TIDMBKG
RNS Number : 7085P
Berkeley Group Holdings (The) PLC
22 June 2022
PRESS RELEASE 22 JUNE 2022
YEAR RESULTS ANNOUNCEMENT
The Berkeley Group Holdings plc ("Berkeley") today announces its
audited results for the year ended 30 April 2022.
Rob Perrins, Chief Executive, said:
"These strong results reflect the stability of our uniquely
long-term operating model throughout an exceptionally volatile
period. They are underpinned by our portfolio of major brownfield
regeneration projects, where patient and sustained investment is
transforming disused land into distinct and highly sustainable
mixed-use neighbourhoods within the UK's most undersupplied
markets.
We are incredibly proud of the places we create, which are
individually designed in close collaboration with local councils
and communities to provide the right mix of homes, amenities,
natural landscapes, cultural attractions and commercial spaces.
Examples include Grand Union, where we completed the first 128
homes this year, 92 of which are affordable rented homes delivered
in partnership with Brent Borough Council, alongside a beautiful
canal-side public square and 5,000 square foot Community Centre;
and the hugely exciting Horlicks Quarter where, in partnership with
Slough Borough Council, we have delivered the first 35 homes and
the heritage restoration of the iconic factory, clock tower and
chimney is well underway.
As the largest contributor to new homes in London, our
conviction in the long-term resilience and attraction of the
capital has been rewarded by the city's resurgence post COVID-19,
with our passion for creating distinctive and well-rounded
neighbourhoods providing a clear advantage as customers
increasingly prioritise the quality and character of the local
setting post pandemic. The GBP556 million of subsidies provided to
deliver affordable housing and committed to wider community and
infrastructure benefits exceeds our profit for the year, and is a
clear indicator of the social value and benefits that stem from our
unique portfolio of long-term regeneration sites.
Most importantly, the year has seen Berkeley deliver
comprehensively on its long-term "Our Vision 2030: Transforming
Tomorrow" strategy, through which we are leading the industry in
tackling today's most important challenges. This includes the
completion of a ground-breaking research project into embodied
carbon, which involved detailed studies of 15 of our buildings to
identify the most carbon intensive materials and processes,
providing previously unavailable data and insight. This has been
instrumental in developing our roadmap for meeting our ambitious
science-based target to reduce embodied carbon in our buildings by
40% by 2030. This research also demonstrated the progress Berkeley
has already made in this area, with our buildings already well
below business as usual embodied carbon benchmarks. This is a
strong position from which Berkeley and its supply chain can lead
the transition to a low carbon, high growth economy.
Berkeley has continued to pioneer nature recovery within our
industry, with 46 sites now having net biodiversity gain strategies
in place, which together will create more than 500 acres of new or
measurably improved natural habitats. Reflecting our focus on
brownfield regeneration, most of these beautiful green and blue
spaces are being created in urban areas where nature is most
depleted and communities lack accessible green space. These sites
are set to deliver an average net biodiversity gain of over 400%,
far exceeding the Government's proposed 10% minimum target and
reflecting the wider benefits of reviving brownfield land.
We have maintained our industry leading customer Net Promoter
Score and health and safety performance and continued our
investment in skills and training to make sure our industry is a
great place to work for young people looking to begin their
careers.
Berkeley has invested GBP4 billion in its development activities
over the last two years. This level of investment and the continued
drive to innovate requires a stable and fair regulatory environment
that is supportive of responsible businesses. The last year has
seen increases in taxation for all businesses and our sector in
particular which has also faced further regulatory changes. The
restoration of a stable and predictable regulatory and taxation
regime is in the interests of both business and Government. For
without it, there is a risk that the investment required to deliver
much needed new homes and the transition to net zero will not come
forward at the necessary pace.
The progress over the last twelve months has been extraordinary
and has required a combination of expertise, innovation and
determination. I would like to thank our exceptional people and
partners for their tremendous efforts and commitment to achieve
these results against such a volatile and uncertain backdrop."
Summary of Earnings, Shareholder Returns and Financial
Position
Change
Earnings 30-Apr-22 30-Apr-21 %
------------------------------ ---------- ---------- -----------
Profit before tax GBP551.5m GBP518.1m +6.4%
Earnings per share - basic 417.8p 339.4p +23.1%
Pre-tax return on equity 17.5% 16.5% -
------------------------------- ---------- ---------- -----------
Shareholder Returns 30-Apr-22 30-Apr-21
------------------------------ ---------- ----------
Share buy-backs undertaken GBP63.7m GBP188.6m
Capital Return GBP451.5m -
Dividends paid - GBP145.5m
Shareholder returns GBP515.2m GBP334.1m
---------- ----------
Share buy-backs - volume 1.5m 4.4m
Share consolidation with
capital return 9.3m -
------------------------------- ---------- ---------- -----------
As at As at Change
Financial Position 30-Apr-22 30-Apr-21 absolute
------------------------------- ---------- ---------- -----------
Net cash GBP269m GBP1,128m -GBP859m
Net asset value per share GBP28.18 GBP26.12 +GBP2.06
Cash due on forward sales
(1) GBP2,171m GBP1,712m +GBP459m
Land Holdings - future
gross margin GBP8,258m GBP6,884m +GBP1,374m
------------------------------- ---------- ---------- -----------
(1) Cash due on private exchanged forward sales
completing within the next three years
TRADING performance
-- Value of underlying reservations up 25% on last year and
slightly ahead of pre-pandemic levels, with cost inflation absorbed
by sales prices.
-- Stable start to the current year with enquiries, visitor
numbers and reservations in line with the end of 2021/22.
-- Cash due on forward sales up to GBP2.2 billion (2021: 1.7 billion).
INCREASING INVESTMENT AND DELIVERY
-- Berkeley now has GBP8.3 billion of estimated future gross
margin in its unrivalled land holdings, meeting its GBP7.5 billion
target three years early, following the St William transaction, and
will now only acquire new land very selectively.
-- GBP412.5 million acquisition of the remaining 50% share of St
William saw Berkeley gain full control of 24 sites with the
potential to deliver over 20,000 homes.
-- Further investment in Berkeley's unique operating model:
o Four new sites acquired covering around 6,000 homes, including
the strategic land site at Milton Keynes on which Berkeley has
recently obtained planning consent for the delivery of up to 4,600
new homes and 403,000 square metres of logistics space, as well as
fantastic new local amenities, a 155-acre country park and new
bridge over the M1.
o Four major new planning consents obtained on long-term
developments: Milton Keynes and St William's Bow Common (1,000
homes), Leyton (570 homes) and Bethnal Green (550 homes).
o Seven sites, with the capacity to deliver over 5,000 homes, moved into production.
-- Berkeley now has 26 of its 32 long-term complex regeneration developments in production.
-- In addition, Berkeley has approximately 8,000 plots on six
sites that constitute its pipeline.
DELIVERING FOR ALL STAKEHOLDERS
-- 3,760 homes delivered, plus 872 in joint ventures (2021:
2,825, plus 429 in joint ventures); a 42% increase. Berkeley is
delivering some 10% of London's new private and affordable homes -
supporting approximately 27,000 UK jobs per annum directly and
indirectly through its supply chain over the last five years.
-- Over GBP555 million of subsidies provided to deliver
affordable housing and committed to wider community and
infrastructure benefits in the year; a similar level to the year's
pre-tax profit.
-- Industry leading Net Promoter Score (+77.2) and customer satisfaction ratings maintained.
-- 15 embodied carbon assessments undertaken to create a roadmap
which has already identified 16 specific actions to help Berkeley
meet its ambitious science-based target in this area.
-- Green Bond Framework put in place to support GBP400 million
Green Bond issuance in August 2021.
-- Berkeley has an industry leading "A-" CDP rating for its
carbon climate action and transparency and has recently once again
been AAA rated in the MSCI global ESG index.
-- 46 developments now committed to net biodiversity gain
strategies that will deliver over 500 acres of new or measurably
improved natural habitat, not including the 155-acre country park
planned for our Milton Keynes site .
-- Annual Injury Incident Rate of 0.72 (industry average 2.72)
-- More than 60 construction management apprentices and 30
graduates joined the business in the year, with 9% of Berkeley's
workforce consisting of 'earn and learn' roles.
SHAREHOLDER RETURNS
-- Berkeley anticipates delivering pre-tax earnings of
approximately GBP600 million for the year ending 30 April 2023 and
GBP625 million for the two years thereafter, following which the
focus will shift to returning cash over and above the current
annual scheduled payment to shareholders.
-- Commitment to annual GBP282 million (GBP2.54 per share)
ongoing Shareholder Returns up to 30 September 2025 re-affirmed,
with next GBP141 million due for the six months ending 30 September
2022, of which GBP64 million has already been returned via share
buy-backs.
-- GBP451 million B-share return of capital made in September
2021, which was followed by a share consolidation.
-- Return of previously identified GBP455 million Surplus
Capital completed through the B-share return and acquisition of St
William land interests.
Investor and Analyst Presentation:
A pre-recorded presentation by the Directors of Berkeley on the
results will be made available on the Company's website at 11:00
today -
https://www.berkeleygroup.co.uk/about-us/investor-information/results-and-announcements
.
For further information please contact:
The Berkeley Group Holdings plc Novella Communications
R J Stearn (01932 868555) Tim Robertson (020 3151 7008)
CHIEF EXECUTIVE'S REVIEW
Purpose, Strategy and Capital Allocation
Berkeley's purpose is to create quality homes, strengthen
communities and improve lives, using its sustained commercial
success to make valuable and enduring contributions to society, the
economy and natural world. To achieve this, the Company's long-term
strategy is to invest in opportunities with the right risk-adjusted
returns, ensuring that its financial strength reflects the
prevailing macro environment, and to make returns to the
shareholders who support the Company to achieve its purpose,
through dividends or share buy-backs.
Berkeley is the only large UK homebuilder focused on the
regeneration of large, complex brownfield projects at scale. We
have built up the breadth of expertise, financial strength and
holistic place-making approach needed to patiently transform these
challenging sites into highly connected, accessible and welcoming
neighbourhoods. Places where homes are conveniently served by a
high concentration of new and existing local infrastructure and
amenities, carefully stitching them back into their surrounding
communities.
Reviving these under-used spaces, which include redundant
gasworks and industrial estates, is vital to re-energising our
cities and town centres. It creates an increasingly sustainable,
socially inclusive, lower carbon model of modern living, with land,
energy, resources and infrastructure used more efficiently and
responsibly.
