Housebuilder posts strong half-year results, partly thanks to sale of share in Imperial College London scheme

Housebuilder Berkeley has pulled further ahead of its competitors after posting strong half-year results for the six months ending 31 October 2011.

The group’s pre-tax profit was up more than two thirds to £101m over the period, and turnover increased 20% to £405m.

What they’re unrolling now is their order book from 18 months, two years ago

Kevin Cammack, Cenkos

Commenting in the group’s interim statement, managing director Rob Perrins said he was confident that Berkeley “remains well placed to deliver its target to double its earnings, when compared with the financial year ended 30 April 2010, by 30 April 2013.”

The group’s earnings in the first half of 2011 benefited from the sale of Berkeley’s 51% share in a post-graduate accommodation scheme for Imperial College London, which created an exceptional profit of £30.7m. Berkeley also surprised analysts by unveiling Olympic Delivery Agency chair John Armitt as the group’s new deputy chair, and the results and management comments caused analysts to upgrade earnings forecasts.

Cenkos analyst Kevin Cammack said the firm had reaped the benefits of consistent foreign investment. “What they’re unrolling now is their forward sales and order book from 18 months, two years ago,” he said. “They’re doing the higher rise stuff, and 40% is being sold to overseas investments. I think it’s circa half of their profit [from house sales] that are bought for cash.”   

Robin Hardy, housing sector analyst at broker Peel Hunt, said the firm’s long-term focus and land bank - presently 26,404 plots - were the keys to its success. “The danger is that one writes off what the company has achieved by saying it’s all to do with the fact that it’s in London. That simply isn’t the case,” he said.

“It’s about how long it takes to do things. It thinks nothing of buying a site and not getting any sales from that site for many years because it’s worked hard during that period to get a far better planning consent or likely outcome. Wherever that company was operating, with the kind of operating structure it has, it would do very well.”