Berkeley Group shares down as pre-tax profit drops

Investing.com — Shares of the Berkeley Group (OTC:) fell today as the property developer reported a 7.7% year-on-year decline in pre-tax profit for the six months ending October 31. 

The slump to £275.1 million, from £298 million during the same period last year, was attributed to the challenges of a volatile macroeconomic environment and lower transaction volumes in the housing market. 

The decline in profit occurred despite a slight uptick in recent sales activity, as transaction volumes remain approximately one-third below pre-pandemic levels. 

The group mentioned resilient home prices and stable construction costs but flagged a broader need for improved consumer confidence and economic stability for a meaningful recovery.

Berkeley’s new 10-year strategy, “Berkeley 2035,” aims to navigate current challenges while capitalizing on long-term opportunities. 

The strategy will focus on reinvestment in land, the development of its Build to Rent platform, and shareholder returns, with £7 billion earmarked for these initiatives. However, the dip in profits and market sentiment overshadowed these plans, as investors remain cautious.

The company reiterated its guidance for £525 million in pre-tax profit for FY2025 but warned that meeting long-term return on equity targets could be challenging under current market conditions. 

As policymakers push for a brownfield-led housing agenda to address a severe housing shortage, Berkeley remains optimistic about its position but acknowledges that translating government plans into viable projects will take time.

Berkeley’s results reflect broader headwinds in the UK housing market, where a lack of affordable housing and regulatory uncertainties weigh heavily on development activity. 

The group’s net cash position decreased to £474 million from £532 million in April, reflecting higher shareholder returns and investments.