The acquisition of National Grid's 50% interest in St William
continued Berkeley's philosophy of investing at the right time in
the cycle for the long-term, securing unrivalled land holdings in
London and the South East. It saw the Group achieve its target of
increasing the estimated future gross margin in its land holdings
to over GBP7.5 billion, three years ahead of schedule, on sites it
knows well, without increasing operational delivery requirements at
a time when it is increasingly difficult to find new land that can
accommodate today's costs of development and generate appropriate
returns. Berkeley will now only acquire new land very
selectively.
The focus of investment over the next two years will be on
bringing the Group's regeneration sites into delivery in line with
the current business plan and earnings guidance to 30 April 2025,
ensuring they each have the most appropriate development solution
to reflect the preferences of today's customer, the needs of local
communities and costs of delivering these complex developments in
the prevailing operating environment. During this period, Berkeley
is now targeting to be working capital neutral.
Once this investment phase completes the focus will shift to
returning surplus capital, over and above the current annual
scheduled payment to shareholders. Sustained return on equity,
rather than annual profit will be the principal financial metric
for the business. This reflects Berkeley's long-held prioritisation
of quality of profit and financial soundness ahead of annual profit
targets, as well as the lumpiness of delivery of profit on
regeneration developments.
Shareholder Returns and Surplus Capital
Berkeley has in place a long-term plan for shareholder returns,
based upon an ongoing annual return of GBP282 million through to
September 2025 which can be made through either dividends or share
buy-backs.
In addition, Berkeley had previously identified GBP455 million
of surplus capital to be returned by 30 April 2023 through either a
combination of enhanced cash returns to shareholders or incremental
land investment.
In September 2021, Berkeley returned the first half (GBP228.9
million) of this surplus capital as part of a GBP451.5 million
B-share return to shareholders. The balance of the GBP451.5 million
comprised the remaining GBP222.6 million of the underlying annual
return for 2021/22, with GBP59.3 million having already been
returned through share buy-backs in the year ended 30 April 2021.
The B-share return was equivalent to GBP3.71 per share and was
followed by a share consolidation which reduced the Company's share
capital, net of treasury and EBT shares, by 7.65% from 121.6
million to 112.3 million shares at the time of the consolidation.
The acquisition of National Grid's 50% interest in St William
completed the GBP455 million surplus capital return.
The Company has committed to the next ongoing scheduled
shareholder return which is the GBP141 million in respect of the
six months ending 30 September 2022, against which GBP63.7 million
has been spent on 1.5 million share buy-backs in the year. The
amount that will be returned as dividend will be announced on 11
August 2022 taking account of any further share buy-backs in the
intervening period.
Since January 2017, when share buy-backs were first introduced,
Berkeley has acquired 20.5 million shares for GBP766.6 million, at
an average price of GBP37.34 per share and, following these
buy-backs and the recent share consolidation, the ongoing annual
return of GBP282 million currently equates to GBP2.54 per share; a
27% increase on the initial GBP2.00 per share initiated in
2016.
Summary of Performance
Berkeley has delivered pre-tax profits of GBP551.5 million for
the year. This is from the sale of 3,760 homes (2021: 2,825) at an
average selling price of GBP 603,000 (2021: GBP770,000), reflecting
the mix of properties sold in the year:
Year ended 30 April 2022 2021 Change
GBP'm GBP'm GBP'm %
---------------------------- -------- -------- ------- -------
Revenue 2,348.0 2,202.2 +145.8 +6.6%
Gross profit 664.8 635.3 +29.5 +4.6%
Operating expenses (156.9) (133.0) -23.9 +18.0%
---------------------------- -------- -------- ------- -------
Operating profit 507.9 502.3 +5.6 +1.1%
Net finance costs (12.5) (6.6) -5.9
Share of joint ventures 56.1 22.4 +33.7
---------------------------- -------- -------- ------- -------
Profit before tax 551.5 518.1 +33.4 +6.4%
---------------------------- -------- -------- ------- -------
Pre-tax return on equity 17.5% 16.5% +1.0%
Earnings per share - basic 417.8p 339.4p +78.4p +23.1%
Shareholder Returns
---------------------------- -------- -------- -------
Dividends paid - 145.5 -145.5
Capital return 451.5 - +451.5
Share buy-backs 63.7 188.6 -124.9
---------------------------- -------- -------- -------
Shareholder return in the
period 515.2 334.1 +181.1
---------------------------- -------- -------- -------
At the time of our interim results in December 2021 we raised
our earnings guidance by 5% for the current year to approximately
GBP545 million and then 5% per annum thereafter for the next three
years which placed Berkeley on a path to delivering approximately
GBP625 million pre-tax profit for the year ending 30 April
2025.
The acquisition of St William further underpinned earnings for
the next three years and Berkeley therefore accelerated its
earnings guidance for the financial years ending 30 April 2024 and
2025 by a year in each case. Accordingly, Berkeley anticipates
delivering pre-tax earnings of approximately GBP600 million for the
year ending 30 April 2023 and GBP625 million for the two years
thereafter.
Housing Market and Operating Environment
Sales
For Berkeley, the value of underlying sales reservations over
the year has been 25% ahead of last year and slightly ahead of the
two years preceding the pandemic. As anticipated, London's status
as a global city has not diminished and people are returning to
urban living and businesses to office working. Demand is robust
across domestic and international customers, with the opening of
the Elizabeth Line reinforcing confidence and directly benefiting a
number of Berkeley sites across London and the Thames Valley.
Pricing has been firm and Berkeley has sold above its business
plan level throughout the year, absorbing input cost increases. The
rate of cancellations remains stable and within the normal range,
whilst sales continue to be split broadly evenly between
owner-occupier and investors.
Our cash due on forward sales is GBP2.17 billion at 30 April
2022, a 27% increase on the GBP1.71 billion held a year ago. The
majority of the increase relates to the acquisition of St William
with phases in production at Prince of Wales Drive, Kings Road
Park, Clarendon and Poplar Riverside, alongside a small underlying
increase in line with sales trends.
These forward sales provide a strong underpin to delivery over
the next three years and represent cash due on exchanged sales
contracts which will be collected over the next three financial
years and excludes secured sales in St Edward and forward sales to
housing associations.
London and South East housing market fundamentals
The UK housing market has navigated well through the recent
domestic and global challenges, with sales and construction
activity around pre-pandemic levels. The economic and operating
environment remains volatile with inflation, labour and materials
shortages, interest rates and regulatory costs of development all
having the potential to impact supply and demand.
Against this economic backdrop, the fundamentals of Berkeley's
core markets in London and the South East remain strong, most
notably with the ongoing undersupply of housing. Based upon the
Government's assessment of housing need:
-- London's housing need is 94,000 per year. Over the last three
years, an average of 39,000 homes were delivered per year, an
annual shortfall of 55,000 homes (58%).
-- The South East's housing need is 50,000 per year. Over the
last three years an average of 41,000 homes were delivered per
year, an annual shortfall of 9,000 homes (24%).
The current London Plan has a housing delivery target of 52,000,
based on London's capacity to deliver homes. Even if this target
were reached, this would still represent a shortfall of 42,000
homes (45%) relative to London's assessed housing need every year.
This supply constraint in London looks set to continue with recent
starts having remained below 17,000 per year for the last three
calendar years (DLUHC Live Table 253a).
Interest rates are rising but remain at historically low levels
and mortgage availability is strong with a competitive lender
market and Government policy remaining supportive of mortgage
lending. Affordability levels remain within historical parameters
for those with the requisite deposit.
Land and planning
Berkeley has added four new sites to its land holdings during
the year. In London, these include
a shopping centre in Peckham acquired unconditionally where we
are targeting the delivery of over 900 new homes and a new
supermarket, and the Ram Brewery site in Wandsworth. Outside
London, St Edward has conditionally contracted a site in Guildford
in Surrey for around 450 homes, whilst the strategic site in Milton
Keynes was acquired and transferred from the pipeline.
As part of the St William transaction, Berkeley unconditionally
contracted three new long-term sites from National Grid which
together comprise approximately 5,000 homes that have been added to
the pipeline. This includes an 84 acre former gas works site in
Beckton which is allocated for residential-led mixed use in the
Newham Local Plan.
On the planning front, Berkeley secured four new major consents
during the year. Three were on St William sites in London: in
Leyton (570 homes); Bow Common (1,000 homes) and Bethnal Green (550
homes); whilst the other was the Milton Keynes site. In addition,
Berkeley obtained two new consents outside London, at Reading (200
homes) and a site in Frimley Green in Surrey (160 homes). We have
obtained over 50 revisions to existing consents as we continue to
evolve our sites.
Berkeley has two developments in London which are currently
subject to call-in and is at appeal at two sites outside
London.
In May 2022, the Levelling Up and Regeneration Bill was placed
before Parliament, following which more clarity is now available on
the Government's intentions. A number of consultations have been
announced and we will be responding to these in due course. We hope
Government will continue to engage with industry to ensure its
laudable aims are not achieved at the cost of limiting housing
delivery and its social and economic benefits.
We are encouraged by the Government's decision that larger
brownfield projects will be able to deliver the proposed
consolidated infrastructure levy in kind through local section 106
agreements rather than post completion financial contributions as
these would not be appropriate for large brownfield sites, which
inherently provide such significant investment in local
infrastructure. We will continue to make the case that the benefits
of local negotiation should be retained to maximise the potential
of each site and empower local stakeholders and councils when
planning for their area.
Similarly, we have consistently argued that design codes make
sense for new additions to existing neighbourhoods. However, where
a new neighbourhood is being designed from scratch we will continue
to make the case that the appropriate way to maximise the social
value of these neighbourhoods is to engage in a bespoke, design
led, approach, rather than follow a pre-determined set of
regulations.
We have moved seven sites, with the capacity to deliver over
5,000 homes into production during the year; two in London and five
outside.
Construction
During the financial year we have seen build cost inflation
accelerate due to the confluence of a number of macro challenges.
This has impacted material inflation more than labour costs,
however, supply conditions do now appear to be stabilising,
supported by the recent decline in material price volatility.
The supply chain has proved adept at managing supply issues and
we have adapted to extended delivery periods. We continue to engage
with our supply chain to ensure its resilience during this period
of uncertainty, cognisant of the financial pressure faced by many
contractors but balanced by the opportunity for long-term
relationships with Berkeley and visibility on future workload.
