Berkeley Group Reaffirms Earnings Guidance Amid Modest Sales Improvement
Why we think this is good
The Berkeley Group's trading update indicates a mixed performance, with profit guidance reaffirmed but modest revenue growth and some concerns around regulatory changes. The company's strong financial position and low valuation suggest it is well-positioned to navigate the current challenges.
Key Points
- Reaffirmed earnings guidance of at least £975 million pre-tax profit across FY25 and FY26
- Modest improvement in sales reservations, but still below pre-pandemic levels
- Concerns over regulatory changes, including new Building Safety Levy
- Maintained strong financial position with net cash of around £300 million expected
- Stock trading at low valuation relative to expected profitability
Summary
Berkeley Group has reaffirmed its earnings guidance to deliver at least £975 million of pre-tax profit across FY25 and FY26, indicating profit growth. However, the company notes a modest improvement in sales reservations, with sales rates ahead of last year but still below pre-pandemic levels. Berkeley remains concerned about the impact of regulatory changes, including the new Building Safety Levy, which it believes place significant pressure on the delivery of new homes. The company has maintained a strong financial position, with net cash anticipated to be around £300 million at the end of April 2025. Broker targets suggest the stock is trading at a low valuation relative to its expected profitability.