Pidgley: Worst is over but no dividend yet

Tony Pidgley, chairman of residential developer Berkeley Group, said the housing market stabilised in the year to 30 April 2010 but not to the extent the company would pay shareholders a dividend.

Announcing a 12% fall in turnover to £615m, Pidgley said: “Berkeley’s strategy is to maximise shareholder value in a sustainable and safe way over the long-term. At present, the board believes that greatest value will be achieved through land acquisition, investing in work in progress and opportunistic share purchases, as opposed to declaring a dividend.”

The consensus expectation was a dividend of 10p per share.

Despite admitting to a “growing sense the worst is over”, he remained cautious amid the austerity measures being imposed by the coalition government.

He said: “Quite understandably, this has given cause for reflection as people look to understand the impact of the spending reviews and policies to be implemented by. Such reviews and changes in policy are inevitable and necessary. Most important is that hard work and innovation are rewarded and growth is encouraged. In our own industry, this means a continued and concerted commitment from the private and public sector to work together to address the shortage in supply of quality housing.”  

Pre-tax profit fell 8% to £110m and the company ended the period with net cash of £317m, which compares to the net debt position of most of its listed peers.

Although completions rose from 1,501 to 2,201, the average selling price fell from £395,000 to £263,000, which Berkeley said was down to a higher proportion of lower priced homes rather than any underling weakness in sale prices. Transaction levels are still 40% below what was the historic average.

It produced an operating margin of 17.3% (2009:17.8%), which Cenkos Securities analyst Kevin Cammack described as “massively industry leading”.

Managing director Rob Perrins, the heir apparent to the company founded by Pidgley, said results had been boosted by the weakness of Sterling and the appetite of overseas investors although this was tempered by domestic economic and political uncertainty and restrictions around mortgage finance.

The company added 2,200 plots across 20 sites over the year, which Cammack said was disappointing although outweighed by the positive trading numbers, which were at the upper end of expectations.

Charlie Campbell, an analyst at Liberum Capital said he was disappointed by the lack of dividend but added: “Berkeley remains one of our top picks in the sector due to the strength of its business model, management and London exposure.”