Labour, in terms of both supply and cost is steady, and we do not
anticipate significant rises from this juncture.
Overall, whilst spot inflation for certain materials, such as
steel reinforcement, has been particularly acute, on a blended
basis across our portfolio we have been able to absorb these cost
pressures through sales pricing.
Fire Safety
Berkeley has been very supportive of Government in its
determination both to ensure buildings are fire-safe for people to
live in them, and mortgageable so they can move home and
re-mortgage their properties when they wish. Berkeley's focus in
this area has been on ensuring its buildings achieve the required
EWS 1 form certification for mortgage purposes and it has obtained
this on 99% of its relevant freehold buildings.
In the last six months we are delighted that the Consolidated
Advice Note, that had created much uncertainty in this process, was
withdrawn and replaced by PAS9980, a proportionate risk-based
approach that has the support of the wider industry. Berkeley is
carrying out PAS9980 assessments on all relevant buildings and will
undertake any works necessary to address life-critical fire safety
issues.
Government's approach changed in the year, requiring developers
to go back 30 years and also to assume responsibility for
remediating buildings accepted by Government into the Building
Safety Fund and to meet historic funding commitments Government has
made on certain of these buildings. Berkeley has signed the
associated Developer Pledge with assurances from Government that an
appropriate arbitration process will be put in place and that all
assessments should be under the PAS9980 methodology. It is
Berkeley's preference to take full responsibility for all its
buildings and complete any required works ourselves as determined
by a PAS9980 assessment as this will speed up the overall process
of remediation. There are a number of buildings that Berkeley has
asked to take over where historic funding commitments have been
made for works that are not life-critical fire safety issues and we
are working through these as part of the Developer Pledge.
Government has undertaken to ensure that all developers and
house-builders are treated equally and that all parties involved in
the development process are held to account and pay their fair
share. Berkeley believes this is fair and equitable and is fully
supportive of this approach. With the Developer Pledge and 4%
Residential Property Developer Tax ('RPDT') Berkeley believes that
the UK house-builders have played a very full part in resolving
this issue and further levies on the industry would be unfair and
constrain delivery and innovation. Looking forward, Berkeley is
ensuring its procedures are compliant with new legislation and is
supportive of the Building Safety Act which, together with the
actions taken to date, should restore trust and confidence to the
housing market, enabling it to operate efficiently, effectively and
be fair for all.
Berkeley Modular
Berkeley Modular has now produced its first modules which will
be delivered to Kidbrooke Village. Our approach is precision
manufactured, highly automated, digitally integrated and safe,
combining machine, robotic and skilled manual processes within a
controlled factory environment.
This year a number of external validation processes have been
completed on the factory and its product to ensure high standards
of product quality, safety and environmental performance are met.
The role of our supply chain is key in helping us to innovate and
we have welcomed input from our supply chain partners.
Our Vision 2030: Transforming Tomorrow
Our Vision 2030 is Berkeley's ambitious long-term strategy which
sets ten strategic priorities for the business over the current
decade. This framework is designed to drive our performance, spur
innovation and reinforce Berkeley's position as the country's most
sustainable developer through maximising our positive impacts on
society, the economy and the natural world.
Key indicators of our strategy's ongoing recognition include
a:
-- Sector-leading A- Leadership rating for Climate Action and Transparency from CDP;
-- Prime status from the ISS ESG Corporate Rating which is
reserved for "industry leaders who fulfil demanding performance
expectations";
-- AAA MSCI rating held for more than five years; and
-- Continual FTSE4Good Index listing since 2003.
In May 2022 we were delighted to win the Transformation Award
from the Better Society Network for the positive impact we are
already delivering through Our Vision 2030 and the level of our
future ambition.
Driving ambitious carbon action
Tackling climate change has been a priority for Berkeley since
2007 and we are proud to be a 1.5 degree aligned business working
towards validated Science-Based Targets ('SBTs') for reducing our
emissions, which are:
-- Reducing scope 1 and 2 emissions from our sites, offices and
sales venues by a further 50% between 2019 and 2030 on an absolute
basis (on top of a 73% reduction achieved between 2016 and 2019
through investment in efficient operations and procuring 100%
renewable electricity); and
-- Reducing scope 3 embodied carbon within our supply chain and
the in-use emissions from our homes by 40% between 2019 and 2030 on
an intensity basis.
Scopes 1 and 2
This financial year we have seen a 13% reduction in our absolute
scope 1 and 2 emissions from last year. This has largely been
driven by the increased use of low carbon biodiesel, which now
accounts for over 50% of all fuel used in construction activity.
Relative to our baseline 2019 year, we have reduced our absolute
scope 1 and 2 emissions by more than 40%, well on track to meet our
50% SBT reduction target by 2030.
Scope 3
Our most significant carbon impact occurs across our value chain
(Scope 3), from the activities within our supply chain and from the
energy used by our customers once our homes are lived in, the
latter measured over a 60 year period.
We have been actively working with industry partners and
specialist consultants to improve our understanding and the data
accuracy of these impacts since we set our SBTs. This year we have
focused on understanding the impact of the materials we use - known
as upfront embodied carbon - through an in-depth assessment of a
representative selection of 15 buildings. For each building we
calculated the carbon of the specific materials used to construct
our homes; covering the extraction, manufacture and transportation
of materials.
Our 15 assessments were across a range of building typologies,
from houses to mid-rise apartments and tall buildings. The outcome
of our assessments is illustrated in the graphic below:
http://www.rns-pdf.londonstockexchange.com/rns/7085P_1-2022-6-21.pdf
Each of the 15 buildings assessed outperformed the business as
usual industry benchmark of 850kgCO(2) /m(2) set by LETI
(originally London Energy Transformation Initiative) and UK Green
Building Council, indicating that our teams are already considering
and reducing embodied carbon beyond the norm, with some
developments outperforming the LETI benchmark for 2020 of 500
kgCO(2) /m(2) .
Our embodied carbon studies provide valuable insights into the
most carbon intensive elements of our buildings and provide clear
recommendations on how to target and reduce these areas in
partnership with our supply chain. We are now in the process of
setting internal targets for the business for each of the three
different building typologies. This will entail our teams
calculating the embodied carbon at the design stage of each
building and working with design consultants and the supply chain
to drive down our carbon impacts..
The carbon emissions from our homes over 60 years of use is the
other material impact within our value chain. 89% of completed
homes in 2021/22 had an EPC of B or above. Berkeley is well-placed
to meet the requirements of the Government's update to Part L
(conservation of fuel and power) and Part F (ventilation) of the
Building Regulations and the introduction of Part O (overheating)
and S (electric vehicle charging infrastructure). These changes,
which became effective in June 2022, include tighter fabric,
energy, carbon, ventilation and overheating requirements.
Task Force on Climate-related Financial Disclosures ('TCFD')
We have supported the recommendations of the TCFD since 2018,
and this year have completed detailed Climate Scenario Analysis
which has helped us to further understand and enhance our
disclosure around the risks and opportunities that climate change
present to our portfolio and business activities, but also
demonstrates how Berkeley designs its places and buildings to
mitigate long-term climate change risks.
Leading nature's recovery
We are proud to have pioneered nature recovery within our
industry and played a proactive role in reversing biodiversity loss
within the communities we serve, which is the other great
environmental challenge of our time. We were the first homebuilder
to commit to delivering a measurable net biodiversity gain on every
new site back in 2017 and have since built up a pipeline of 46
developments, which together will create over 500 acres of new or
improved natural habitats, not including the 155-acre country park
planned for our Milton Keynes site. These projects will create or
measurably enhance approximately 100 acres of nature-rich
grassland, 70 acres of woodland and 50 acres of living roofs.
This focus on biodiverse and beautiful natural landscapes has
been of great benefit to the health and wellbeing of the
communities within and around our sites, as well as to the natural
environment. The success of our programme has led the Government to
mandate biodiversity net gain of 10% for all developments, which is
expected to occur in late 2023. The average net biodiversity gain
we expect to deliver across our 46 sites is over 400%.
We remain committed to supporting nature recovery on a national
scale and are proud to have become a founding member of the Blue
Recovery Leaders Group, set up in 2021 by the Wildfowl and Wetlands
Trust and supported by His Royal Highness The Prince of Wales, to
create networks of healthy wetlands across the UK. 37 of our
current developments have planned or completed wetland features,
which will amount to 52 acres of valuable blue habitats.
We are now evolving our approach to net biodiversity gain to
include an even more challenging and valuable combination of
measurable environmental benefits. Our approach to 'environmental
net gain' will focus on four areas where the pressures on the
environment are greatest and where we can have most impact:
Climate, Pollution, Ecology and Water. This year, we have partnered
with Thames Water to explore how water neutrality can be applied to
our sites; with Royal Exchange in Kingston currently undergoing the
first large scale trial of its kind, with around 45,000 litres used
per day by our customers being offset through the upgrade and
retrofit of water fittings in local homes, schools and
businesses.
Developing skills for the future
As we modernise production and digitise multiple areas of our
business, we are building a workforce with the flexible skillset
needed for the future. We have already helped to design and
implement new apprenticeship standards to meet the needs of
advanced manufacturing and are now mapping the skills and
competencies required, both now and for the future, across all
disciplines in our business to ensure that we are training and
upskilling our workforce to meet evolving needs. This includes an
increased focus on digital skills and ensuring competence in
advance of emerging changes in regulatory requirements. We run a
range of training courses for our employees at our in-house
Berkeley Academy, which has been accredited with Approved Training
Organisation status by the Construction Industry Training Board
during the year.
We are proud to be a member of The 5% Club and this year we have
exceeded our pledge with 9% of our workforce consisting of 'earn
and learn' roles including apprentices, graduates and sponsored
students.
Within the year we developed a bespoke construction site
management apprenticeship in partnership with Farnborough College
and Ixion Holdings (part of the Shaw Trust Group) that reflects the
latest construction management practices. We brought 60 new
construction apprentices onto this innovative programme in autumn
2021 and now have over 140 apprentices in the business. In
addition, more than 30 new starters joined our graduate programme,
bringing the total to 60, and we are proud to be among
TheJobCrowd's Top 50 Graduate Employers in the country, which is
based on anonymous feedback from graduates.
Increasing the diversity of our workforce is a priority for
Berkeley and we are a Platinum Member of Women into Construction, a
signatory to the Mayor's Fund for London's Diversity Pledge and a
signatory of the BuildForce charter, supporting people
transitioning from the military. 29% of managers are female,
together with 37% of our overall employees. This year we have seen
more than a third of graduate positions filled by female candidates
and around one quarter of our construction apprenticeship roles,
significantly above the national average for such roles.
