Profits grow at Berkeley
Soaring homebuyer demand in the UK has helped The Berkeley Group share price rise 6% during the past year. But the price of the FTSE 100 builder fell 1% on Wednesday to £46.15 per share, due to a subdued reaction to full-year results.
Berkeley — which trades on a forward price-to-earnings (P/E) ratio of around 14.5 times — said revenues roared 14.2% higher during the 12 months to April, to £2.2bn. This, in turn, pushed pre-tax profit to £518.1m, up 2.8% year-on-year.
The UK construction company sold 2,825 homes in its core London and South East marketplace last year, up from 2,723 in fiscal 2020. Meanwhile, a changed mix of developments and varying stages of production helped average asking prices rise to £770,000 from £677,000.
Berkeley said it remains on course to lift its delivery of new homes by 50% between financial 2019 and 2025. And it claimed market fundamentals in the London and South East remain “strong” thanks to an insufficient quantity of new homes being created. The FTSE 100 firm said that low interest rates, government support and the reintroduction of higher loan-to-value mortgage products is also driving the market.
However, Berkeley also said building costs have been rising to around 4% per annum since the start of 2021. This reflects strong demand for materials along with supply problems caused by Covid-19 and Brexit. The UK share has also seen lead times increasing on certain products.
A rising UK share
Car retailer Vertu Motors also put out a bubbly trading update in midweek business. In it, the company — which sells new cars by popular marques from Kia and Volkswagen to Mercedes-Benz and Jeep — said it “has seen a continuation of the strong trading trends witnessed in March and April.”
As a consequence, Vertu expects to record adjusted pre-tax profit of between £28m and £32m in the financial year to February 2022. This is above market expectations and “has been driven largely by the exceptional used car market environment.”
The UK retailer warned that potential Covid-19 disruptions and supply problems could throw a spanner in the works later this year. It said that “a tightening of new vehicle supply, largely reflecting component shortages flagged in the year end announcement, is increasingly apparent.”
This means new car buyers are having to wait longer and longer between order and taking delivery.
However, Vertu added that the used car market remains “very robust” from a demand perspective. And that reduced new car supply is causing shortages of used vehicles which is, in turn, causing an “exceptional” wholesale pricing environment.
Vertu Motors was last trading over 4% higher on Wednesday at 48p per share. This leaves the UK share trading on a forward P/E multiple of 8.5 times. The company’s share price has risen almost 80% over the past 12 months as Covid-19 vaccination rollouts have helped car retail recover.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Vertu Motors. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.