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Berkeley:Full year results
As expected, Berkeley announced weak full year results for the year to April 2005. Turnover declined by 16% (to £1,070m), operating profits were down 6% (to £199.6m) and pretax profits fell 11.7% (to £202.9m).
The figures for continuing operations were even weaker with operating profits declining by 13.3% to £162.3m.
Operating margins on the sale of houses improved to 18.6% (2004: 17.5%) but volumes dropped 6% to 3,570 units and the average selling price declined to £282,000 (2004:£283,000). Surprisingly, given the relatively better state of the commercial property market, commercial property sales declined by more than half to £67.5m (2004:£142.3m)
Higher interest and operating costs also contributed to the poor performance.
Net debt rose to £255.1m (from a £145.2m net cash position at the last year-end). The increase in debt was used to finance the repayment of £604m. to shareholders in December 2004.
The company says forward sales stand and £945.3m (2004:£948m) which covers much of this years sales. Berkeley says they are committed to a strategy of maximising returns to shareholders as opposed to concentrating mainly on the profit and loss account.
The company’s profits have not been impressive this year and its growth prospects look weaker as the housing market slows.
The company has issued units under a scheme of arrangement that we have explained in detail in our previous piece.
When investors buy units in BGH they will be buying is the income stream in the form of the share buyback plus any growth thereafter. The nominal value of the remaining payouts is £6.86, well in excess of the current share price of 915p.
The next payment (£2 per share) is due in December 2006 with further payments scheduled for December 2008 (£2) and December 2010 (£3).
Operating cashflows have declined by 33% (to £289m) and the prospect of the company requiring further borrowings to meet the next payout to shareholders cannot be ruled out. While we welcome the return of surplus cash to shareholders we are rather concerned that the company has returned borrowed funds for the first tranche (£604m).
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