completion during May and June of the
acquisition of a further 11 sites into St William as part of the
transaction in March 2022, which are represented by land creditors.
There is one further St William site which will complete in 2025.
No sites have been moved into production during the year.
Creditors
Total creditors of GBP2,867.4 million include GBP921.3 million
of on-account receipts from customers (2022: GBP931.4 million) and
land creditors of GBP900.7 million (2022: GBP800.7 million), with
the latter's increase represented by the completion of the
acquisition of the St William sites noted above. Of the total
GBP900.7 million land creditor balance, GBP37.3 million is
short-term and GBP863.4 million is spread over the following nine
years.
Creditors also include provisions of GBP193.6 million (30 April
2022: GBP161.0 million) which represents post-completion
development obligations, including those related to building
fire-safety matters, and other provisions.
Net cash
The Group ended the year with net cash of GBP410.4 million (30
April 2022: GBP268.9 million), an increase of GBP141.5 million
during the year (2022: net decrease of GBP859.3 million):
Abridged Cash Flow for year
ended 30 April 2023 2022
GBP'm GBP'm
-------- --------
Profit before taxation 604.0 551.5
Taxation paid (133.7) (142.6)
Net investment in working
capital (50.1) (132.6)
Net investment in joint ventures (33.0) (82.8)
Other movements 8.2 3.0
Shareholder returns (253.9) (515.2)
Acquisition of St William - (540.6)
----------------------------------- -------- --------
Increase/ (decrease) in net
cash 141.5 (859.3)
Opening net cash 268.9 1,128.2
Closing net cash 410.4 268.9
=================================== ======== ========
The net cash of GBP410.4 million consists of gross cash holdings
of GBP1,070.4 million, net of GBP660.0 million of long-term
borrowings.
Net assets and NAVPS
Net assets increased over the year by GBP196.2 million, or 6.3%
to GBP3,332.3 million (2022: GBP3,136.1 million) primarily due to
the profit after tax for the year of GBP465.7 million outweighing
the shareholder returns of GBP253.9 million (comprising GBP155.4
million share buy backs and GBP98.5 million dividends) and other
movements in reserves of GBP15.6 million.
The shares in issue, net of treasury and EBT shares, closed at
107.5 million compared to 111.3 million at the start of the year.
The net reduction of 3.8 million shares comprises two
movements:
-- The 4.0 million share buy-backs undertaken during the year
for GBP155.4 million (GBP38.25 per share);
-- The issue of 0.2 million shares under the 2011 LTIP.
Consequently, the net asset value per share is 3,101 pence, up
10% from the 2,818 pence at 30 April 2022.
Funding
The Group's borrowing capacity of GBP1,200 million is unchanged
over the course of the year and comprises:
-- GBP400 million unsecured 10-year Green Bonds which mature in
August 2031 at a fixed coupon of 2.5% per annum; and
-- GBP800 million bank facility, including a GBP260 million
Green Term loan and a GBP540 million undrawn revolving credit
facility ("RCF").
In February 2023, Berkeley exercised the first of two one-year
extensions on its GBP800 million bank facility, which extended the
term thereof to February 2028, with one remaining extension option
available.
Berkeley has allocated the proceeds of the Green Bonds and Green
Term Loan to its ongoing development activities in accordance with
its Green Financing Framework (available on its website).
With total borrowings of GBP660 million, the Group's gross cash
holdings of around GBP1.1 billion are placed on deposit with its
relationship banks.
Joint Ventures
Included within non-current assets are investments in joint
ventures accounted for using the equity method which are at
GBP223.4 million at 30 April 2023 (2022: GBP190.4 million). The net
GBP33.0 million increase in the year arises from Berkeley's 50%
share of three movements:
-- Profits earned in joint ventures of GBP96.3 million;
-- Dividend distribution from St Edward of GBP74.9 million; and
-- Cash contributions (loans) to site specific joint ventures of GBP11.6 million.
In St Edward, 594 homes were completed in the year at an average
selling price of GBP885,000 (2022: 303 homes at GBP898,000). The
completions occurred at Royal Warwick Square and Millbank in
London, Hartland Village in Fleet, Green Park Village in Reading
and Highcroft in Wallingford.
In total, 2,435 plots (30 April 2022: 5,317 plots) in Berkeley's
land holdings relate to five St Edward developments, two in London
(Westminster and Kensington) and three outside the capital
(Reading, Fleet and Wallingford ).
The majority of homes on the two sites in London are expected to
complete in the year ending 30 April 2024, following which the
three sites outside London remain under development. During the
year, two sites without planning in Brentford and Guildford, both
contracted on a conditional basis, have been transferred to the
long-term pipeline as these are subject to a call-in and appeal
process, respectively.
Land Holdings and Pipeline
Berkeley's land holdings comprise 58,045 plots at 30 April 2023
(2022: 66,163 plots), including the St Edward joint venture. The
three sites (3,165 homes) that were contracted on a subject to
planning basis at 30 April 2022 have been transferred to the
pipeline during the year to reflect the long-term nature of these
sites, particularly in the current planning environment.
Consequently, all of the current land holdings of 58,045 plots
across 73 sites that are owned and included on the Balance Sheet of
the Group or its joint venture. Berkeley started the year with 86
owned sites (62,998 plots). During the year no new sites have been
acquired on an unconditional basis, while nine sites have finished
and four owned sites have been transferred to the long-term
pipeline.
The pipeline comprises approximately 14,000 plots across 14
sites at 30 April 2023 (2022: 8,000 plots on 6 sites). The increase
during the year comprises the transfer from the land holdings of
the four owned and three conditionally contracted sites, as noted
above, as well as the addition of a long-term site in Motspur Park
which has been conditionally contracted in the year.
The plots in the land holdings at 30 April 2023 have an
estimated future gross profit of GBP7.63 billion (30 April 2022:
GBP8.26 billion), which includes the Group's 50% share of the
anticipated profit on St Edward's joint venture developments. This
is a net reduction in gross profit of GBP0.63 billion over the
course of the year. With over GBP0.8 billion of gross profit taken
through the Income Statement (including St Edward share), the value
added through new planning consents and other market movements has
more than offset the impact of the seven sites which have
transferred to the pipeline.