Championing safer homes and operations
Our Annual Injury Incidence Rate is 0.72 for the year, compared
to an industry average of 2.72 (HSE, October 2021). This is
testament to the dedication of our teams in focusing on behavioural
safety, and supported by strong leadership with more than 3,400
operating company directors' health and safety visits completed in
the year. We continue to target zero harm on every site, as we
champion health and safety for every employee and contractor
working with us.
We aim to extend our influence beyond our direct operations and
since 2018 our strategic partnership with the Royal Society for
Prevention of Accidents (RoSPA) has focused on reducing accidents
and injuries in new build homes. Following the co-writing of
RoSPA's Safer by Design framework, we have now rolled this out
across the business and have recently achieved our first Gold
standard at Lombard Square in Plumstead.
Delivering for our customers
We put our customers at the heart of every decision we make,
which is exemplified by our independently verified Net Promoter
Score of 77.2, which significantly outperforms the industry average
of 45 (HBF, March 2022). 98% of our customers said they would
'recommend us to a friend' in 2022 and we are proud to have
received the Investor in Customers Gold rating for the fifth time,
which recognises the importance that Berkeley places on customer
experience. Berkeley has also won In-House Research's Outstanding
Achievement Award for six consecutive years.
From exceptional service to the quality of our homes, we aim to
delight our customers in every last detail. More than 50% of our
homes have zero defects, as reported by the customer, compared to
only 5% of homes on average across the industry (HBF, March 2022).
On average, our customers report less than two defects which
reflects our detailed handover checks, underpinned by enhanced
Build Quality Assurance arrangements, with robust training and
audit programmes in place. We welcome the introduction of a New
Homes Ombudsman to provide more reassurance and protection to home
buyers.
The Berkeley Foundation
The social and economic impacts of the pandemic have deepened
inequalities within the communities we serve and the Berkeley
Foundation's unique charity partnerships are playing an
increasingly vital role in supporting those in greatest need.
Total charitable contributions increased to GBP3.3 million over
the year as we continued to invest in highly innovative long-term
programmes which complement Berkeley's social purpose. Highlights
include a further GBP1 million commitment to the award-winning
Money House partnership with MyBnk, which prevents homelessness by
teaching young care leavers the skills for independent living.
The Foundation also strengthened its ten year Street Elite
partnership with The Change Foundation by extending its support for
the programme in Birmingham through to 2024. Street Elite has now
supported over 800 young people impacted by crime, violence and
inequality to find pathways into employment. In October 2021, the
Foundation launched a new GBP900,000 Resilience Fund, which
supports small-to-medium sized charities to develop their
organisational resilience in the wake of the pandemic, with the
first ten grants having been made in the year.
With the Foundation celebrating its tenth anniversary in 2021,
we published a review of the first decade of operation to help
share the learning and insights from our unique long-term
charitable partnership model (berkeleyfoundation.org.uk).
Outlook
Looking forward, Berkeley is set on continuing to differentiate
itself from other house-builders by creating fantastic places,
predominantly on brownfield land, that communities can be proud of
for decades to come. Berkeley also wants to play a leading role in
the UK in respect of its environmental, social and governance
responsibilities and has made considerable strides in this regard
over the last year, recognising that there are no short-term fixes
to the challenges presented by, for example, climate change and
social inequality. Berkeley is also passionate about ensuring
London is an attractive place to live, work and play. This requires
continued investment to create highly skilled jobs, increase
productivity and stimulate economic growth.
We are, of course, very mindful of the ongoing volatility in the
operating environment from the series of significant global and
domestic events, including Brexit, COVID-19 and the conflict in
Ukraine. The impact of these is complex and ongoing with supply
chain disruption, increased taxation, inflation and concerns over
future economic growth all features of the last 12 months. Our
industry has also seen regulatory developments in building safety,
including the Building Safety Pledge and RPDT, carbon related taxes
and the Levelling Up and Regeneration Bill. These factors
inevitably risk impacting companies' capacity and appetite for
investment and innovation.
Notwithstanding the current volatility and cyclical nature of
the housing market, Berkeley is in a great position to deliver on
its ambitions and those of our stakeholders and wider society.
Rob Perrins
Chief Executive
TRADING AND FINANCIAL REVIEW
Trading performance
Revenue of GBP2,348.0 million in the year (2021: GBP2,202.2
million) arose primarily from the sale of new homes in London and
the South East. This included GBP2,302.0 million of residential
revenue (2021: GBP2,200.3 million) and GBP46.0 million of
commercial revenue (2021: GBP1.9 million).
3,760 new homes (2021: 2,825) were sold across London and the
South East at an average selling price of GBP603,000 (2021:
GBP770,000) reflecting the mix of developments and varying stages
thereon.
Revenue of GBP46.0 million from commercial property includes the
sale of retail, office and leisure space primarily at Oval Village,
Camden Goods Yard, Silkstream, Grand Union and Beaufort Park in the
year.
The gross margin percentage is 28.3% (2021: 28.8%), reflecting
the mix of properties sold in the year. Overheads of GBP156.9
million (2021: GBP133.0 million) increased by GBP23.9 million in
the year. The prior year benefitted from reduced LTIP charges and
operational efficiencies. Consequently, the Group's operating
margin has decreased to 21.6% from 22.8% last year.
Berkeley's share of the results of joint ventures is a profit of
GBP56.1 million (2021: GBP22.4 million). St Edward's profits arose
predominantly from completions at Royal Warwick Square as well as
the first legal completions at Millbank, whilst St William's
profits, prior to 15 March 2022, arose primarily from completions
at Prince Of Wales Drive in Battersea and Clarendon in Hornsey.
The Group has remained cash positive on a net basis throughout
the year. Net finance costs were
GBP12.5 million for the year (2021: GBP6.6 million net finance
costs) due to facility fees, interest on borrowings and imputed
interest on land creditors, which outweighed interest income on
cash deposits.
The taxation charge for the year is GBP69.1 million (2021:
GBP95.4 million) which yields an effective tax rate of 12.5% (2021:
18.4%). The taxation charge includes a GBP32.1m credit arising from
the re-measurement of the Group's UK deferred tax assets at 29%
following the changes to both the corporation tax rate,
substantially enacted in May 2021, and the introduction of RPDT at
a rate of 4% on 1 April 2022. The low rate this year is therefore
driven by the deferred tax accounting rules. For the avoidance of
doubt, the cash tax paid on profits earned in the year was at the
statutory rate of 19.3%.
Pre-tax return on equity for the year is 17.5%, compared to
16.5% for the comparative year. Basic earnings per share has
increased by 23.1% from 339.4 pence to 417.8 pence, which takes
into account the share consolidation undertaken in the year and the
share buy-backs of 1.5 million shares at a cost of GBP63.7 million
under the Shareholder Returns Programme, as well as the effective
tax rate of 12.5%.
Financial Position
St William
On 15 March 2022, Berkeley acquired the outstanding 50%
partnership interest in its joint venture St William Homes LLP ('St
William') from National Grid plc for cash consideration of GBP412.5
million, following which St William became a wholly owned
subsidiary of the Group. Concurrently, the St William bank facility
was refinanced from Berkeley's existing cash reserves.
The transaction has been accounted for as an asset acquisition,
rather than a business combination. Consequently, the cash
consideration paid in excess of National Grid's 50% share of the
net assets of St William reflects additional land cost within
inventory in the Group's balance sheet of GBP238 million.
The acquisition has significantly enhanced the Group's inventory
holdings, represented by the cash consideration and an increase to
land creditors, as explained immediately below. The increase to the
Group's land holdings and pipeline land is considered separately in
the relevant section below.
All of the sites previously contracted on a conditional basis
from National Grid, and which were therefore not on the St William
balance sheet at 15 March 2022, became unconditional with the land
transfer completions occurring in April through June 2022 bar one
which completes in 2024. Although the sites are completing and
transferring to St William over this timeframe, which is when the
cost is recognised on the balance sheet, payments are deferred and
included in land creditors. The Group also acquired three new sites
as part of the transaction which complete in April through June
2022.
Summarised balance sheet
Reflecting the B-share capital return in September 2021, the
Group's net assets reduced by GBP39 million during the year to
GBP3,136 million at 30 April 2022:
Summarised balance sheet 30-Apr-22 30-Apr-21 Variance GBP'm
as at
---------------------------------
GBP'm GBP'm Total St William Underlying
------------------------------- ---------- ----------
Non-current assets 375 388 -14 -174 +160
Inventory - land not
under development 738 331 +407 +33 +374
Inventory - WIP and completed
stock 4,396 3,321 +1,075 +1,113 -38
Inventory - total 5,134 3,653 +1,482 +1,146 +336
---------- ---------- -----------
Debtors 150 83 +67 +10 +57
Customer deposits (931) (791) -141 -133 -8
Land creditors (801) (388) -413 -205 -208
Provisions (161) (128) -33 -8 -25
Trade creditors (899) (770) -129 -95 -33
-------------------------------- ---------- ---------- ----------- -----------
Capital employed 2,867 2,047 +820 +541 +279
Net cash 269 1,128 -859 -541 -318
Net assets 3,136 3,175 -39 - -39
================================ ========== ========== ======= =========== ===========
Shares, net of Treasury
and EBT 111.3m 121.6m -10.3m
Net asset value per share 2,818p 2,612p +206p
The impact of the St William acquisition on the Group's balance
sheet at 15 March 2022 is summarised in the table above, with
comments thereon below.
Inventory
Inventory totals GBP5,134 million at 30 April 2022, an increase
of GBP1,482 million during the year, of which GBP1,146 million
relates to the acquisition of St William, including the additional
land cost paid of GBP238 million. Inventories include GBP738
million of land not under development (30 April 2021: GBP331
million) and GBP4,396 million of work in progress and completed
stock (30 April 2021: GBP3,321 million).
The increase in land not under development reflects both sites
acquired from National Grid before 30 April 2022, including Bethnal
Green, Leyton, New Barnet and Beckton, and other sites during the
year such as Milton Keynes, of which a significant component is on
deferred terms, Peckham and Wandsworth in London. This increase
more than outweighed the impact of the sites moved into production
during the year.
