The Investment Column: Berkeley builds on its reputation - Business - News - The Independent

The Investment Column: Berkeley builds on its reputation

Tony Pidgley earned a reputation in the late 1980s for being something of a housing market guru. The managing director of upmarket housebuilder Berkeley went substantially liquid just as house prices were riding for a fall. During the subsequent five-year property slump Berkeley bucked the sector trend, delivering a period of profits, earnings and dividend growth backed by a cash-rich balance sheet.

Results for the year to April continued this enviable run. Pre-tax profits rose 15 per cent to pounds 43.4m on turnover 18 per cent higher at pounds 334m. Earnings per share advanced a more modest 11 per cent to 34.8p, held back slightly by the dilution of February's pounds 73m rights issue.

The secret of Berkeley's success lies, as with any good property business, in "location, location and location" and the company is benefiting from a trend towards the small town and city centre sites it specialises in.

The bulk of its business is building executive-style homes, often with joint venture partners such as large land-owning utilities such as Thames Water, in and around London, a region which has seen the biggest house price rises in recent months. Projects in the capital include schemes in Barnes, Hampstead and near St Paul's Cathedral.

As the chart below shows, 80 per cent of the 1,560 homes sold last year went for at least pounds 100,000. The average selling price rose from pounds 190,000 to pounds 208,000, reflecting a shift towards more expensive homes rather than any significant upward movement in house prices, which are growing at about 4 per cent a year.

So much for the good news. Given Berkeley's impressive track record, when Mr Pidgley warns that activity in the housing market could stagnate in the run-up to the general election, commercial rivals and potential house buyers alike should take notice.

Assuming the Conservatives leave going to the country until the last possible moment next May, Berkeley reckons it could lose up to two months of sales worth pounds 60m due to uncertainty about the election outcome and its consequences for interest rates and consumer confidence.

But Berkeley is cautious, and net reservations in the first two months were up a fifth on the same period last year. Whether Berkeley can maintain its momentum as political uncertainties increase remains to be seen, but with pounds 35.6m of cash in the bank, it is better placed than most.

Merrill Lynch looks for pre-tax profits this year of pounds 56m rising to pounds 66.5m in 1997/98. That implies a p/e ratio falling from 16 to 13 with the high- flying shares closing 3p better yesterday at 617p. The executive homes market may not look so clever a year from now, so that is probably high enough.

News
John Travolta is a qualified airline captain and employed the pilot with his company, Alto
people'That was the lowest I’d ever felt'
Life and Style
healthIt isn’t greasy. It doesn’t smell. And moreover, it costs nothing
News
peopleThe report and photo dedicated to the actress’s decolletage has, unsurprisingly, provoked anger
Property
Home body: Badger stays safe indoors
property
PROMOTED VIDEO
News
The programme sees four specialists creating what they believe are three perfect couples, based on scientific matchmaking. The couples will not meet until they walk down the aisle together
tvUK wedding show jilted
Arts and Entertainment
US pop diva Jennifer Lopez sang “Happy Birthday” to Gurbanguly Berdimuhamedow, president of Turkmenistan
musicCorporate gigs become key source of musicians' income
Arts and Entertainment
You've been framed: Henri Matisse's colourful cut-outs at Tate Modern
artWhat makes a smash-hit art show
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig believed to be donning skis as 007 for first time
Sport
Mikel Arteta pictured during Borussia Dortmund vs Arsenal
champions league
Voices
Yes supporters gather outside the Usher Hall, which is hosting a Night for Scotland in Edinburgh
voicesBen Judah: Is there a third option for England and Scotland that keeps everyone happy?
Arts and Entertainment
Pulp-fiction lover: Jarvis Cocker
booksJarvis Cocker on Richard Brautigan
Arts and Entertainment
Robin Thicke and Pharell Williams in the video of the song, which has been accused of justifying rape
music...and he had 'almost no part' in writing it
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Sales Executive

£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

Payroll & Accounts Assistant

£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Senior BA - Insurance **URGENT**

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week