By Maximilian Clarke
Persistent demand for new housing has helped Berkeley Group (LSE: BKG) boost profits by 64.1% over the 6 months ending October 2011.
Revenue was up 20% to more than £400 million, delivering 70% increase in earnings per share, whilst the group hold some 26,000 plots, predominately in the South East.
Overall construction orders in the UK have been falling since 2006, accelerating since the Coalition Government’s cuts agenda. Due predominately to demand in London and the South East, the private housing sector has bucked the downward trend, almost doubling in number over the same period.
“I am delighted to report a strong performance in the first half of the year, in which basic earnings per share have increased by approximately 70% when compared with the same period a year ago,” commented R C Perrins, the Group’s managing Director. “Looking forward, the further increase in forward sales and the strong balance sheet, which remains ungeared, means Berkeley is increasingly well positioned to capitalise on the current market conditions.
"In terms of the housing industry more generally, the recent announcements which are aimed at stimulating the delivery of new homes are welcome. On the supply side, the draft National Planning Policy Framework addresses many of the obstacles within the current planning system and, if implemented, will put in place the conditions to allow developers to bring forward new planning applications with the necessary safeguards to ensure this takes place in harmony with the natural environment.
“On the demand side, the innovative new build mortgage indemnity scheme backed by Government and developers is expected to enable many people who currently aspire to own their own property to take the first steps on the housing ladder. These are people who are currently prevented from buying a home by the high upfront deposit required by today's mortgage market, as opposed to the ongoing affordability. Building new homes is proven to contribute to economic growth by creating jobs and supporting consumer confidence and these are important and welcome initiatives in support of our industry and the wider economy. For each new home Berkeley builds, an average of 3½ new jobs are created.
“The Localism Agenda and the Government's Plan for Growth represent the most significant changes to the housing industry for a generation. When implemented effectively, I believe Localism will achieve housing and economic growth at the same time as ensuring powerful local engagement, decision making and benefits for local communities. The challenge for Government policy at both national and local level is to reduce the burden of unnecessary red tape, regulation and bureaucracy which acts as a barrier to more housing by slowing delivery, in some cases by more than a year, following a resolution to grant planning. Without addressing this issue, I fear planning on a large scale will become the sole preserve of the strongest and most financially secure developers which will be detrimental to the desire to increase supply and competition to stimulate economic growth.”
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