Berkeley profit up, echoes optimism on London, south east UK

Fri Jun 29, 2012 6:25am EDT

(Reuters) - British homebuilder Berkeley Group Holdings Plc (BKGH.L) reported a higher full-year profit and said demand in London and south-east England would remain strong, echoing other real estate developers that are also underpinning their growth on the two areas in 2012.

The residential property market in London and south-east England has remained robust. But conditions in the rest of the country remain challenging, largely due to tight mortgage financing amid a tough economic environment.

"London's a very stable market, it has very consistent demand for sales," Berkeley Group Managing Director Rob Perrins said. "It has a much better feel-good factor compared to the rest of the (UK) economy."

Last month, British real estate developers Telford Homes Plc (TELF.L) and St. Modwen Properties Plc (SMP.L) said the residential property market in London and the south east of England remained robust and both companies forecast full-year profit growth.

"Improving returns are not yet priced in," J.P.Morgan Cazenove analyst Emily Biddulph said.

"Flat market conditions mean that house builders will grow margins and returns on equity year-over-year, over the medium term."

HIGHER SALES, HIGHER PRICES TOO

London-focused Berkeley said the value of its land bank grew 12 percent to 2.58 billion pounds ($4.00 billion) as of April 30.

"We will also aim to meet our objective to grow the value in the land bank to 3 billion pounds, now by April 2014, one year earlier than originally intended," Berkeley said.

Berkeley's land bank remains one of the most valuable in the sector, with its London and South East geography, Shore Capital analyst Jon Bell said.

The company, which unveiled plans to return cash to shareholders through a targeted 13 pounds per share by 2021 last year, also said it was considering buying back shares.

For the full-year ended April 30, the builder and developer said pretax profit rose to 214.8 million pounds, from 136.2 million pounds a year earlier, benefiting from the sale of more homes at higher prices.

Residential revenue, excluding land sales, rose mainly on a 40 percent growth in the number of homes Berkeley sold during the year. The average selling price for these homes was 280,000 pounds, up from 271,000 pounds in the prior year.

"We now expect the group to materially outperform our previous average sales price assumptions," Numis Securities' Chris Millington said and upgraded the company's stock to "buy."

Shares of the company were up 4 percent at 1418 pence at 0600 EDT on the London Stock Exchange on Friday, touching a four-and-a-half year high earlier in the session.

(Reporting by Brenton Cordeiro in Bangalore; Editing by Joyjeet Das)