Profits at Berkeley Group fell by a fifth last year as the housebuilder signalled the end of a period of bumper earnings and said it would look outside its traditional territory in London.
Growth in the housing market has weakened in the past three years as extended political uncertainty has weighed on prices, particularly in London and south-east England, where Berkeley specialises.
Berkeley warned that margins would be squeezed this year by continued Brexit uncertainty and said it was “naturally cautious in this period of extended political and economic volatility”.
Profits for the year to the end of April were £775m, down from £977m in the previous 12 months, although that was higher than analysts had expected. Berkeley expects profits to fall by a further third in the 2019-20 financial year, leaving them only about half the level of 2017-18.
The company, which employs about 11,000 people, completed 3,698 homes during the year in London and the south-east, including more than 10% of London’s new private homes.
House prices fell by 3.8% in London year on year in the three months to March – the biggest fall since the financial crisis a decade ago – according to data from the building society Nationwide. Berkeley’s average selling price rose by 3% year on year in the 12 months to April, to £748,000.
However, the group has started to look beyond the capital in search of growth. Eight of 11 new developments launched in the past year were outside Greater London, including sites in the home counties in locations such as Winchester, Cranleigh and Fleet, as well as one in Birmingham.
Tony Pidgley, who founded Berkeley in 1976, said the company had produced a “solid performance”.
Berkeley bought 14 sites during the year, which analysts at the stockbroker Peel Hunt, led by Clyde Lewis, said was a “clear indication that [Berkeley] is once again seeing value in land”.
Berkeley, which is sitting on a cash pile of almost £1bn, continued to return cash to shareholders, paying out £252m in share buybacks and dividends during the year. It plans to give shareholders another £140m by 30 September 2019, alongside a dividend to be announced in August.
Housebuilders’ profits have been supported by the help-to-buy scheme, the government subsidy that provides financial support to first-time homebuyers. Many independent economists believe the scheme has acted to inflate house prices – and consequently builders’ profits.
Analysis by the investment platform AJ Bell in March found that Britain’s biggest housebuilders had paid out £2.3bn in dividends in their most recent financial year, in part thanks to the scheme.