The estimated future gross margin is 26.2% (2022: 26.5%), a
resilient position in the context of the operating and
macro-economic environment.
The status of the 73 owned sites is:
-- 51 sites (plots: 42,748) have an implementable planning consent and are in production;
-- 13 sites (plots: 9,888) have a consent but are not in
production, in some cases as they are not yet implementable, due to
practical technical constraints and challenges surrounding, for
example, vacant possession, CPO requirements or utilities
provision; and
-- 9 sites (plots: 5,409) do not have a planning consent.
The estimated future gross margin represents management's
risk-adjusted assessment of the potential gross profit for each
site, taking account of a wide range of factors, including: current
sales and input prices; the political and economic backdrop; the
planning regime; and other market forces; all of which could have a
significant effect on the eventual outcome.
Our Vision 2030: Transforming Tomorrow
Our Vision 2030 is Berkeley's ambitious long-term strategy,
which sets 10 strategic priorities for the business over the
current decade. It is designed to drive our performance, spur
innovation and reinforce our position as the country's most
sustainable developer through maximising our positive impacts on
society, the economy and the natural world.
External recognition of our strategy includes:
-- A- Leadership rating for Climate Action and Transparency from CDP;
-- Prime status from the ISS ESG Corporate Rating which is
reserved for "industry leaders who fulfil demanding performance
expectations";
-- Low risk rating with Sustainalytics;
-- AAA MSCI rating held for more than five years; and
-- Continual FTSE4Good Index listing since 2003.
In May 2023 we were delighted to win Management Today's award
for 'Long-Term Business Success' for demonstrating long-term growth
not just in financial terms, but culture, values and product. The
cross-sector judging panel said Berkeley was a "worthy winner",
praising the emphasis and commitment to measuring and improving
customer satisfaction, as well as a strong commitment to ESG.
Delivering for our customers
Our independently verified Net Promoter Score (NPS) of +79.2
significantly outperforms the industry average of 42 (HBF, March
2023). 97.5% of our customers said they would 'recommend us to a
friend' in 2023. We retain the Investor in Customers Gold rating
and this year won In-House Research's Outstanding Achievement
Award.
From exceptional service to the quality of our homes, we aim to
delight our customers in every last detail. This year, our
customers reported that 60% of our homes had zero defects, compared
to only 5% of homes on average across the industry (HBF, March
2023). On average, our customers report fewer than three defects
which reflects our detailed handover checks, underpinned by our
build quality assurance arrangements, with robust training and
audit programmes in place.
Driving ambitious climate action
Tackling climate change has been a priority for Berkeley since
2007 and we are proud to be a 1.5 degree aligned business working
towards validated science-based targets ("SBTs") for reducing our
emissions.
We are pleased to report that we have achieved our absolute
scopes 1 and 2 (market-based) emissions target well ahead of the
2030 target, exceeding our 50% reduction target with a 76% decrease
since the baseline year of 2019. This reduction has largely been
driven by a transition to the use of biodiesel HVO (Hydrotreated
Vegetable Oil) on our construction sites, with 95% of fuel directly
purchased for use in the year being this low carbon
alternative.
We have purchased 100% renewable electricity in the UK since May
2017, backed by Renewable Energy Guarantees of Origin ("REGOs"). We
voluntarily offset the remainder of our scopes 1 and 2 emissions
through certified schemes. This year our offset payments have
supported the new RetrofitCredits programme which utilises funds to
decarbonise existing UK affordable housing through the installation
of energy efficient measures such as improved insulation.
We recognise that our most significant impacts, around 99%,
occur across our value chain (scope 3), including the activities of
our supply chain ('embodied carbon') and the energy used by our
customers in homes once sold ('low carbon homes'). We have
continued to improve our understanding and the data accuracy of
these impacts, including undertaking detailed life-cycle
assessments of individual buildings to identify materials and
processes which drive embodied carbon. We have used this data to
create internal guidance on how to design-out these emissions from
future developments and set quantitative reduction targets to drive
progress. This pioneering approach to tackling embodied carbon was
recognised with the Carbon Reduction Award at the National
Sustainability Awards in October 2022.
Berkeley continues to implement the requirements of the 2021
Building Regulations (effective June 2022 with a 12-month
transitional arrangements) through a fabric-first design approach
in combination with the most appropriate technology and
infrastructure solution for each site. We continue to engage with
industry on this important topic, particularly through the UKGBC's
Advancing Net Zero Programme and the Future Homes Hub.
Supporting nature's recovery
As the first homebuilder to commit to delivering a measurable
biodiversity net gain on every new site back in 2017 we were
delighted to co-host the industry-wide Biodiversity Conference in
March 2023 with Natural England and the Local Government
Association. This aimed to prepare developers and local authority
professionals for the forthcoming mandatory requirement for
biodiversity net gain from autumn 2023 and was attended by more
than 500 delegates from across the public, private and voluntary
sectors.
Since we set our commitment in May 2017 all new planning
applications have committed to a biodiversity net gain, with each
site targeting a gain in excess of 10% since May 2021. Overall, 54
sites have committed to an on-site biodiversity net gain, which
together are set to deliver more than 550 acres of new or
measurably improved natural habitats. These natural landscapes are
all being delivered on our development sites rather than off-site,
helping to improve the areas in which we work and to connect our
customers and future residents with nature at their doorstep.
We continue to evolve our approach to biodiversity net gain to
include an even more challenging and valuable combination of
measurable environmental benefits. Our approach to 'environmental
net gain' will focus on four areas where the pressures on the
environment are greatest and where we can have most impact:
climate, pollution, ecology and water. This year, our Royal
Exchange development in Kingston upon Thames is believed to be the
first of its kind to achieve water neutrality in a trial completed
with Thames Water through retrofitting and upgrading local
businesses, homes and schools.
