Berkeley Group has said it is not currently investing in new projects amid an “uncertain, unpredictable and difficult” environment for new home development.
Despite this, tThe company said it will target £1.5bn in pre-tax profit and aims to keep net cash above £400m over the next few years, to April 30, 2026.
Although the developer and homebuilder posted positive numbers in its interim results announced on December 8, chief executive Rob Perrins criticized the planning system and regulatory uncertainty.
In the half to 31 October 2023, the company made a pre-tax profit of £298m and an operating margin of 19.5 per cent. The builder also increased its cash reserves from £410m to £422m.
Perrins said: “While urban regeneration is a clear national priority, it has become increasingly difficult to progress this form of development as changes in planning, taxation and regulatory regimes have created an environment where increasingly uncertain, unpredictable and onerous.
“This is driving investment away from urban areas, restricting growth and preventing housing and other tangible benefits from being delivered.”
He also expressed concern about the impact of contractor insolvencies on the supply chain, amid reduced demand for construction services.
Perrins took a more optimistic view of construction cost inflation, saying that material prices had “receded to insignificant levels in line with our expectations”.
He said Berkeley aimed to reduce risk and modify the business plan to reflect the operating environment.
It also said that if Berkeley did not start investing again by April 30, 2027, the company would send 100 percent of its profit after tax since the start of the current financial year to shareholders.
The homebuilder has already issued warnings about the state of the construction market. In his last trade update, in September, he revealed this he did not buy any land during the summer periodciting the complexity of the planning system.
In June, he warned that his future the pipeline of new homes would be threatened for “the planning environment and regulatory uncertainty”.
The industry generally reacted positively to Berkeley’s most recent trade update.
Charlie Huggins, quality equity portfolio manager at investment broker Wealth Club, said: “Berkeley has delivered solid performance in a challenging trading environment. The strength of Berkeley’s operating model, which turns large and complex places of urban regeneration in beautiful houses, it shines.
“However, the planning and regulatory environment remains extremely complex, meaning Berkeley is focusing on existing sites rather than committing to new schemes.”
Clive Chalkley, head of the real estate team at law firm Gowling WLG, said: “The housebuilding market is gradually returning to a good level of output, despite issues around future projects investment
“Berkeley Group is rightly taking a cautious approach to implementing new developments to offset this and has managed to weather the recent economic storm well by advancing/upgrading existing projects.”
