UK housebuilder Berkeley Group shrugged off a drop in profits of almost a third as it warned that it remained “alert to market risks” around next week’s general election and Brexit.
The London-focused builder on Friday said the slide constituted earnings “return[ing] to normal” after a bumper few years when it had cashed in on cheap land purchases made after the 2008 financial crisis.
Chief executive Rob Perrins said “profits in the last two years have been exceptional”.
In the six months to October, Berkeley’s pre-tax profits fell 31 per cent to £278m on revenues that dropped more than 40 per cent to £931m. Average selling prices fell almost 13 per cent to £644,000. Berkeley said this was expected and reflected “the mix of developments and [their] varying stages”.
Reflecting an unwillingness to make big spending commitments, net cash rose to £1.1bn for the period, a more than fivefold increase since the Brexit referendum. Mr Perrins said that uncertainty surrounding Brexit “has made us more cautious” and was by far the biggest reason for the company’s reticence to spend.
“When you don’t have certainty, you want a higher return to take a risk,” he added. “We haven’t bought as much land as we normally would have done.”
Looking forward to next week’s election, Mr Perrins noted that the company prized stability over any specific political outcome: “The last position I would like to get into from a business point of view is a hung parliament and potentially another election very quickly.”
Housebuilders including Berkeley have diversified away from central London in recent years as house prices in the capital have fallen.
But Mr Perrins remained upbeat on the capital’s long-term prospects, and stressed that 80 per cent of the group’s business remained within London. “With a lot of the others moving out, that gives us a competitive advantage,” he said.