Developing skills for the future and a working environment where
people can thrive
During the year Berkeley released a new competency framework for
our people to ensure that we are training and upskilling our
workforce to meet evolving needs. Our in-house Berkeley Academy,
which is an Approved Training Organisation by the Construction
Industry Training Board (CITB), has delivered 4,400 trainer hours
in the year to upskill our employees.
This year we have developed a new People Framework that fosters
a positive working environment defined by respect, support,
wellbeing, safety and inclusivity. This is supported by our
approach to Equity, Diversity and Inclusion (EDI), which set out a
number of action areas including strong leadership, awareness,
allyship and celebration. Our efforts are particularly focused on
women, ethnicity, disability and LGBTQ+ and work alongside our
commitments to social mobility. We are pleased to have expanded our
partnerships to support our progress in this area with pledges to
the Race at Work Charter and Disability Confident employer scheme.
This year 31% of managers are female, together with 37% of our
employees.
Berkeley is pleased to have been awarded Gold member status of
The 5% Club, and this year have exceeded our pledge with 10% of our
workforce consisting of 'earn and learn' roles including
apprentices, graduates and sponsored students. On average, we have
had 160 direct apprentices and 70 graduates throughout the year and
are now listed 16(th) in TheJobCrowd's Top 50 Graduate Employers in
the country.
Championing safer homes and operations
Our Annual Injury Incidence Rate for the year is 79 per 100,000
people, compared to an industry average of 326 (HSE, October 2022).
We continue to target zero harm on every site, as we champion
health and safety for every employee and contractor working with
us. We were proud to have once again been recognised by RoSPA in
2023, winning the Construction Housebuilding and Property
Development Industry Sector award.
We aim to extend our influence beyond our direct operations and
to make new homes safer places to live, especially for young
children and the elderly. Following the co-writing of RoSPA's Safer
by Design framework, we have now rolled this out as standard for
all new sites and achieved Gold status for 17 developments.
The Berkeley Foundation ("Foundation")
The Foundation continues to be deeply embedded at Berkeley and
during the year launched a new Volunteering Hub, encouraging more
employees to volunteer their time. Our employees organised 26 major
fundraising events and donated through payroll giving, with more
than half of our workforce choosing to get involved in the
Foundation's work over the last 12 months. We have offered work
placements and job opportunities, held careers days to help young
people about to start their journey into employment, and shared our
expertise.
Over the year, the Foundation contributed GBP3.9 million to its
charity partnerships and programmes through grants and staff
fundraising and Give as You Earn. Highlights include the commitment
of a further GBP300,000 for the second year of the Foundation's
three-year GBP900,000 Resilience Fund, aiming to help small to
medium sized charities and Community Interest Companies to develop
their organisational resilience - whether through improved
governance, strengthened people power, better financial planning or
stronger systems and strategies. 10 new organisations will receive
these funds over two years, alongside a programme of learning and
development support.
The Foundation also launched a number of new partnerships,
including a new three-year partnership with Groundwork London,
supporting young people to kick-start their careers in the green
economy through a youth leadership programme.
- End -
Principal risks and uncertainties
The Board is conscious of the ongoing elevated volatility in the
operating environment and the Group's business model and risk
management approach ensures we are agile and responsive to evolving
market conditions. As such, our risk appetite remains dynamic and
is respectful of the cyclical nature or our industry and the risks
and opportunities this presents.
Financial risk
The financial risks to which Berkeley is exposed include:
-- Liquidity risk - the risk that the funding required for the
Group to pursue its activities may not be available.
-- Market credit risk - the risk that counterparties (mainly
customers) will default on their contractual obligations, resulting
in a loss to the Group. The Group's exposure to credit risk is
comprised of cash and cash equivalents and trade and other
receivables.
-- Market interest rate risk - the risk that Group financing
activities are affected by fluctuations in market interest
rates.
-- Other financial risks - Berkeley contracts all of its sales
and the vast majority of its purchases in sterling, and so has no
significant exposure to currency risk, but does recognise that its
credit risk includes receivables from customers in a range of
jurisdictions who are themselves exposed to currency risk in
contracting in sterling.
Management of financial risks
Berkeley adopts a prudent approach to managing these financial
risks.
-- Treasury policy and central overview - The Board approves
treasury policy and senior management control day-to-day
operations. Relationships with banks and cash management are
co-ordinated centrally as a Group function. The treasury policy is
intended to maintain an appropriate capital structure to manage the
financial risks identified and provide the right platform for the
business to manage its operating risks.
-- Low gearing - the Group is currently financing its operations
through shareholder equity, supported by GBP410 million of net cash
on the Balance Sheet and debt facilities. This in turn has
mitigated its current exposure to interest rate risk.
-- Headroom provided by bank facilities - the Group now has
GBP800 million of committed credit facilities maturing in February
2028, with an optional extension to February 2029. This comprises a
term loan of GBP260 million and the revolving credit facility of
GBP540 million. In addition, the Group has listed debt in the form
of Green Bonds to the value of GBP400 million maturing in August
2031. Berkeley has a strong working partnership with the six banks
that provide the facilities and this is key to Berkeley's approach
to mitigating liquidity risk.
-- Forward sales - Berkeley's approach to forward selling new
homes to customers provides good visibility over future cash flows,
as expressed in cash due on forward sales which stands at GBP2.14
billion at 30 April 2023. It also helps mitigate market credit risk
by virtue of customers' deposits held from the point of
unconditional exchange of contracts with customers.
-- Land holdings - by investing in land at the right point in
the cycle, holding a clear development pipeline in our land
holdings and continually optimising our existing holdings, we are
not under pressure to buy new land when it would be wrong for the
long-term returns for the business.
-- Detailed appraisal of spending commitments - a culture which
prioritises an understanding of the impact of all decisions on the
Group's spending commitments and hence its Balance Sheet, alongside
weekly and monthly reviews of cash flow forecasts at operating
company, divisional and Group levels, recognises that cash flow
management is central to the continued success of Berkeley.
