Economic news

UK Homebuilder Berkeley Sticks to Profit Forecast Despite Reservations Slump

  • Shares flat in morning trade
  • Expects 1.05 bln stg pre-tax profits in FY24 and 2025
  • Forward sales of around 2 bln stg at Oct. 31
  • Selective about investment amid economic concerns

LONDON, Sept 8 (Reuters) - British high-end developer Berkeley Group reaffirmed its profit forecast on Friday, but joined other homebuilders in highlighting a gloomy trading environment due to higher borrowing costs and wider macro-economic concerns.

Britain's housing market has struggled in recent months as demand slowed against the backdrop of Bank of England efforts to tame inflation with a sustained run of interest rate rises.

FTSE 100 member Berkeley reported a 35% fall in private sales reservations in the first four months of its current fiscal year, which began May 1, from a year earlier.

Berkeley, which unlike its bigger rivals focuses on redeveloping land that was previously used for industrial purposes, reiterated pre-tax profit guidance of 1.05 billion pounds ($1.3 billion) for the fiscal years 2024 and 2025.

Shares in the company were flat in early morning trade.

Other housebuilders, including its largest Barratt, as well as Taylor Wimpey, Crest Nicholson and Bellway have all warned over the state of the market.

Berkeley is seen as being more resilient, however, as many of its developments are targeted at the luxury market and it has a greater exposure to London.

"Demand in the capital’s likely to remain more robust than other areas of the country ... but in the short term, there’s plenty of stormy clouds for Berkeley to weather," said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.

Berkeley, which did not acquire land in the four months to Aug. 31, said it would remain selective about new investment due to macro-economic, political and regulatory uncertainty.

"Considerable uncertainty for the UK economy with persistent high inflation and interest rates, continues to deter investment into brownfield regeneration and the wider housebuilding sector," it said in a trading statement.

Berkeley expects forward sales - an industry metric that gauges housing demand - of around 2 billion pounds at Oct. 31, compared to 2.14 billion pounds on April 30.

($1 = 0.7996 pounds)

Reporting by Suban Abdulla, additional reporting Aby Jose Koilparambil in Bengaluru; editing by William James and Alexander Smith

Source: Reuters

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