Housebuilder launches pounds 73m cash call

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The Independent Online
TOM STEVENSON

City Editor

Berkeley Group, perhaps the best regarded of all the quoted housebuilders, issued an unambiguous statement of confidence in the housing market yesterday, launching a pounds 73m cash call to fund an accelerating land-buying program.

Tony Pidgley, chief executive, said he had confidence in the market and needed to be able to react quickly to increasing opportunities to buy good quality land and development schemes. Those tended to come when the market had been quiet, he said, adding: "we are positive about the prospects for housing and, given the changes in the structure of the housing industry in the last two years, believe the opportunity exists to continue to grow both organically and possibly through modest acquistions."

Since the half-year end last October, Berkeley has bought enough land for 913 houses on 53 sites at a cost of pounds 43m. With borrowings rising to pounds 16.8m, the rights issue will initially pay off debt and then be used to buy more sites.

Berkeley, which specialises in upmarket houses, believes a trend away from large volume green-field developments towards smaller town and city centre sites is emerging.

Purchases to meet that demand have included sites on the Thames near Hammersmith Bridge, a scheme near St Paul's cathedral in the City of London and a development in Brindley Place, a mixed commercial and residential development in Birmingham.

According to Mr Pidgley: "Larger urban schemes of this type are often carried out in association with major land owners, are capital intensive and involve up front financial expenditure. They also involve a longer gestation period and it is important to acquire the sites both when they are available on the right terms and in anticipation of future development needs."

The rights issue, a 2-for-9 call at 435p compares with Monday's closing price of 509p. The market's welcome for the issue was reflected in a fall of just 5p yesterday to 504p, well above the notional ex-rights price of 496p. Since last February, Berkeley's shares have risen more than 60 per cent from a low of 316p.

The City's enthusiasm for Berkeley has been underpinned by steady growth since the recession, despite the difficult housing market. Turnover has climbed from pounds 126.5m in the year to April 1992 to pounds 283.4m last year. During the same period, pre-tax profits have trebled from pounds 12.6m to pounds 37.6m.

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