Homebuilder warns high land prices must be cut

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BERKELEY, the South-eastern builder, celebrated the return to health of the house market yesterday with an 81 per cent jump in pre- tax profits and a 17 per cent rise in the dividend, writes Tom Stevenson.

But Tony Pidgley, chief executive, warned that sales in June had been below expectations and said overheated land prices would have to fall if they were to move into line with modestly rising house prices.

Driven by an increase in house sales from 1,226 to 1,404, profits from continuing activities rose from pounds 15.8m to pounds 28.6m. There was also a pounds 10.9m one-off profit from the liquidation of part of a commercial property joint venture set up in 1991, taking reported profits to pounds 39.5m.

Despite the dilution caused by a one-for-four rights issue in March 1993, earnings per share were 51 per cent higher at 24.1p, excluding property sales, compared with 16p last time. A final dividend of 5.1p made a full-year total of 7p (6p). .

Mr Pidgley confirmed the cautious comments of other housebuilders recently, admitting that sales so far in June had been about 10 per cent below those recorded in May. Internal budgets, forecasting a maintained performance, had also been disappointed.

He warned that land prices had moved dramatically over the past year and, with house prices only expected to rise by 2 or 3 per cent this year, they would have to fall.

Despite the high prices, Berkeley increased its land holdings by about 1,000 plots to 5,500 during the year, spending pounds 80m on land purchases. The average selling price rose slightly last year from pounds 150,000 to pounds 160,000.

Mr Pidgley said Berkeley had sold several properties in Hampstead during the year for more than pounds 1m. He estimated that residential property prices in London had risen more than 20 per cent since September 1992.

The shares, which had fallen 30 per cent since February, closed 2p lower at 398p.

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