Creditors
Customer deposits total GBP931 million at 30 April 2022 (2021:
GBP791 million), with the majority of the increase from the St
William acquisition.
Land creditors total GBP801 million at 30 April 2022 (2021:
GBP388 million), with the increase reflecting the St William sites
owned at acquisition and those which were completed thereafter as
identified above, along with other site changes including Milton
Keynes. Of the total GBP801 million land creditor balance, GBP81
million is short-term and GBP720 million is spread broadly evenly
over the next 10 years.
Provisions of GBP161 million (30 April 2021: GBP128 million)
include post-completion development obligations and other
provisions.
Net cash
The Group ended the year with net cash of GBP269 million (30
April 2021: GBP1,128 million), a decrease of GBP859 million during
the year (2021: net decrease of GBP11 million):
Abridged Cash Flow for 30-Apr-22 30-Apr-21
year ended
GBP'm GBP'm
--------------------------- ---------- ----------
Profit before taxation 551.5 518.1
Taxation paid (142.6) (90.1)
Net increase in working
capital (132.6) (77.2)
Net investment in joint
ventures (82.8) (19.9)
Other movements 3.0 (7.5)
Shareholder returns (515.2) (334.1)
Acquisition of St William (540.6) -
--------------------------- ---------- ----------
Decrease in net cash (859.3) (10.7)
Opening net cash 1,128.2 1,138.9
Closing net cash 268.9 1,128.2
============================ ========== ==========
The net cash of GBP269 million consists of gross cash holdings
of GBP929 million, net of GBP660 million of long-term
borrowings.
Net assets and NAVPS
Net assets decreased over the year by GBP39 million to GBP3,136
million (2021: GBP3,175 million) primarily due to the profit after
tax for the year of GBP482 million being marginally outweighed by
the shareholder returns of GBP515 million, comprising the September
2021 capital return payment of GBP451.5 million and GBP63.7 million
of share buy-backs, and other smaller movements.
The shares in issue, net of treasury and EBT shares, closed at
111.3 million compared to 121.6 million at the start of the year.
The net reduction of 10.3 million shares comprises three
movements:
-- The 9.3 million share consolidation in September 2021
alongside the B-share capital return of GBP3.71 per share;
-- The 1.5 million share buy-backs undertaken during the year
for GBP63.7 million (GBP41.54 per share); and
-- The issue of 0.5 million shares under the 2011 LTIP.
Consequently, the net asset value per share is 2,818 pence, up
7.9% from the 2,612 pence at 30 April 2021.
Funding
Berkeley started the financial year with banking facilities
totaling GBP750 million, comprising a drawn GBP300 million term
loan and a GBP450 million undrawn revolving credit facility
(RCF).
In the year, Berkeley issued GBP400 million of unsecured Green
Bonds maturing in ten years in August 2031 at a fixed coupon of
2.5% per annum. The proceeds of the Green Bonds have been allocated
to our ongoing development activities in accordance with our Green
Bond Framework (available on the website); specifically in
connection with the development of green buildings (energy
efficient homes) on large, complex brownfield sites.
In support of the issuance, Fitch Ratings Ltd published a
Long-term Issuer Default Rating and senior unsecured investment
grade rating of BBB- with a Stable Outlook, along with a BBB-
rating for the Green Bonds.
In February 2022, Berkeley refinanced its bank facilities at
GBP800 million, comprising a GBP260 million Green Term loan, and a
GBP540 million RCF which is undrawn at year-end. The facility is in
place for a period of five years to February 2027, with two one
year extension options available.
The Group's cash holdings are placed on deposit with its
relationship banks.
Joint Ventures
Investments accounted for using the equity method have decreased
by GBP91.3 million during the year from GBP281.7 million to
GBP190.4 million at 30 April 2022. Berkeley's share of the net
assets of St William at acquisition were GBP174.1 million which
were de-recognised. Offsetting this reduction is Berkeley's share
of undistributed joint venture profits of GBP56.1 million and
additional loan contributions to joint ventures of GBP26.7 million
made prior to St William becoming a subsidiary.
In St Edward, 303 homes were completed in the year at an average
selling price of GBP898,000
(2021: 184 at GBP696,000). The completions occurred at Royal
Warwick Square and Millbank in London and Green Park Village in
Reading and Highcroft in Wallingford.
In total, 5,317 plots (30 April 2021: 5,139 plots) in Berkeley's
land holdings relate to seven St Edward developments, three in
London (Westminster, Kensington and Brentford) and four outside the
capital (Reading, Fleet, Walingford and Guildford). Five of the
sites are in production apart from Guildford, which was acquired
conditionally during the year, and Brentford which is contracted on
a subject to planning basis and is part of the Group's 32 long-term
regeneration developments.
In St William, 569 homes were completed prior to the acquisition
on 15 March 2022 at an average selling price of GBP460,000 (2021:
254 at GBP677,000). The majority of completions were at Prince Of
Wales Drive in Battersea and Clarendon in Hornsey.
Land Holdings
Berkeley's land holdings comprise 66,163 plots at 30 April 2022
(30 April 2021: 63,270 plots), including the St Edward joint
venture. Of these land holdings, 62,998 plots (30 April 2021:
52,080) are on 86 sites that are owned and included on the balance
sheet of the Group or its joint venture or are unconditionally
contracted in respect of St William sites, and 3,165 plots (30
April 2021: 11,190) are on four contracted sites which either do
not yet have a planning consent or have another conditional element
such as vacant possession.
The plots in the land holdings at 30 April 2022 have an
estimated future gross profit of GBP8.26 billion
(30 April 2021: GBP6.88 billion), which includes the Group's 50%
share of the anticipated profit on St Edward's joint venture
developments.
Through the acquisition of St William, Berkeley gained 100%
control of:
-- 19 sites already in its land holdings but at 50% of revenue and profit (12,600 homes);
-- Two sites already in its pipeline but at 50% (2,600 homes); and
-- Three new long-term sites that have been included in the
pipeline (approximately 5,000 homes).
In total, this represents over 20,000 future homes across 24
sites, all of which are either owned or unconditionally contracted
at 30 April 2022. The increase in future gross margin associated
with these sites, taking into account the additional land cost, is
approximately GBP1.6 billion, broadly 60 per cent of which relates
to those sites in the Group's land holdings, at 27% gross margin,
and the remainder to its pipeline.
Excluding St William, the estimated gross margin in the land
holdings has increased by GBP1.1 billion, before taking account of
the gross margin delivered in the year. Around two thirds of the
increase relates to the new sites added to the land holdings and
the remainder to the net impact of site-reappraisals and market
movements.
Combined with the St William acquisition, the net increase in
land holdings future gross margin is GBP1.4 billion during the
year. Following these changes the land holdings gross margin at 30
April 2022 is 26.5% (2021: 27.0%).
The status of Berkeley's 86 owned and unconditionally contracted
sites is:
-- 60 sites (plots: 46,559) have an implementable planning consent and are in production;
-- 13 sites (plots: 9,053) have a consent which is not yet
implementable, due to practical technical constraints and
challenges surrounding, for example, vacant possession, CPO
requirements or utilities provision; and
-- 13 sites (plots: 7,386) do not have a planning consent. These
include a number of the St William sites that were conditionally
contracted prior to the transaction.
Of the four contracted sites, one site has achieved a resolution
to grant consent but remains subject to a call-in.
The estimated future gross margin represents management's
risk-adjusted assessment of the potential gross profit for each
site, taking account of a wide range of factors, including: current
sales and input prices; the political and economic backdrop; the
planning regime; and other market forces; all of which could have a
significant effect on the eventual outcome.
- End -
Principal risks and uncertainties
At the start of 2021/22, COVID-19 related lockdowns were still
having a significant impact on our business. However, following the
successful vaccination programme over the last year, all
restrictions were removed in early 2022. This has reduced the risks
relating to COVID-19 and, while it is likely that COVID-19 will
still be prevalent in society and the risk of further COVID-19
variants remains, the Board views these potential risks as an
integral part to our Principal Risks rather than as an ongoing
standalone risk.
Looking forward, the volatile and uncertain environment
resulting from the COVID-19 pandemic, coupled with ever increasing
political and economic uncertainty, both in the UK and
internationally, as a result of energy price volatility, supply
chain shortages and disruption and the war in Ukraine, is placing
further pressure on inflation, which may lead to further interest
rate rises and suppress future UK economic growth. This presents an
ongoing uncertain risk environment for Berkeley.
As a result of this ongoing volatility, it is right that our
risk appetite remains dynamic, varying over time in line with the
cyclical nature of our industry and complexity of our operating
environment. This is unchanged from last year.
Financial risk
The financial risks to which Berkeley is exposed include:
-- Liquidity risk - the risk that the funding required for the
Group to pursue its activities may not be available.
-- Market credit risk - the risk that counterparties (mainly
customers) will default on their contractual obligations, resulting
in a loss to the Group. The Group's exposure to credit risk is
comprised of cash and cash equivalents and trade and other
receivables.
-- Market interest rate risk - the risk that Group financing
activities are affected by fluctuations in market interest
rates.
-- Other financial risks - Berkeley contracts all of its sales
and the vast majority of its purchases in sterling, and so has no
significant exposure to currency risk, but does recognise that its
credit risk includes receivables from customers in a range of
jurisdictions who are themselves exposed to currency risk in
contracting in sterling.
Management of financial risks
Berkeley adopts a prudent approach to managing these financial
risks.
-- Treasury policy and central overview - The Board approves
treasury policy and senior management control day-to-day
operations. Relationships with banks and cash management are
co-ordinated centrally as a Group function. The treasury policy is
intended to maintain an appropriate capital structure to manage the
financial risks identified and provide the right platform for the
business to manage its operating risks.
-- Low gearing - the Group is currently financing its operations
through shareholder equity, supported by GBP269 million of net cash
on the balance sheet and debt facilities that were refinanced in
the year. This in turn has mitigated its current exposure to
interest rate risk.
-- Headroom provided by bank facilities - the Group now has
GBP800 million of committed credit facilities maturing in February
2027, with optional extensions to February 2029. This comprises a
term loan of GBP260 million and the revolving credit facility of
GBP540 million. In addition, in August 2021, the Group issued
listed debt in the form of Green Bonds to the value of GBP400
million maturing in August 2031. Berkeley has a strong working
partnership with the six banks that provide the facilities and this
is key to Berkeley's approach to mitigating liquidity risk.