Risk Description and Impact Approach to Mitigating Risk
Economic Outlook
As a property developer, Berkeley's Recognition that Berkeley operates
business is sensitive to wider in a cyclical market is central to
economic factors such as changes our strategy and maintaining a strong
in interest rates, employment financial position is fundamental to
levels and general consumer our business model and protects us
confidence. against adverse changes in economic
conditions.
Some customers are also sensitive
to changes in the sterling exchange Land investment in all market conditions
rate in terms of their buying is carefully targeted and underpinned
decisions or ability to meet by demand fundamentals and a solid
their obligations under contracts. viability case.
Changes to economic conditions Levels of committed expenditure are
in the UK, Europe and worldwide carefully monitored against forward
may lead to a reduction in demand sales secured, cash levels and headroom
for housing which could impact against our available bank facilities,
on the Group's ability to deliver with the objective of keeping financial
its corporate strategy. risk low to mitigate the operating
risks of delivery in uncertain markets.
Production programmes are continually
assessed, depending upon market conditions.
The business is committed to operating
at an optimal size, with a strong Balance
Sheet, through autonomous businesses
to maintain the flexibility to react
swiftly, when necessary, to changes
in market conditions.
Political Outlook
Significant political events Whilst we cannot directly influence
in the UK and overseas, may political events, the risks are taken
impact Berkeley's business through, into account when setting our business
for example, supply chain disruption strategy and operating model. In addition,
or the reluctance of customers we actively engage in the debate on
to make purchase decisions due policy decisions.
to political uncertainty and,
subsequently, policies and regulation
may be introduced that directly
impact our business model.
Regulation
Berkeley is primarily focused geographically
Adverse changes to Government on London, Birmingham and the South
policy on areas such as taxation, East of England, which limits our risk
design requirements and the when understanding and determining
environment could restrict the the impact of new regulation across
ability of the Group to deliver multiple locations and jurisdictions.
its strategy.
The effects of changes to Government
Failure to comply with laws policies at all levels are closely
and regulations could expose monitored by operating businesses and
the Group to penalties and reputational the Board, and representations made
damage. to policy-setters where appropriate.
Berkeley's experienced teams are well
placed to interpret and implement new
regulations at the appropriate time
through direct lines of communication
across the Group, with support from
internal and external legal advisors.
Land Availability
Understanding the markets in which
An inability to source suitable we operate is central to Berkeley's
land to maintain the Group's strategy and, consequently, land acquisition
land holdings at appropriate is primarily focused on Berkeley's
margins in a highly competitive core markets of London, Birmingham
market could impact on the Group's and the South East of England, markets
ability to deliver its corporate in which it believes the demand fundamentals
strategy. are strong.
Berkeley has experienced land teams
with strong market knowledge in their
areas of focus, which gives us the
confidence to buy land without an implementable
planning consent and, with an understanding
of local stakeholders' needs, positions
Berkeley with the best chance of securing
a viable planning consent.
Berkeley's land holdings mean that
it has the land in place for its immediate
business plan requirements and can
therefore always acquire land at the
right time in the cycle.
Planning Process
The Group's strategic geographical
Delays or refusals in obtaining focus and expertise place it in the
commercially viable planning best position to conceive and deliver
permissions could result in the right consents for the land acquired.
the Group being unable to develop
its land holdings. Full detailed planning and risk assessments
are performed and monitored for each
This could have a direct impact site without planning permission, both
on the Group's ability to deliver before and after purchase. The planning
its product and on its profitability. status of all sites is reviewed at
both monthly divisional Board meetings
and Main Board meetings.
The Group works closely with local
communities in respect of planning
proposals and strong relationships
are maintained with local authorities
and planning officers.
Retaining People
An inability to attract, develop, Two commitments within Our Vision 2030
motivate and retain talented are designed to help recruit and retain
employees could have an impact a high calibre work force.
on the Group's ability to deliver
its strategic priorities. The first is 'Employee Experience'
which places a specific focus on areas
Failure to consider the retention including employee experience and diversity
and succession of key management and inclusion, and the second focuses
could result in a loss of knowledge on 'Future Skills' looking at how we
and competitive advantage. can create tangible long-term change
within the industry.
Succession planning is regularly reviewed
at both divisional and Main Board level.
Close relationships and dialogue are
maintained with key personnel.
Remuneration packages are constantly
benchmarked against the industry to
ensure they remain competitive.
Securing Sales
An inability to match supply The Group has experienced sales teams
to demand in terms of product, both in the UK and within our overseas
location and price could result sales offices, supplemented by market-leading
in missed sales targets and/or agents.
high levels of completed stock
which in turn could impact on Detailed market demand assessments
the Group's ability to deliver of each site are undertaken before
its corporate strategy. acquisition and regularly during delivery
of each scheme to ensure that supply
is matched to demand in each location.
Design, product type and product quality
are all assessed on a site-by-site
basis to ensure that they meet the
target market and customer aspirations
in that location.
The Group's ability to forward sell
reduces the risk of the development
cycle where possible, thereby justifying
and underpinning the financial investment
in each of the Group's sites. Completed
stock levels are reviewed regularly.
Liquidity
Reduced availability of the The Board approves treasury policy
external financing required and senior management control day-to-day
by the Group to pursue its activities operations. Relationships with banks
and meet its liabilities. and cash management are co -- ordinated
centrally as a Group function.
Failure to manage working capital
may constrain the growth of The treasury policy is intended to
the business and ability to maintain an appropriate capital structure
execute the business plan. to manage the Group's financial risks
and provide the right platform for
the business to manage its operating
risks.
Cash flow management is central to
the continued success of Berkeley.
There is a culture which prioritises
an understanding of the impact of all
decisions on the Group's spending commitments
and hence its Balance Sheet, alongside
weekly and monthly reviews of cash
flow forecasts at operating company,
divisional and Group levels.
