Bloomberg News

Berkeley Group Shares Rise Most Since 2007 After Profit Jumps

December 07, 2012

Berkeley Group Holdings Plc (BKG), the U.K.’s second-largest homebuilder by market value, climbed to the highest since 2007 in London trading after reporting a 45 profit increase for the fiscal first half.

The shares rose as much as 7.1 percent to 1,767 pence after Berkeley said net income climbed to 107.5 million pounds in the six months through October from 74 million pounds a year earlier. The company will pay a dividend for the period of 15 pence a share, the first in five years, according to a statement today.

The U.K.’s fragile recovery from a double-dip recession has hampered the property market and restricted mortgage lending, prompting the Bank of England to bolster the market with its Funding for Lending Scheme. Mortgage approvals rose to a nine- month high in October and a better-than-expected labor market is helping to stabilize the housing market.

“The group has seen a strong trading performance across the board, with increases in average selling prices, volumes and net margins,” Rachael Applegate, an analyst at Panmure Gordon & Co., said in a note to investors today. The broker increased its 12-month target price for the shares to 1,650 pence from 1,390 pence and kept its hold rating.

Berkeley was up 80 pence, or 4.9 percent, to 1,730 pence as of 9:10 a.m., giving the company a market value of 2.3 billion pounds. The shares have risen 35 percent this year compared with a 64 percent gain for the seven members of the Bloomberg EMEA Homebuilders Index.

Higher Prices

Berkeley sold 1,927 homes in the first half compared with 1,506 a year earlier. The average price climbed to 335,000 pounds from 254,000 pounds as the company focused more on projects in central London.

“The London market has been underpinned by international buyers and U.K. buyers who are equity rich,” Managing Director Rob Perrins said in an interview.

The company invested 202 million pounds in land in the first half, acquiring around 1,965 plots on five sites, including the former headquarters of News Corp.’s News International unit for 150 million pounds, according to the statement.

Berkeley’s gross profit margin widened to 29.3 percent from 28.8 percent, while its operating margin rose to 19.6 percent as the company reduced its costs.

“We’ve been able to build more homes with the same number of people, so our overheads have come down,” Perrins said by phone. “That’s what has maintained the margin.”

To contact the reporter on this story: Christopher Spillane in London at cspillane3@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.


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