UPDATE: Berkeley Targets Growth As Full-Year Earnings Fall

25th Jun 2010 09:19

(Adds detail and comment.) By Anita Likus Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. home builder Berkeley Group PLC (BKG.LN) Friday posted declines in profit and revenue but said it plans to grow its earnings per share and its land bank by 10% over the next 12 months. Berkeley said it will achieve growth in earnings through opening new developments and home sales outlets this year. "We are opening seven to eight new outlets currently," Managing Director Rob Perrins told Dow Jones Newswires in an interview, adding "we plan to open 15 smaller sites this year, which will ensure growth." The sites have been bought recently and are in the south of England. Perrins said that trading slowed because of the U.K.'s general election but that stability has now returned to pre-election levels. Despite setting growth targets, Berkeley disappointed some observers because it didn't declare a dividend while it has cash available on its balance sheet. The company believes that greater value will be achieved through buying land, investing in work in progress and opportunistic share purchases. "This dividend policy will, however, be reviewed at the end of each reporting period," said Chairman Tony Pidgley. "Berkeley's results are in line with expectations, but we are disappointed that Berkeley has deferred a return to the dividend list, even in spite of substantial cash reserves," said Liberum Capital analyst Charlie Campbell. However, at 0755 GMT, Berkeley shares traded up 3 pence, or 0.4%, at 803 pence while the FTSE 250 index traded up 0.2%. While Berkeley's pretax profit in the year to April 30 fell 8.4% on lower revenue, it still made a profit that was better than expected. The company also generated GBP57.5 million of net cash, part of which was used to buy shares and settle share plans. It reported total net cash of GBP316.9 million from GBP284.8 million. During the year, it bought 2,200 plots across 20 sites in its operating area of London and the southeast where underlying demand is strong. The 10% growth target, for the land bank and earnings per share it set for the year, "should mean around 66 pence in 2011, which is against current consensus of 61 pence," said Campbell. Revenue for the year ended April 30 fell to GBP615.3 million from GBP702.2 million despite completions increasing from 1,501 to 2,201. As the mix of properties shifted to more lower-value units, average sales prices fell to GBP263,000 from GBP395,000 and drove revenue down. Perrins said Berkeley sold many units for more than GBP1 million in fiscal 2009 than in fiscal 2010. As a result, pretax profit fell to GBP110.3 million from GBP120.4 million a year ago. It reported operating margin of 17.3% at a time when rivals are reporting low single-digit margins. U.K. house builders have endured almost two years of turbulent market conditions as mortgage liquidity evaporated, crimping demand for new homes. But Berkeley, which is known for calling the market correctly, was in a better position than rivals because it didn't have to take write downs, as it bought its land cheaply in the last downturn, and has a strong balance sheet. -By Anita Likus, Dow Jones Newswires; +44 20 7842 9407; [email protected] (END) Dow Jones Newswires June 25, 2010 04:19 ET (08:19 GMT)