-- Forward sales - Berkeley's approach to forward selling new
homes to customers provides good visibility over future cash flows,
as expressed in cash due on forward sales which stands at GBP2.17
billion at 30 April 2022. It also helps mitigate market credit risk
by virtue of customers' deposits held from the point of
unconditional exchange of contracts with customers.
-- Land holdings - by investing in land at the right point in
the cycle, holding a clear development pipeline in our land
holdings and continually optimising our existing holdings, we are
not under pressure to buy new land when it would be wrong for the
long-term returns for the business.
-- Detailed appraisal of spending commitments - a culture which
prioritises an understanding of the impact of all decisions on the
Group's spending commitments and hence its balance sheet, alongside
weekly and monthly reviews of cash flow forecasts at operating
company, divisional and Group levels, recognises that cash flow
management is central to the continued success of Berkeley.
Risk Description and Impact Approach to Mitigating Risk
Economic Outlook
As a property developer, Berkeley's Recognition that Berkeley operates
business is sensitive to wider in a cyclical market is central to
economic factors such as changes our strategy and maintaining a strong
in interest rates, employment financial position is fundamental to
levels and general consumer our business model and protects us
confidence. against adverse changes in economic
conditions.
Some customers are also sensitive
to changes in the sterling exchange Land investment in all market conditions
rate in terms of their buying is carefully targeted and underpinned
decisions or ability to meet by demand fundamentals and a solid
their obligations under contracts. viability case, respecting the cyclical
nature of the property industry.
Changes to economic conditions
in the UK, Europe and worldwide Levels of committed expenditure are
may lead to a reduction in demand carefully monitored against forward
for housing which could impact sales secured, cash levels and headroom
on the Group's ability to deliver against our available bank facilities,
its corporate strategy. with the objective of keeping financial
risk low to mitigate the operating
risks of delivery in uncertain markets.
Production programmes are continually
assessed, depending upon market conditions.
The business is committed to operating
at an optimal size, with a strong balance
sheet, through autonomous businesses
to maintain the flexibility to react
swiftly, when necessary, to changes
in market conditions.
Political Outlook
Significant political events, Whilst we cannot directly influence
in the UK and overseas, may political events, the risks are taken
impact Berkeley's business through, into account when setting our business
for example, supply chain disruption strategy and operating model. In addition,
or the reluctance of customers we actively engage in the debate on
to make purchase decisions due policy decisions.
to political uncertainty and,
subsequently, policies and regulation
may be introduced that directly
impact our business model.
Regulation
Berkeley is primarily focused geographically
Adverse changes to Government on London, Birmingham and the South-East
policy on areas such as taxation, of England, which limits our risk when
design requirements and the understanding and determining the impact
environment could restrict the of new regulation across multiple locations
ability of the Group to deliver and jurisdictions.
its strategy.
The effects of changes to Government
Failure to comply with laws policies at all levels are closely
and regulations could expose monitored by operating businesses and
the Group to penalties and reputational the Board, and representations made
damage. to policy-setters where appropriate.
Berkeley's experienced teams are well
placed to interpret and implement new
regulations at the appropriate time
through direct lines of communication
across the Group, with support from
internal and external legal advisors.
Detailed policies and procedures are
in place where appropriate to the prevailing
regulations and these are communicated
to all staff.
Land Availability
Understanding the markets in which
An inability to source suitable we operate is central to Berkeley's
land to maintain the Group's strategy and, consequently, land acquisition
land holdings at appropriate is primarily focused on Berkeley's
margins in a highly competitive core markets of London, Birmingham
market could impact on the Group's and the South-East of England, markets
ability to deliver its corporate in which it believes the demand fundamentals
strategy. are strong.
Berkeley has experienced land teams
with strong market knowledge in their
areas of focus, which gives us the
confidence to buy land without an implementable
planning consent and, with an understanding
of local stakeholders' needs, positions
Berkeley with the best chance of securing
a viable planning consent.
Berkeley acquires land, where it meets
its internal criteria for purchase,
and considers joint ventures in particular
as a vehicle to work with the right
partners who bring good quality land
complemented by Berkeley's expertise.
Each land acquisition is subject to
a formal internal appraisal and approval
process prior to the submission of
a bid and again prior to exchange of
contracts to give the Group the greatest
chance of securing targeted land.
Berkeley's land holdings mean that
it has the land in place for its immediate
business plan requirements and can
therefore always acquire land at the
right time in the cycle.
Planning Process
The Group's strategic geographical
Delays or refusals in obtaining focus and expertise place it in the
commercially viable planning best position to conceive and deliver
permissions could result in the right consents for the land acquired.
the Group being unable to develop
its land holdings. Full detailed planning and risk assessments
are performed and monitored for each
This could have a direct impact site without planning permission, both
on the Group's ability to deliver before and after purchase.
its product and on its profitability.
Our assessment of the risk profile
dictates whether sites are acquired
either conditionally or unconditionally.
The planning status of all sites is
reviewed at both monthly divisional
Board meetings and Main Board meetings.
The Group works closely with local
communities in respect of planning
proposals and strong relationships
are maintained with local authorities
and planning officers.
Retaining People
An inability to attract, develop, In February 2021 we launched two new
motivate and retain talented commitments within Our Vision, Berkeley's
employees could have an impact long-term strategy, to help recruit
on the Group's ability to deliver and retain a high calibre work force.
its strategic priorities.
The first is 'Employee Experience'
Failure to consider the retention which places a specific focus on areas
and succession of key management including employee experience and diversity
could result in a loss of knowledge and inclusion, and the second focuses
and competitive advantage. on 'Future Skills' looking at how we
can create tangible long-term change
within the industry.
Succession planning is regularly reviewed
at both divisional and Main Board level.
Close relationships and dialogue are
maintained with key personnel.
Remuneration packages are constantly
benchmarked against the industry to
ensure they remain competitive.
Securing Sales
An inability to match supply The Group has experienced sales teams
to demand in terms of product, both in the UK and within our overseas
location and price could result sales offices, supplemented by market-leading
in missed sales targets and/or agents.
high levels of completed stock
which in turn could impact on Detailed market demand assessments
the Group's ability to deliver of each site are undertaken before
its corporate strategy. acquisition and regularly during delivery
of each scheme to ensure that supply
is matched to demand in each location.
Design, product type and product quality
are all assessed on a site-by-site
basis to ensure that they meet the
target market and customer aspirations
in that location.
The Group has a diverse range of developments
with homes available across a broad
range of property prices to appeal
to a wide market.
The Group's ability to forward sell
reduces the risk of the development
cycle where possible, thereby justifying
and underpinning the financial investment
in each of the Group's sites. Completed
stock levels are reviewed regularly.
Liquidity
Reduced availability of the The Board approves treasury policy
external financing required and senior management control day-to-day
by the Group to pursue its activities operations. Relationships with banks
and meet its liabilities. and cash management are co -- ordinated
centrally as a Group function.
Failure to manage working capital
may constrain the growth of The treasury policy is intended to
the business and ability to maintain an appropriate capital structure
execute the business plan. to manage the Group's financial risks
and provide the right platform for
the business to manage its operating
risks.
Cash flow management is central to
the continued success of Berkeley.
There is a culture which prioritises
an understanding of the impact of all
decisions on the Group's spending commitments
and hence its balance sheet, alongside
weekly and monthly reviews of cash
flow forecasts at operating company,
divisional and Group levels.
Mortgage Availability
An inability of customers to Berkeley has a broad product mix and
secure sufficient mortgage finance customer base which reduces the reliance
now or in the future could have on mortgage availability across its
a direct impact on the Group's portfolio.
transaction levels.
The Group participates in the Government's
Help to Buy scheme, which provides
deposit assistance to first-time buyers,
and has participated in other Government
schemes historically.
Deposits are taken on all sales to
mitigate the financial impact on the
Group in the event that sales do not
complete due to a lack of mortgage
availability.
Climate Change
The effects of climate change Climate action is a strategic priority
could impact Berkeley in different within our business strategy, Our Vision
ways, from risks and opportunities 2030, and we have set ambitious science-based
relating to the transition to targets (SBTs) to mitigate our impact,
a lower-carbon economy to those alongside continuing to incorporate
relating to the physical impacts adaptation measures within our developments
of climate change. to make them more resilient to the
expected future impacts of climate
Aggressive climate mitigation change.
could lead to the implementation
of carbon tax regimes, and an Our sites, offices and sales suites
increase in the demand for renewable are identifying and investing in energy
energy and cost of emissions efficiency measures to take action
offset. under our Scope 1 and 2 carbon emissions
reduction target. We also look to reduce
The cost of raw materials could the impact of our homes and places
increase if suppliers pass through when in use and are taking action to
the impact of carbon pricing contribute to a zero carbon built environment.
for carbon intensive building Our Scope 3 SBT commits us to building
materials. For example, steel, more efficient homes and working with
concrete, cement and glass all our supply chain to reduce the embodied
have energy intensive production carbon within the materials and services
which could require increased we procure.
energy input costs.
To build resilience into our homes
There is an inherent risk that and developments, we consider climate
as energy prices increase, property change risks and incorporate measures
buyers will favour lower carbon to reduce these. We have minimum Sustainability
homes and expect greater operational Standards in place for all developments
energy efficiency. Conversely, to assess overheating risk and incorporate
strong environmental related measures to reduce this risk. Standards
credentials evidenced through also cover minimum water efficiency
a proven delivery track record measures, rainwater harvesting and
should improve the prospects sustainable drainage systems.
of higher demand for Berkeley's
homes. Our developments, and particularly
foundation design, are engineered to
Chronic physical risks such ensure the risk of subsidence is mitigated.
as heat stress, drought stress In respect of medium to high rise buildings,
and subsidence may increasingly wind engineering includes dynamic or
impact Berkeley's developments, physical modelling, analysis and testing
as the climate changes. at pre-planning stage and mitigation
measures incorporated into the design
There are also potential impacts such as mechanical fixings and screening
from acute risks. For example, and planting.
windstorms and floods may result
in physical damage to completed Flood risk assessments have been a
property and construction assets. standard part of our development planning
and design for many years if the developments
fall within a flood zone. The flood
risk assessments vary in extent based
on the potential risk and include allowances
for the effects of climate change.
Sustainability
Berkeley is aware of the environmental The strategic direction for sustainability
and social impact of the homes is set at a Group level within a dedicated
and places that it builds, both Sustainability Strategy and three areas
throughout the development process have been identified as being of strategic
and during occupation and use importance and integrated within our
by customers and the wider community. business strategy, Our Vision 2030;
communities; climate action and nature.