Mortgages
An inability of customers to Berkeley has a broad product mix and
secure sufficient mortgage finance customer base which reduces the reliance
now or in the future could have on mortgage availability across its
a direct impact on the Group's portfolio.
transaction levels.
Deposits are taken on all sales to
mitigate the financial impact on the
Group in the event that sales do not
complete due to a lack of mortgage
availability.
Climate Change
The effects of climate change Climate action is a strategic priority
could impact Berkeley in different within our business strategy, Our Vision
ways. Climate Scenario Analysis 2030, and we have set ambitious SBTs
has been undertaken to evaluate to mitigate our impact, alongside continuing
climate related risks and opportunities. to incorporate adaptation measures
within our developments to make them
Identified risks and opportunities more resilient to the expected future
relating to the transition to impacts of climate change.
a lower carbon economy include:
carbon pricing and emissions We have energy efficiency standards
offsets; evolving planning and in place that cover the activities
design requirements; skills of our sites, offices and sales suites
shortage impacting ability to and encourage the identification and
install low carbon technology; investment in measures to take action
technology evolution; increasing under our scopes 1 and 2 GHG emissions
raw material cost; and demand reduction target. In addition, our
supply imbalance. scope 3 SBT commits us to working with
our supply chain to reduce the embodied
Risks relating to the physical carbon within the materials and services
impacts of climate change include: we procure, and building more efficient
heat stress, drought stress, homes.
subsidence, windstorm and flood.
To build resilience into our homes
and developments, we consider climate
change risks and incorporate measures
to reduce these through minimum Sustainability
Standards. These cover areas such as
energy efficiency, water efficiency,
rainwater harvesting, sustainable drainage
systems (SuDS) and leaving space for
nature.
Sustainability
Berkeley is aware of the environmental The strategic direction for sustainability
and social impact of the homes is set at a Group level within a dedicated
and places that it builds, both Sustainability Strategy. Three areas
throughout the development process of the Sustainability Strategy have
and during occupation and use been identified as being of material
by customers and the wider community. importance and integrated within our
business strategy, Our Vision 2030;
Failure to address sustainability communities, climate action and nature.
issues could affect the Group's We have specific commitments to enhance
ability to acquire land, gain environmental and social value in the
planning permission, manage operation of our business and the delivery
sites effectively and respond of our homes and places.
to increasing customer demands
for sustainable homes and communities, Dedicated sustainability teams are
with access to green spaces in place at Group's Head Office and
and nature. within each division of the business,
providing advice, driving improvement
and monitoring performance.
Sustainability Standards set out the
minimum Berkeley requirements for new
developments and the operation of our
construction sites, divisional offices
and sales suites. These are supported
by more detailed procedures within
our Sustainability Management System,
including a requirement for environmental
risk registers for each site and the
completion of at least quarterly site
sustainability assessments by our internal
sustainability professionals.
Health and Safety
Berkeley's operations have a
direct impact on the health Berkeley considers this to be an area
and safety of its people, contractors of critical importance. Berkeley's
and members of the public. health and safety strategy is set by
the Board. Dedicated health and safety
A lack of adequate procedures teams are in place in each division
and systems to reduce the dangers and at Head Office.
inherent in the construction
process increases the risk of Procedures, training and reporting
accidents or site related catastrophes, are all regularly reviewed to ensure
including fire and flood, which that high standards are maintained
could result in serious injury and comprehensive accident investigation
or loss of life leading to reputational procedures are in place. Insurance
damage, financial penalties is held to cover the risks inherent
and disruption to operations. in large scale construction projects.
The Group continues to implement initiatives
to improve health and safety standards
on site.
Product Quality and Customers
Berkeley has a reputation for Detailed reviews are undertaken of
high standards of quality in the product on each scheme both during
its product. the acquisition of the site and throughout
the build process to ensure that product
If the Group fails to deliver quality is maintained.
against these standards and
its wider development obligations, The Group has detailed quality assurance
it could be exposed to reputational procedures in place surrounding both
damage, as well as reduced sales design and build to ensure the adequacy
and increased cost. of build at each key stage of construction.
Customer satisfaction surveys are undertaken
on the handover of our homes, and feedback
incorporated into the specification
and design of subsequent schemes.
Build Cost and Programme
Build costs are affected by A procurement and programming strategy
the availability of skilled for each development is agreed by the
labour and the price and availability divisional Board before site acquisition,
of materials, suppliers and whilst a further assessment of procurement
contractors. and programming is undertaken and agreed
by the divisional Board prior to the
Declines in the availability commencement of construction.
of a skilled workforce, and
changes to these prices could Build cost reconciliations and build
impact on our build programmes programme dates are presented and reviewed
and the profitability of our in detail at divisional cost review
schemes. meetings each month.
Our Vision 2030 strategy includes ongoing
commitments to training and support
across both our employees and our indirect
workforce.
Cyber and Data Risk
The Group acknowledges that Berkeley's systems and control procedures
it places significant reliance are designed to ensure that confidentiality,
upon the availability, accuracy availability and integrity are not
and confidentiality of all of compromised.
its information systems and
the data contained therein. Our Information Security Programme
focuses primarily on the detection
The Group could suffer significant and prevention of security incidents
financial and reputational damage and potential data breaches.
because of the corruption, loss
or theft of data, whether inadvertent An IT Security Committee meets monthly
or via a deliberate, targeted to address all cyber security matters.
cyber attack.
The Group operates multiple physical
data centres supported by cloud based
services thereby reducing centralised
risk exposure. An IT disaster recovery
plan is regularly assessed.
The Group has cyber insurance in place
to reduce any potential financial impact.
