Berkeley Group has said it is not currently investing in new projects amid an “uncertain, unpredictable and burdensome” environment for new housing development.
Despite this, the firm said it will target £1.5bn in pre-tax profit and aim to maintain net cash above £400m over the next few years, to 30 April 2026.
Although the developer-homebuilder posted positive numbers in its interim results announced on 8 December, chief executive Rob Perrins criticised the planning system and regulatory uncertainty.
In the half-year to 31 October 2023, the firm posted a pre-tax profit of £298m and an operating margin of 19.5 per cent. The homebuilder also increased its cash reserves from £410m to £422m.
Perrins said: “Despite urban regeneration being a clear national priority, it has become increasingly difficult to progress this form of development, as changes to planning, tax and regulatory regimes have created an increasingly uncertain, unpredictable and burdensome environment.
“This is driving investment away from urban areas, restricting growth and preventing homes and other tangible benefits being delivered.”
He also expressed concern about the impact of contractor insolvencies on the supply chain, amid lowering demand for construction services.
Perrins took a rosier view of build-cost inflation, saying material prices had “receded to negligible levels in line with our expectations”.
He said Berkeley was aiming to de-risk and alter the business plan to reflect the operating environment.
He also said that if Berkeley did not start to invest again by 30 April 2027, the firm would send 100 per cent of its post-tax profit from the start of the current financial year back to shareholders.
The homebuilder has previously issued warnings about the state of the construction market. In its last trading update, in September, it revealed it did not buy any land over the summer period, citing the complexity of the planning system.
In June, it warned that its future pipeline of new homes would be threatened by the “planning environment and regulatory uncertainty”.
The wider industry reacted positively to Berkeley’s most recent trading update.
Charlie Huggins, manager of the quality shares portfolio at investment broker Wealth Club, said: “Berkeley has delivered a solid performance in a difficult trading environment. The strength of Berkeley’s operating model, which converts large and complex urban regeneration sites into beautiful homes, is shining through.
“However, the planning and regulatory environment remains extremely complex, meaning Berkeley is focusing on existing sites rather than committing to new schemes.”
Clive Chalkley, head of the real estate sector team at law firm Gowling WLG, said: “The housebuilding market is gradually returning to a good level of output, despite issues around future investment projects.
“Berkeley Group is rightly taking a cautious approach to implementing new development to offset this and has managed to weather the recent economic storm well through advancing/enhancing existing projects.”
Source: Construction News