MARKET REPORT: Investors in housebuilder Berkeley take a slump in profits and sales in their stride
Investors in housebuilder Berkeley took a slump in profits and sales in their stride.
The firm, founded by former Barnado’s boy Tony Pidgley, said that it and its rivals have been hesitating to embark on new projects despite a thirst for property in London.
It said the extended Brexit deadline, adding to three years of uncertainty for the sector, and next week’s General Election have put pressures on developers.
‘This is damaging to our economy and London where fewer developers are prepared or able to accept the high operational risk of bringing forward new homes, with supply falling as a consequence,’ Berkeley said.
It came as the company reported a drop of almost a third in pre-tax profit to £277m in the first six months of the financial year. Revenue dipped nearly 44 per cent to 931m.
However, management had already braced investors for a drop. As a result shares were up by 0.2 per cent, or 7p, to 4556p. Russ Mould of AJ Bell suggested the firm has become a ‘victim of its own success’, having delivered stellar returns after hoovering up prime land on the cheap in the wake of the financial crisis.
Berkeley then generated huge profit margins from building ‘posh’, predominantly in London and the South East.
The FTSE 100 rose 101.81 points to 7239.66 while the FTSE 250 was up 225.70 points to 20.933.03.
Advertising titan WPP was jostling for position at the top of the leaderboard after selling off 60 per cent of its data firm Kantar.
The stock market darling was tainted when former boss and founder Sir Martin Sorrell was forced to step down last year amid allegations, which he fiercely denied, that he used company money to pay for prostitutes.
But investors were duly impressed by the deal sealed by his successor, Mark Read, with private equity firm Bain Capital.
This will net about £950m for existing shareholders via a share repurchase programme.
The windfall, which represents around 40 per cent of the £2.4billion generated from the sale, will be returned in two tranches, planned to be completed by March.
The rest of the money will be used to pay down WPP’s debt pile. Read described it as a ‘major step in simplifying and focusing WPP’, adding that it ‘achieves the objective we set out in December 2018, to strengthen our balance sheet’.
The transaction, completed earlier than expected, sent shares up 2.9 per cent, or 27.8p, to 977.8p.
Oil prices rose after the world’s biggest producers, including Russia and Saudi Arabia, agreed to cut production by an additional 500,000 barrels per day in the first months of 2020. This will take the total reduction in oil production to 1.7m barrels a day.
Companies are trying to push the price up by cutting production. The cuts help offset an expected rise from countries which are not part of Opec, including the US.
The price of Brent crude rose almost 2 per cent to $64.55 a barrel.
Elsewhere, Aston Martin continued to race back amid speculation that Canadian F1 motor racing billionaire Lawrence Stroll – owner of the Racing Point team – is keen to take a chunky stake in the luxury car maker. Shares jumped 6 per cent, or 35.4p, to 630p, adding to a rise of more than 18 per cent on Thursday.
It was a satisfying day all round for the embattled company and its under-fire boss Andy Palmer, who was in South Wales with Welsh First Minister Mark Drakeford to open its new plant.
The factory, which will employ up to 750 workers, will make its £158,000 luxury SUV – the DBX – on which Aston Martin is pinning so much of its hopes.