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Following the publication of its first half report this morning, Berkeley Group Holdings plc (LSE:BKG) share price increased by 11.17% (255.0 pence) to 2,537.0.
Even if they did not read the entire report, investors had to be appropriately impressed by Managing Director, R C Perrins’ opening remarks, in which he said that he was “pleased to report a 19.2% increase in profit before tax to £169.5 million and a 22.0% increase in basic earnings per share from 82.0 pence to 100.0 pence. The Group has sold 2,294 new homes in the period, up from 1,927 last year, and operating margins have remained stable at 20.7% (2012: 21.3%). Pre-tax return on shareholders’ equity for the period is 25.0% which compares with 24.5% in the equivalent period last year and 22.4% for the year ended 30 April 2013.”
The guy sure knows how to grab your attention. He didn’t hurt the company’s cause when he added that, whilst continuing to invest rather heavily (£278 million) in new building sites, BKG has managed to remain a cash-generating machine. Net cash as of 31 October was £78.9 million compared to £44.7 million earlier in the fiscal year on 30 April 2013. In addition, Berkeley has £608.8 million on accounts compared to £426.1 million on 30 April. Oh, lest we forget, last year’s interim dividend of 15 pence per share pales in comparison to the 90 pps that will be paid out to shareholders in January 2014.
Remarkably, not only has BKG’s share price risen from 1,660 at 07 December 2012 and from 868 on 11 December 2008, but it is building more new houses than it was prior to the 2008 sub-prime mortgage and lending crisis that nearly crippled the housing construction market.
Total revenue increase for the first half was 19.7% over the same period last year (2013:£821.0 million; 2012:£686.0 million). This was accompanied by at 19.4% increase in gross margin dollars as well (2013:£240.3 million; 2012:£201.2 million). Net operating profit was up 19.2% and pre-tax profit gained 21.9% over the previous year (2013:£169.5 million; 2012:£142.2 million).
Perhaps, just as important as, if not more important than, the financial results, is the fact that BKG barely took advantage of the “Help to Buy” program. They used the plan on only 117 sales, and they expect to use it in fewer then 5% of their total sales ongoing, which equates to their current rate of usage of the plan. The 30,000-foot view of BKG and the economy in general is evidence of a well-strategized and well-run operation that does not easily buckle under extremely adverse economic conditions. Like the houses that it builds, Berkeley is built to last.