Failure to address sustainability We have specific commitments to enhance
issues could affect the Group's environmental and social value in the
ability to acquire land, gain operation of our business and the delivery
planning permission, manage of our homes and places.
sites effectively and respond
to increasing customer demands Dedicated sustainability teams are
for sustainable homes and communities, in place within the business and at
with access to green spaces Group level, providing advice, monitoring
and nature. performance and driving improvement.
Operational procedures and processes
are regularly reviewed to ensure that
high standards and legal compliance
are maintained. Site sustainability
assessments are completed at least
every quarter. We also have minimum
standards and processes in place for
offices and sales suites.
Health and Safety
Berkeley's operations have a
direct impact on the health Berkeley considers this to be an area
and safety of its people, contractors of critical importance. Berkeley's
and members of the public. health and safety strategy is set by
the Board. Dedicated health and safety
A lack of adequate procedures teams are in place in each division
and systems to reduce the dangers and at Head Office.
inherent in the construction
process increases the risk of Procedures, training and reporting
accidents or site related catastrophes, are all regularly reviewed to ensure
including fire and flood, which that high standards are maintained
could result in serious injury and comprehensive accident investigation
or loss of life leading to reputational procedures are in place. Insurance
damage, financial penalties is held to cover the risks inherent
and disruption to operations. in large scale construction projects.
The Group continues to implement initiatives
to improve health and safety standards
on site.
Product Quality and Customers
Berkeley has a reputation for Detailed reviews are undertaken of
high standards of quality in the product on each scheme both during
its product. the acquisition of the site and throughout
the build process to ensure that product
If the Group fails to deliver quality is maintained.
against these standards and
its wider development obligations, The Group has detailed quality assurance
it could be exposed to reputational procedures in place surrounding both
damage, as well as reduced sales design and build to ensure the adequacy
and increased cost. of build at each key stage of construction.
Customer satisfaction surveys are undertaken
on the handover of our homes, and feedback
incorporated into the specification
and design of subsequent schemes.
Build Cost and Programme
Build costs are affected by A procurement and programming strategy
the availability of skilled for each development is agreed by the
labour and the price and availability divisional Board before site acquisition,
of materials, suppliers and whilst a further assessment of procurement
contractors. and programming is undertaken and agreed
by the divisional Board prior to the
Declines in the availability commencement of construction.
of a skilled workforce, and
changes to these prices could Build cost reconciliations and build
impact on our build programmes programme dates are presented and reviewed
and the profitability of our in detail at divisional cost review
schemes. meetings each month.
The Group monitors its development
obligations and recognises any associated
liabilities which arise.
Our new strategy includes ongoing commitments
to training and support across both
our employees and our indirect workforce.
Cyber and Data Risk
The Group acknowledges that Berkeley's systems and control procedures
it places significant reliance are designed to ensure that confidentiality,
upon the availability, accuracy availability and integrity are not
and confidentiality of all of compromised.
its information systems and
the data contained therein. Our Information Security Programme
focuses primarily on the detection
The Group could suffer significant and prevention of security incidents
financial and reputational damage and potential data breaches. Ongoing
because of the corruption, loss monitoring and scanning is conducted
or theft of data, whether inadvertent to detect and respond to vulnerabilities
or via a deliberate, targeted and security events.
cyber attack.
We also work closely with recognised
security service providers to implement
and improve security best practices.
An IT Security Committee meets monthly
to address all cyber security matters.
The Group has Cyber Essentials Plus
certification and a Group-wide security
awareness programme, which is refreshed
on a regular basis to update employees
on current cyber security trends.
The Group operates multiple physical
data centres supported by cloud based
services thereby reducing centralised
risk exposure. An IT disaster recovery
plan is regularly assessed.
The Group has cyber insurance in place
to reduce the any potential financial
impact.
Condensed Consolidated Income Statement
For the year ended 30 April 2022 2021
Notes GBPm GBPm
------------------------------------- ------ ---------- ----------
Revenue 2,348.0 2,202.2
Cost of sales (1,683.2) (1,566.9)
------------------------------------- ------ ---------- ----------
Gross profit 664.8 635.3
Net operating expenses (156.9) (133.0)
------------------------------------- ------ ---------- ----------
Operating profit 507.9 502.3
Finance income 3 2.5 3.0
Finance costs 3 (15.0) (9.6)
Share of results of joint ventures
using the equity method 56.1 22.4
---------- ----------
Profit before taxation for the year 551.5 518.1
Income tax expense 4 (69.1) (95.4)
------------------------------------- ------ ---------- ----------
Profit after taxation for the year 482.4 422.7
------------------------------------- ------ ---------- ----------
Earnings per share (pence):
Basic 5 417.8 339.4
Diluted 5 411.4 332.5
------------------------------------- ------ ---------- ----------
Condensed Consolidated Statement of Comprehensive Income
2022 2021
GBPm GBPm
Profit after taxation for the year 482.4 422.7
-------------------------------------------- ------ ----------
Other comprehensive (expense)/income
Items that will not be reclassified
to profit or loss
Actuarial (loss)/gain recognised in
the pension scheme (1.6) 2.7
Total items that will not be reclassified
to profit or loss (1.6) 2.7
-------------------------------------------- ------ ----------
Other comprehensive (expense)/income
for the year (1.6) 2.7
-------------------------------------------- ------ ----------
Total comprehensive income for the
year 480.8 425.4
-------------------------------------------- ------- --------
Condensed Consolidated Statement of Financial Position
As at 30 April 2022 2021
Notes GBPm GBPm
---------------------------------- ------ ---------- ----------
Assets
Non-current assets
Intangible assets 17.2 17.2
Property, plant and equipment 40.5 46.0
Right-of-use assets 5.8 3.2
Investments accounted for using
the equity method 190.4 281.7
Deferred tax assets 120.7 40.1
374.6 388.2
---------------------------------- ------ ---------- ----------
Current assets
Inventories 6 5,134.0 3,652.5
Trade and other receivables 145.7 75.4
Current tax assets 4.5 7.9
Cash and cash equivalents 7 928.9 1,428.2
---------------------------------- ------ ---------- ----------
6,213.1 5,164.0
---------------------------------- ------ ---------- ----------
Total assets 6,587.7 5,552.2
---------------------------------- ------ ---------- ----------
Liabilities
Non-current liabilities
Borrowings 7 (660.0) (300.0)
Trade and other payables (719.8) (330.8)
Lease liability (3.8) (1.7)
Provisions for other liabilities
and charges (98.5) (62.3)
---------------------------------- ------ ---------- ----------
(1,482.1) (694.8)
---------------------------------- ------ ---------- ----------
Current liabilities
Trade and other payables (1,904.9) (1,614.7)
Lease liability (2.1) (1.5)
Provisions for other liabilities
and charges (62.5) (65.8)
---------------------------------- ------ ---------- ----------
(1,969.5) (1,682.0)
Total liabilities (3,451.6) (2,376.8)
---------------------------------- ------ ---------- ----------
Total net assets 3,136.1 3,175.4
---------------------------------- ------ ---------- ----------
Equity
Shareholders' equity
Share capital 6.5 6.6
Share premium 49.8 49.8
Capital redemption reserve 25.0 24.9
Other reserve (961.3) (961.3)
Retained earnings 4,016.1 4,055.4
---------------------------------- ------ ---------- ----------
Total equity 3,136.1 3,175.4
---------------------------------- ------ ---------- ----------
Condensed Consolidated Statement of Changes in Equity
Capital
Share Share redemption Other Retained Total
capital premium reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------ -------- -------- ----------- -------- --------- --------
Unaudited
At 1 May 2021 6.6 49.8 24.9 (961.3) 4,055.4 3,175.4
Profit after taxation for the year - - - - 482.4 482.4
Other comprehensive expense for the year - - - - (1.6) (1.6)
Purchase of own shares (0.1) - 0.1 - (63.7) (63.7)
Transactions with shareholders:
- Charge in respect of employee share schemes - - - - (8.7) (8.7)
- Deferred tax in respect of employee share schemes - - - - 3.8 3.8
- Capital Return to equity holders of the Company - - - - (451.5) (451.5)
------------------------------------------------------ -------- -------- ----------- -------- --------- --------
At 30 April 2022 6.5 49.8 25.0 (961.3) 4,016.1 3,136.1
------------------------------------------------------ -------- -------- ----------- -------- --------- --------
At 1 May 2020 6.8 49.8 24.7 (961.3) 3,981.6 3,101.6
Profit after taxation for the year - - - - 422.7 422.7
Other comprehensive income for the year - - - - 2.7 2.7
Purchase of own shares (0.2) - 0.2 - (188.6) (188.6)
Transactions with shareholders:
- Charge in respect of employee share schemes - - - - (11.9) (11.9)
- Deferred tax in respect of employee share schemes - - - - (5.6) (5.6)
- Dividends to equity holders of the Company - - - - (145.5) (145.5)
------------------------------------------------------ -------- -------- ----------- -------- --------- --------
At 30 April 2021 6.6 49.8 24.9 (961.3) 4,055.4 3,175.4
------------------------------------------------------ -------- -------- ----------- -------- --------- --------
Condensed Consolidated Cash Flow Statement
For the year ended 30 April 2022 2021
Notes GBPm GBPm
----------------------------------------------- ------ -------- --------
Cash flows from operating activities
Cash generated from operations 7 372.4 419.4
Consideration paid for 50% share of (355.6) -
St William assets
Interest received 1.9 3.0
Interest paid (5.6) (8.1)
Income tax paid (142.6) (90.1)
----------------------------------------------- ------ -------- --------
Net cash flow from operating activities (129.5) 324.2
----------------------------------------------- ------ -------- --------
Cash flows from investing activities
Purchase of property, plant and equipment (1.3) (2.4)
Proceeds on disposal of property, plant
and equipment 0.3 0.8
Dividends from joint ventures - 7.5
Increase in loans with joint ventures (26.7) (5.0)
Net cash flow from investing activities (27.7) 0.9
----------------------------------------------- ------ -------- --------
Cash flows from financing activities
Lease capital repayments (1.9) (1.8)
Proceeds associated with settlement
of share options - 0.1
Purchase of own shares (63.7) (188.6)
Dividends paid to Company's shareholders - (145.5)
Capital Return paid to Company's shareholders (451.5) -
Drawdown of bank borrowings 260.0 -
Increase in listed debt borrowings 400.0 -
Repayment of bank borrowings (300.0) (200.0)
Repayment of St William bank borrowings (185.0) -
Net cash flow from financing activities (342.1) (535.8)
----------------------------------------------- ------ -------- --------
Net decrease in cash and cash equivalents (499.3) (210.7)
Cash and cash equivalents at the start
of the financial year 1,428.2 1,638.9
----------------------------------------------- ------ -------- --------
Cash and cash equivalents at the end
of the financial year 928.9 1,428.2
----------------------------------------------- ------ -------- --------
Notes to the Condensed Consolidated Financial Information
1 General information
The Berkeley Group Holdings plc (the 'Company') is a public
limited company incorporated and domiciled in the United Kingdom.