Condensed Consolidated Income Statement
For the year ended 30 April 2023 2022
Notes GBPm GBPm
------------------------------------- ------ ---------- ----------
Revenue 2,550.2 2,348.0
Cost of sales (1,853.4) (1,683.2)
------------------------------------- ------ ---------- ----------
Gross profit 696.8 664.8
Net operating expenses (178.5) (156.9)
------------------------------------- ------ ---------- ----------
Operating profit 518.3 507.9
Finance income 3 23.1 2.5
Finance costs 3 (33.7) (15.0)
Share of results of joint ventures
using the equity method 96.3 56.1
---------- ----------
Profit before taxation for the year 604.0 551.5
Income tax expense 4 (138.3) (69.1)
------------------------------------- ------ ---------- ----------
Profit after taxation for the year 465.7 482.4
------------------------------------- ------ ---------- ----------
Earnings per share (pence):
Basic 5 426.8 417.8
Diluted 5 422.4 411.4
------------------------------------- ------ ---------- ----------
Condensed Consolidated Statement of Comprehensive Income
2023 2022
GBPm GBPm
------------------------------------------- ------ ------
Profit after taxation for the year 465.7 482.4
-------------------------------------------- ------ ------
Other comprehensive expense
Items that will not be reclassified
to profit or loss
Actuarial loss recognised in the pension
scheme (1.3) (1.6)
Total items that will not be reclassified
to profit or loss (1.3) (1.6)
-------------------------------------------- ------ ------
Other comprehensive expense for the
year (1.3) (1.6)
-------------------------------------------- ------ ------
Total comprehensive income for the
year 464.4 480.8
-------------------------------------------- ------ ------
Condensed Consolidated Statement of Financial Position
As at 30 April 2023 2022
Notes GBPm GBPm
-------------------------------------- ------ ---------- ----------
Assets
Non-current assets
Intangible assets 17.2 17.2
Property, plant and equipment 34.6 40.5
Right-of-use assets 5.2 5.8
Investments accounted for using the
equity method 223.4 190.4
Deferred tax assets 114.5 120.7
394.9 374.6
-------------------------------------- ------ ---------- ----------
Current assets
Inventories 6 5,302.1 5,134.0
Trade and other receivables 92.3 145.7
Current tax assets - 4.5
Cash and cash equivalents 7 1,070.4 928.9
-------------------------------------- ------ ---------- ----------
6,464.8 6,213.1
-------------------------------------- ------ ---------- ----------
Total assets 6,859.7 6,587.7
-------------------------------------- ------ ---------- ----------
Liabilities
Non-current liabilities
Borrowings 7 (660.0) (660.0)
Trade and other payables (863.4) (719.8)
Lease liability (2.9) (3.8)
Provisions for other liabilities and
charges (115.1) (98.5)
-------------------------------------- ------ ---------- ----------
(1,641.4) (1,482.1)
-------------------------------------- ------ ---------- ----------
Current liabilities
Trade and other payables (1,801.6) (1,904.9)
Current tax liabilities (3.7) -
Lease liability (2.2) (2.1)
Provisions for other liabilities and
charges (78.5) (62.5)
-------------------------------------- ------ ---------- ----------
(1,886.0) (1,969.5)
Total liabilities (3,527.4) (3,451.6)
-------------------------------------- ------ ---------- ----------
Total net assets 3,332.3 3,136.1
-------------------------------------- ------ ---------- ----------
Equity
Shareholders' equity
Share capital 6.3 6.5
Share premium 49.8 49.8
Capital redemption reserve 25.2 25.0
Other reserve (961.3) (961.3)
Retained earnings 4,212.3 4,016.1
-------------------------------------- ------ ---------- ----------
Total equity 3,332.3 3,136.1
-------------------------------------- ------ ---------- ----------
Condensed Consolidated Statement of Changes in Equity
Capital
Share Share redemption Other Retained Total
capital premium reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------ -------- -------- ----------- -------- --------- --------
At 1 May 2022 6.5 49.8 25.0 (961.3) 4,016.1 3,136.1
Profit after taxation for the year - - - - 465.7 465.7
Other comprehensive expense for the year - - - - (1.3) (1.3)
Purchase of own shares (0.2) - 0.2 - (155.4) (155.4)
Transactions with shareholders:
- Charge in respect of employee share schemes - - - - (4.5) (4.5)
- Deferred tax in respect of employee share schemes - - - - (9.8) (9.8)
- Dividends to equity holders of the Company - - - - (98.5) (98.5)
------------------------------------------------------ -------- -------- ----------- -------- --------- --------
At 30 April 2023 6.3 49.8 25.2 (961.3) 4,212.3 3,332.3
------------------------------------------------------ -------- -------- ----------- -------- --------- --------
At 1 May 2021 6.6 49.8 24.9 (961.3) 4,055.4 3,175.4
Profit after taxation for the year - - - - 482.4 482.4
Other comprehensive expense for the year - - - - (1.6) (1.6)
Purchase of own shares (0.1) - 0.1 - (63.7) (63.7)
Transactions with shareholders:
- Charge in respect of employee share schemes - - - - (8.7) (8.7)
- Deferred tax in respect of employee share schemes - - - - 3.8 3.8
- Capital Return to equity holders of the Company - - - - (451.5) (451.5)
------------------------------------------------------ -------- -------- ----------- -------- --------- --------
At 30 April 2022 6.5 49.8 25.0 (961.3) 4,016.1 3,136.1
------------------------------------------------------ -------- -------- ----------- -------- --------- --------
Condensed Consolidated Cash Flow Statement
For the year ended 30 April 2023 2022
Notes GBPm GBPm
------------------------------------------- ------ -------- --------
Cash flows from operating activities
Cash generated from operations 7 472.5 372.4
Consideration paid for 50% share of
St William assets - (355.6)
Interest received 18.2 1.9
Interest paid (21.4) (5.6)
Income tax paid (133.7) (142.6)
------------------------------------------- ------ -------- --------
Net cash flow from operating activities 335.6 (129.5)
------------------------------------------- ------ -------- --------
Cash flows from investing activities
Purchase of property, plant and equipment (2.0) (1.3)
Proceeds on disposal of property, plant
and equipment 0.8 0.3
Dividends from joint ventures 74.9 -
Movements in loans with joint ventures (11.6) (26.7)
Net cash flow from investing activities 62.1 (27.7)
------------------------------------------- ------ -------- --------
Cash flows from financing activities
Lease capital repayments (2.3) (1.9)
Purchase of own shares (155.4) (63.7)
Dividends / B-Share payments to Company's
shareholders (98.5) (451.5)
Drawdown of bank borrowings - 260.0
Increase in listed debt borrowings - 400.0
Repayment of bank borrowings - (300.0)
Repayment of St William bank borrowings - (185.0)
Net cash flow from financing activities (256.2) (342.1)
------------------------------------------- ------ -------- --------
Net increase/(decrease) in cash and
cash equivalents 141.5 (499.3)
Cash and cash equivalents at the start
of the financial year 928.9 1,428.2
------------------------------------------- ------ -------- --------
Cash and cash equivalents at the end
of the financial year 1,070.4 928.9
------------------------------------------- ------ -------- --------
1 General information
The Berkeley Group Holdings plc (the "Company") is a public
limited company incorporated and domiciled in the United Kingdom.
