Berkeley Group chairman Tony Pidgley backs Remain as the housebuilder’s revenues fall
Berkeley group's chairman, the venerable Tony Pidgley, has backed the Remain side as the company announced this morning that its revenue had fallen.
The figures
Revenues fell at the UK housebuilder from £2.12bn to £2.05bn in the year to April 30. Pre-tax profits were also down, from £539.7m to £530.9m.
The company said that there is "robust underlying demand" but that current uncertainty in the property market, combined with the company making fewer new scheme launches, meant new home reservations were down 20 per cent.
Berkeley cited reduced ground rents for its fall in pre-tax profits, with high-end properties in the UK suffering after changes to stamp duty rates, and what Berkeley described as "a dampening effect" of the upcoming referendum on UK investment.
The company acquired 12 sites in the year, increasing its inventories by £602m.
Berkeley's shares edged down in early morning trading, falling by 0.2 per cent.
Why it's interesting
Housebuilders have generally been confident about their future prospects, regardless of the outcome of the EU referendum, which was echoed by Pidgley today, who said the company was "confident about the future of our business", whatever the country may decide on the 23 June.
Surveyors have predicted the first fall in UK house prices since 2012 due to Brexit jitters, but say that the effects are likely to be temporary.
However, Berkeley's results today reflect another trend hitting the property market: waning interest in high-end property. Prime central London properties will be the most affected by this, but developers in the middle of the market are certain demand for London homes outside of the centre will be resilient.
What Berkeley said
Tony Pidgley, chairman, said:
The outcome of next week's referendum on Britain's membership of the European Union is significant for the UK's housebuilding and property sector.
Berkeley supports a vote to remain in the EU. London's status as the world's best big city is underpinned by labour mobility, cultural diversity and a constant influx of talent and investment from around the world, and the UK economy in turn is powered by the success of our capital city.
However, London will always be a world city and a highly desirable place to live, work and play. For Berkeley, our brand, our land holdings and our forward sales will continue to differentiate and underpin our performance over the long term and, while we have a clear view about what the better outcome would be on Thursday 23 June, we are confident about the future of our business.
What analysts said
Anthony Codling, equity analyst at Jefferies International, said:
In our view an investment in Berkeley is a call on London and a backing of Tony Pidgley. Berkeley has the highest London exposure of all the UK housebuilders we follow and Tony Pidgley is widely regarded as one of the smartest operators in the London housing market.
We believe that the fundamentals of the London housing market remain strong, it is a growing city with an accelerating undersupply of homes, and management have a strong track record of managing and steering the business through the twists and turns of the cyclical London housing market.
In short
Berkeley has been slightly bruised by Brexit – but the company's future remains strong.