The address of its registered office is Berkeley House, 19
Portsmouth Road, Cobham, Surrey, KT11 1JG. The Company and its
subsidiaries (together the 'Group') are engaged in residential led,
mixed-use property development.
2 Basis of preparation
2.1 Introduction
These results do not constitute the Group's statutory accounts
for the year ended 30 April 2022 but are derived from those
accounts. Statutory accounts for 2021 have been delivered to the
Registrar of Companies and those for 2022 will be delivered
following the Company's Annual General Meeting. The external
auditor has reported on those accounts; its report was unqualified,
did not contain an emphasis of matter paragraph and did not contain
any statements under section 498 of the Companies Act 2006.
The Consolidated Financial Statements have been prepared in
accordance with the requirements of the Companies Act 2006 and with
UK-adopted International Accounting Standards. The statutory
accounts have been prepared based on the accounting policies and
method of computations consistent with those followed in the
preparation of the Group's annual financial statements for the year
ended 30 April 2021.
2.2 Going concern
The Directors have assessed the business plan and funding
requirements of the Group over the medium-term and compared these
with the level of committed debt facilities and existing cash
resources. As at 30 April 2022, the Group had net cash of GBP268.9
million and total liquidity of GBP1,468.9 million when this net
cash is combined with banking facilities of GBP800 million (which
are committed to February 2027) and GBP400 million listed bonds
(which mature in August 2031). Furthermore, the Group has cash due
on forward sales of GBP2,170.6 million, a significant proportion of
which covers delivery for the next 18 months.
In making this assessment, consideration has been given to the
uncertainty inherent in future financial forecasts and where
applicable, severe but plausible sensitivities have been applied to
the key factors affecting the financial performance of the Group.
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for not
less than 12 months from the date of approval of these Consolidated
Financial Statements. For this reason, it continues to adopt the
going concern basis of accounting in preparing its Consolidated
Financial Statements.
3 Net finance costs
For the year ended 30 April 2022 2021
GBPm GBPm
--------------------------------------------- ------- ------
Finance income 2.5 3.0
--------------------------------------------- ------- ------
Finance costs
Interest payable on borrowings and
non-utilisation fees (12.1) (7.7)
Amortisation of fees incurred on borrowings (1.8) (0.9)
Other finance costs (1.1) (1.0)
--------------------------------------------- ------- ------
(15.0) (9.6)
--------------------------------------------- ------- ------
Net finance costs (12.5) (6.6)
--------------------------------------------- ------- ------
Finance income predominantly represents interest earned on cash
deposits.
Other finance costs predominantly represent imputed interest on
land purchased on deferred settlement terms and lease interest.
4 Income tax expense
For the year ended 30 April 2022 2021
GBPm GBPm
------------------------------------ -------- --------
Current tax including RPDT
UK current tax payable (148.2) (93.1)
Adjustments in respect of previous
years 2.3 1.9
(145.9) (91.2)
Deferred tax including RPDT
Deferred tax movements 73.0 (5.4)
Adjustments in respect of previous
years 3.8 1.2
------------------------------------ -------- --------
76.8 (4.2)
(69.1) (95.4)
------------------------------------ -------- --------
The effective tax rate for the period is 12.5% (2021: 18.4%) and
includes a GBP32.1m credit arising from the re-measurement, in
part, of the Group's UK deferred tax assets at 29% following the
changes to both the corporation tax rate, substantially enacted in
May 2021, and the introduction of Residential Property Developer
Tax (RPDT) at a rate of 4% on 1 April 2022.
5 Earnings per share
Basic earnings per share are calculated as the profit for the
financial year attributable to shareholders of the Group divided by
the weighted average number of shares in issue during the year.
For the year ended 30 April 2022 2021
Profit attributable to shareholders
(GBPm) 482.4 422.7
Weighted average no. of shares (m) 115.5 124.6
Basic earnings per share (p) 417.8 339.4
------------------------------------- ------ ------
For diluted earnings per ordinary share, the weighted average
number of shares in issue is adjusted to assume the conversion of
all potentially dilutive ordinary shares.
At 30 April 2022, the Group had one (2021: two) category of
potentially dilutive ordinary shares: 1.6 million (2021: 2.3
million) share options under the 2011 LTIP and nil (2021: 30,912)
share options under the 2015 Bonus Banking plan.
A calculation is undertaken to determine the number of shares
that could have been acquired at fair value based on the aggregate
of the exercise price of each share option and the fair value of
future services to be supplied to the Group, which is the
unamortised share-based payments charge. The difference between the
number of shares that could have been acquired at fair value and
the total number of options is used in the diluted earnings per
share calculation.
For the year ended 30 April 2022 2021
-------------------------------------- -------- --------
Profit used to determine diluted EPS
(GBPm) 482.4 422.7
-------------------------------------- -------- --------
Weighted average no. of shares (m) 115.5 124.6
Adjustments for:
Share options - 2011 LTIP 1.8 2.5
Shares used to determine diluted EPS
(m) 117.3 127.1
-------------------------------------- -------- --------
Diluted earnings per share (p) 411.4 332.5
-------------------------------------- -------- --------
6 Inventories
Year ended 30 April 2022 2021
GBPm GBPm
--------
Land not under development 738.1 331.4
Work in progress: Land cost 1,952.5 1,134.7
------------------------------------ --------- --------
Total land 2,690.6 1,466.1
Work in progress: Build cost 2,302.6 2,081.0
Completed units 140.8 105.4
------------------------------------ --------- --------
Total inventories 5,134.0 3,652.5
------------------------------------ --------- --------
7 Notes to the Condensed Consolidated Cash Flow Statement
For the year ended 30 April 2022 2021
GBPm GBPm
----------------------------------------------- -------- -------
Net cash flows from operating activities
Profit for the financial year 482.4 422.7
Adjustments for:
Taxation 69.1 95.4
Depreciation 5.6 5.9
Loss on sale of PPE 0.1 -
Finance income (2.5) (3.0)
Finance costs 15.0 9.6
Share of results of joint ventures
after tax (56.1) (22.4)
Non-cash charge in respect of pension
deficit - 0.7
Non-cash charge in respect of share
awards (8.6) (12.3)
Changes in working capital:
Increase in inventories (332.5) (97.6)
Increase in trade and other receivables (61.0) (5.1)
Increase in trade and other payables 260.9 25.5
Cash generated from operations 372.4 419.4
----------------------------------------------- -------- -------
Reconciliation of net cash flow to
net cash
Net decrease in net cash and cash equivalents,
including bank overdraft (499.3) (210.7)
(Increase)/decrease in borrowings (360.0) 200.0
------------------------------------------------ -------- --------
Movement in net cash in the financial
year (859.3) (10.7)
Opening net cash 1,128.2 1,138.9
------------------------------------------------ -------- --------
Closing net cash 268.9 1,128.2
------------------------------------------------ -------- --------
Net cash
Cash and cash equivalents 928.9 1,428.2
Non-current borrowings (660.0) (300.0)
------------------------------------------------ -------- --------
Net cash 268.9 1,128.2
------------------------------------------------ -------- --------
8 Alternative performance measures
Berkeley uses a number of alternative performance measures
(APMs) which are not defined by IFRS. The Directors consider these
measures useful to assess the underlying performance of the Group
alongside the relevant IFRS financial information. They are
referred to as Financial KPIs throughout the interim results. The
information below provides a definition of APMs and reconciliation
to the relevant IFRS information, where required:
Net cash
Net cash is defined as cash and cash equivalents, less total
borrowings. This is reconciled in note 7.
8 Alternative performance measures (continued)
Net assets per share attributable to shareholders (NAVPS)
This is defined as net assets attributable to shareholders
divided by the number of shares in issue, excluding shares held in
treasury and shares held by the employee benefit trust.
As at 30 April 2022 2021
----------------------------------- ------- ---------
Net assets (GBPm) 3,136.1 3,175.4
Total shares in issue (million) 120.6 132.2
Less:
----------------------------------- ------- ---------
Treasury shares held (million) (9.2) (10.5)
------------------------------------ ------- ---------
Employee benefit trust shares held
(million) (0.1) (0.1)
------------------------------------ ------- ---------
Net shares used to determine NAVPS
(million) 111.3 121.6
------------------------------------ ------- ---------
Net asset per share attributable
to shareholders (pence) 2,818.2 2,612.1
------------------------------------ ------- ---------
Return on equity (ROE) before tax
This measures the efficiency of returns generated from
shareholder equity before taxation and is calculated as profit
before taxation attributable to shareholders as a percentage of the
average of opening and closing shareholders' funds.
As at 30 April 2022 2021
-------------------------------- ------- -------
Opening shareholders equity 3,175.4 3,101.6
Closing shareholders equity 3,136.1 3,175.4
--------------------------------- ------- -------
Average shareholders' equity 3,155.8 3,138.5
Return on equity before tax:
-------------------------------- ------- -------
Profit before tax 551.5 518.1
--------------------------------- ------- -------
Return on equity before tax (%) 17.5% 16.5%
--------------------------------- ------- -------
Cash due on forward sales
This measures cash still due from customers, with a risk
adjustment, at the relevant Balance Sheet date during the next
three years under unconditional contracts for sale. It excludes
forward sales of affordable housing and commercial properties and
forward sales within the Group's joint ventures.
Future gross margin in land holdings
This represents management's risk-adjusted assessment of the
potential gross profit for each of the Group's sites, including the
proportionate share of its joint ventures, taking account of a wide
range of factors, including: current sales and input prices; the
economic and political backdrop; the planning regime; and other
market factors; all of which could have a significant effect on the
eventual outcome.
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END
FR SESFWFEESEDM
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June 22, 2022 02:00 ET (06:00 GMT)
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