The address of its registered office is Berkeley House, 19
Portsmouth Road, Cobham, Surrey, KT11 1JG. The Company and its
subsidiaries (together the "Group") are engaged in residential led,
mixed use property development.
2 Basis of preparation
2.1 Introduction
These results do not constitute the Group's statutory accounts
for the year ended 30 April 2023 but are derived from those
accounts. Statutory accounts for 2022 have been delivered to the
Registrar of Companies and those for 2023 will be delivered
following the Company's Annual General Meeting. The external
auditor has reported on those accounts; its report was unqualified,
did not contain an emphasis of matter paragraph and did not contain
any statements under section 498 of the Companies Act 2006.
The Consolidated Financial Statements have been prepared in
accordance with the requirements of the Companies Act 2006 and with
UK-adopted International Accounting Standards. The statutory
accounts have been prepared based on the accounting policies and
method of computations consistent with those followed in the
preparation of the Group's annual financial statements for the year
ended 30 April 2022.
2.2 Going concern
The Directors have assessed the business plan and funding
requirements of the Group over the medium-term and compared these
with the level of committed debt facilities and existing cash
resources. As at 30 April 2023, the Group had net cash of GBP410.4
million and total liquidity of GBP1,610.4 million when this net
cash is combined with banking facilities of GBP800 million
(committed to February 2028), of which GBP540 million is undrawn,
and GBP400 million listed bonds (which mature in August 2031).
Furthermore, the Group has cash due on forward sales of GBP2,135.7
million, a significant proportion of which covers delivery for the
next 18 months.
In making this assessment, consideration has been given to the
uncertainty inherent in future financial forecasts and where
applicable, severe but plausible sensitivities have been applied to
the key factors affecting the financial performance of the Group.
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for not
less than 12 months from the date of approval of these Consolidated
Financial Statements. For this reason, it continues to adopt the
going concern basis of accounting in preparing its Consolidated
Financial Statements.
3 Net finance costs
For the year ended 30 April 2023 2022
GBPm GBPm
---------------------------------------------------- ------- -------
Finance income 23.1 2.5
---------------------------------------------------- ------- -------
Finance costs
Interest payable on borrowings and non-utilisation
fees (21.9) (12.1)
Amortisation of fees incurred on borrowings (1.7) (1.8)
Other finance costs (10.1) (1.1)
---------------------------------------------------- ------- -------
(33.7) (15.0)
---------------------------------------------------- ------- -------
Net finance costs (10.6) (12.5)
---------------------------------------------------- ------- -------
Finance income predominantly represents interest earned on cash
deposits.
Other finance costs represent imputed interest on land purchased
on deferred settlement terms and lease interest.
4 Income tax expense
For the year ended 30 April 2023 2022
GBPm GBPm
------------------------------------------ -------- --------
Current tax including RPDT
UK current tax payable (140.5) (148.2)
Adjustments in respect of previous years (1.4) 2.3
(141.9) (145.9)
Deferred tax including RPDT
Deferred tax movements 2.5 73.0
Adjustments in respect of previous years 1.1 3.8
------------------------------------------ -------- --------
3.6 76.8
(138.3) (69.1)
------------------------------------------ -------- --------
The effective tax rate for the year is 22.9% (2022: 12.5%) and
includes a GBP4.7 credit arising from the re-measurement, in part,
of the Group's UK deferred tax assets at 29% following the changes
to both the corporation tax rate, substantially enacted in May
2021, and the introduction of RPDT at a rate of 4% on 1 April
2022.
5 Earnings per share
Basic earnings per share are calculated as the profit for the
financial year attributable to shareholders of the Group divided by
the weighted average number of shares in issue during the year.
For the year ended 30 April 2023 2022
Profit attributable to shareholders (GBPm) 465.7 482.4
Weighted average no. of shares (m) 109.1 115.5
Basic earnings per share (p) 426.8 417.8
-------------------------------------------- ------ ------
For diluted earnings per ordinary share, the weighted average
number of shares in issue is adjusted to assume the conversion of
all potentially dilutive ordinary shares.
At 30 April 2023, the Group had one (2022: one) category of
potentially dilutive ordinary shares: 1.0 million (2022: 1.6
million) share options under the 2011 LTIP.
A calculation is undertaken to determine the number of shares
that could have been acquired at fair value based on the aggregate
of the exercise price of each share option and the fair value of
future services to be supplied to the Group, which is the
unamortised share-based payments charge. The difference between the
number of shares that could have been acquired at fair value and
the total number of options is used in the diluted earnings per
share calculation.
