Berkeley Group Holdings PLC Sees Profits Soar 80%

The share price of Berkeley Group Holdings (LSE: BKG) is currently up over 5%, following release of the company’s half-year results this morning.

The Cobham-based housebuilder has reported an 80% surge in pre-tax profit — up to £304.9m from £169.5m in the first half of 2013 — and a 24.5% increase in revenue — up to £1,022.2m from £821m in the same period of last year. Revenue was boosted by the disposal of a portfolio of ground rent assets for £99.9m, which netted £85.1m in profit.

Basic earnings per share (EPS) are up almost 80%, at 178.6p, with underlying basic EPS up 28.9%, at 128.9p. Berkley’s board has recommended an additional interim dividend of 90p per share, to be paid in January.

That leaves the company with a further 90p per share, which it says it will use to help meet its initial target of returning 434p per share to shareholders by September 2015. Similar targets are set for September 2018 and September 2021.

The company says that there has been a return to “normal market conditions” and there underlying demand has been “good”. As a consequence, it says that earnings for the full year will be in line with current market expectations, which are ahead of its previously issued guidance.

Operationally, Berkley says that all of its sites that have implementable planning consent — that’s 86% of them — are in production, and that its land holdings now stand at 24,381 plots, across 72 sites, with a expected gross margin of £3.2bn. It also said that it has a pipeline of 11,000 plots, with a potential gross margin of £1.5bn to be realised over the next five years.

Commenting on the results, chairman A W Pidgley said:

I am pleased to report a further period of strong performance which underlines the benefit of having the right strategy to operate in a cyclical market.

Since 2008, Berkeley has increased its net assets by nearly £900 million. This has enabled it to acquire 87 new sites. The Group acquires sites which are complicated, require patience and a long-term strategy, and have a risk profile which would deter most other housebuilders. This counter-cyclical approach underpins today’s results and gives us the confidence to take the business forward.

At 2,640p, Berkley’s share price is up 16% on this time last year, compared with a 3.6% gain by the FTSE All-Share.  And the housebuilder is trouncing then index over the longer-term, too — its share price has soared 202% over the past five years, compared with the  All-Share index’s 32.4% rise.

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Jon Wallis has no position in any shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.