For the year ended 30 April 2023 2022
--------------------------------------------- -------- --------
Profit used to determine diluted EPS (GBPm) 465.7 482.4
--------------------------------------------- -------- --------
Weighted average no. of shares (m) 109.1 115.5
Adjustments for:
Share options - 2011 LTIP 1.1 1.8
Shares used to determine diluted EPS (m) 110.2 117.3
--------------------------------------------- -------- --------
Diluted earnings per share (p) 422.4 411.4
--------------------------------------------- -------- --------
6 Inventories
Year ended 30 April 2023 2022
GBPm GBPm
--------
Land not under development 927.1 738.1
Work in progress: Land cost 1,729.2 1,952.5
------------------------------- -------- --------
Total land 2,656.3 2,690.6
Work in progress: Build cost 2,520.0 2,302.6
Completed units 125.8 140.8
------------------------------- -------- --------
Total inventories 5,302.1 5,134.0
------------------------------- -------- --------
7 Notes to the Condensed Consolidated Cash Flow Statement
For the year ended 30 April 2023 2022
GBPm GBPm
-------------------------------------------------- -------- --------
Net cash flows from operating activities
Profit for the financial year 465.7 482.4
Adjustments for:
Taxation 138.3 69.1
Depreciation 5.1 5.6
Loss on sale of PPE 3.7 0.1
Finance income (23.1) (2.5)
Finance costs 33.7 15.0
Share of results of joint ventures after
tax (96.3) (56.1)
Non-cash charge in respect of share awards (4.5) (8.6)
Changes in working capital:
Increase in inventories (168.1) (332.5)
Decrease/(Increase) in trade and other
receivables 57.5 (61.0)
Increase in trade and other payables 60.5 260.9
Cash generated from operations 472.5 372.4
-------------------------------------------------- -------- --------
Reconciliation of net cash flow to net
cash
Net increase/(decrease) in net cash and
cash equivalents, including bank overdraft 141.5 (499.3)
Movement in borrowings - (360.0)
--------------------------------------------- -------- ----------
Movement in net cash in the financial year 141.5 (859.3)
Opening net cash 268.9 1,128.2
--------------------------------------------- -------- ----------
Closing net cash 410.4 268.9
--------------------------------------------- -------- ----------
Net cash
Cash and cash equivalents 1,070.4 928.9
Non-current borrowings (660.0) (660.0)
--------------------------------------------- -------- --------
Net cash 410.4 268.9
--------------------------------------------- -------- --------
8 Alternative performance measures
Berkeley uses a number of alternative performance measures
("APMs") which are not defined by IFRS. The Directors consider
these measures useful to assess the underlying performance of the
Group alongside the relevant IFRS financial information. They are
referred to as Financial KPIs throughout the results. The
information below provides a definition of APMs and reconciliation
to the relevant IFRS information, where required:
Net cash
Net cash is defined as cash and cash equivalents, less total
borrowings. This is reconciled in note 7.
8 Alternative performance measures (continued)
Net assets per share attributable to shareholders (NAVPS)
This is defined as net assets attributable to shareholders
divided by the number of shares in issue, excluding shares held in
treasury and shares held by the employee benefit trust.
As at 30 April 2023 2022
--------------------------------------------- ------- -------
Net assets (GBPm) 3,332.3 3,136.1
Total shares in issue (million) 116.5 120.6
Less:
--------------------------------------------- ------- -------
Treasury shares held (million) (8.9) (9.2)
---------------------------------------------- ------- -------
Employee benefit trust shares held (million) (0.1) (0.1)
---------------------------------------------- ------- -------
Net shares used to determine NAVPS (million) 107.5 111.3
---------------------------------------------- ------- -------
Net asset per share attributable to
shareholders (pence) 3,100.5 2,818.2
---------------------------------------------- ------- -------
Return on capital employed (ROCE)
This measures the profitability and efficiency of capital being
used by the Group and is calculated as profit before interest and
taxation (including joint venture profit before tax) divided by the
average net assets adjusted for (debt)/cash.
As at April 2023 2022
-------------------------------------------- ------- ---------
Operating profit 518.3 507.9
Share of joint ventures using equity method 96.3 56.1
-------------------------------------------- ------- ---------
Profit used to determine ROCE 614.6 564.0
Opening capital employed:
-------------------------------------------- ------- ---------
Net assets 3,136.1 3,175.4
-------------------------------------------- ------- ---------
Net cash (268.9) (1,128.2)
-------------------------------------------- ------- ---------
Opening capital employed 2,867.2 2,047.2
-------------------------------------------- ------- ---------
Closing capital employed:
-------------------------------------------- ------- ---------
Net assets 3,332.3 3,136.1
-------------------------------------------- ------- ---------
Net cash (410.4) (268.9)
-------------------------------------------- ------- ---------
2,921.9 2,867.2
-------------------------------------------- ------- ---------
Average capital employed 2,894.5 2,457.2
-------------------------------------------- ------- ---------
Return on capital employed (%) 21.2% 23.0%
-------------------------------------------- ------- ---------
8 Alternative performance measures (continued)
Return on equity (ROE) before tax
This measures the efficiency of returns generated from
shareholder equity before taxation and is calculated as profit
before taxation attributable to shareholders as a percentage of the
average of opening and closing shareholders' funds.
As at 30 April 2023 2022
----------------------------- ------- -------
Opening shareholders equity 3,136.1 3,175.4
Closing shareholders equity 3,332.3 3,136.1
------------------------------ ------- -------
Average shareholders' equity 3,234.2 3,155.8
Return on equity before tax:
----------------------------- ------- -------
Profit before tax 604.0 551.5
------------------------------ ------- -------
Return on equity before tax
(%) 18.7% 17.5%
------------------------------ ------- -------
Cash due on forward sales
This measures cash still due from customers, with a risk
adjustment, at the relevant Balance Sheet date during the next
three years under unconditional contracts for sale. It excludes
forward sales of affordable housing, commercial properties and
institutional sales as well as forward sales within the Group's
joint ventures.
Future gross margin in land holdings
This represents management's risk-adjusted assessment of the
potential gross profit for each of the Group's sites, including the
proportionate share of its joint ventures, taking account of a wide
range of factors, including: current sales and input prices; the
economic and political backdrop; the planning regime; and other
market factors; all of which could have a significant effect on the
eventual outcome.
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END
FR SELFWSEDSESM
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June 21, 2023 02:01 ET (06:01 GMT)
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