Thursday, December 8, 2011

Berkeley clings to cash

Berkeley has a strong balance sheet and is conserving cash

Berkeley Group is no ordinary housebuilder - after all, it makes a profit and has no debt. Under normal circumstances this would not be that unusual or particularly impressive. But in today's trading environment it elevates Berkeley into a league of its own. What's more, unlike other housebuilders, it has not seen the need to write down the value of its land bank.

Berkeley has done well to shield itself from economic effects that are largely beyond its control, namely rising unemployment, the mortgage drought and planning restrictions. True, sales were down in the first half of the year from 1,630 to 968, but a change in the sales mix boosted average selling prices from GBP245,000 to GBP399,000. Average prices are expected to stay around this level in the second half, boosted by some properties sold in excess of GBP1m, before falling back. But management has been successful in generating and holding onto cash, and the group is now in a position to pick up cheap distressed assets at knock down prices should it choose to do so.

Meanwhile, Berkeley's strong balance sheet will help to steer the group through what is expected to be another tough year. Sales reservations in the first half were down 55 per cent on the previous year, and 60 per cent lower for the period since the collapse of Lehman Brothers in September. And cash held in respect of forward sales fell from GBP1.21bn in April, to GBP807.9m as of 31 October. The trend is likely to continue, and the group expects this to result in a lower level of production to match falling demand. As a result, Berkeley is also holding off on fresh land purchases, with just four new site agreements in the first half.

Broker Numis expects full-year pre-tax profits of GBP180m and EPS of 105p.

|BERKELEY GROUP(BKG)

|ORD PRICE:|815p|MARKET VALUE:|GBP984.7m|

|TOUCH:|808-815p|12-MONTH HIGH:|1,196p|LOW: 613p|

|DIVIDEND YIELD:|Nil|PE RATIO:|7|

|NET ASSET VALUE:|591p|NET CASH:|GBP138m|

|Half-year to 31 Oct Turnover (GBPm) Pre-tax profit (GBPm) Earnings per share (p) Dividend per share (p)

|2007|441|90.6|52.6|nil|

|2008|453|79.6|47.8|nil|

|% change|+3|-12|-9|-|

|

Guide to the terms used in IC results tables http://www.investorschronicle.co.uk/Companies/ByEvent/Results/Inbrief/article/20070903/d39ffee8-5a0d-11dc-9089-00144f2af 8e8/Guide-to-IC-results-and-tip-tables.jsp Guide to the terms used in IC results tables.

More analysis of company results

Berkeley is one of the strongest housebuilders, boasting a solid balance sheet, good cash flow and no debt. This places it in an enviable position for when the housing market recovers, and justifies the 38 per cent share price premium to net asset value. That said, being the strongest player in a deteriorating market is no recipe for short-term growth so, until the housing sector improves, the shares are fairly priced.

FairlyPriced

Jonas Crosland

Source Citation
"Berkeley clings to cash." Investors Chronicle - magazine and web content 8 Dec. 2008. General OneFile. Web. 8 Dec. 2011.
Document URL
http://go.galegroup.com/ps/i.do?id=GALE%7CA190686635&v=2.1&u=22054_acld&it=r&p=GPS&sw=w

Gale Document Number: GALE|A190686635

ArabicChinese (Simplified)Chinese (Traditional)DeutchEspanolFrenchItalianJapaneseKoreanPortugueseRussian

Berkeley has a strong balance sheet and is conserving cash

Berkeley Group is no ordinary housebuilder - after all, it makes a profit and has no debt. Under normal circumstances this would not be that unusual or particularly impressive. But in today's trading environment it elevates Berkeley into a league of its own. What's more, unlike other housebuilders, it has not seen the need to write down the value of its land bank.

Berkeley has done well to shield itself from economic effects that are largely beyond its control, namely rising unemployment, the mortgage drought and planning restrictions. True, sales were down in the first half of the year from 1,630 to 968, but a change in the sales mix boosted average selling prices from GBP245,000 to GBP399,000. Average prices are expected to stay around this level in the second half, boosted by some properties sold in excess of GBP1m, before falling back. But management has been successful in generating and holding onto cash, and the group is now in a position to pick up cheap distressed assets at knock down prices should it choose to do so.

Meanwhile, Berkeley's strong balance sheet will help to steer the group through what is expected to be another tough year. Sales reservations in the first half were down 55 per cent on the previous year, and 60 per cent lower for the period since the collapse of Lehman Brothers in September. And cash held in respect of forward sales fell from GBP1.21bn in April, to GBP807.9m as of 31 October. The trend is likely to continue, and the group expects this to result in a lower level of production to match falling demand. As a result, Berkeley is also holding off on fresh land purchases, with just four new site agreements in the first half.

Broker Numis expects full-year pre-tax profits of GBP180m and EPS of 105p.

|BERKELEY GROUP(BKG)

|ORD PRICE:|815p|MARKET VALUE:|GBP984.7m|

|TOUCH:|808-815p|12-MONTH HIGH:|1,196p|LOW: 613p|

|DIVIDEND YIELD:|Nil|PE RATIO:|7|

|NET ASSET VALUE:|591p|NET CASH:|GBP138m|

|Half-year to 31 Oct Turnover (GBPm) Pre-tax profit (GBPm) Earnings per share (p) Dividend per share (p)

|2007|441|90.6|52.6|nil|

|2008|453|79.6|47.8|nil|

|% change|+3|-12|-9|-|

|

Guide to the terms used in IC results tables http://www.investorschronicle.co.uk/Companies/ByEvent/Results/Inbrief/article/20070903/d39ffee8-5a0d-11dc-9089-00144f2af 8e8/Guide-to-IC-results-and-tip-tables.jsp Guide to the terms used in IC results tables.

More analysis of company results

Berkeley is one of the strongest housebuilders, boasting a solid balance sheet, good cash flow and no debt. This places it in an enviable position for when the housing market recovers, and justifies the 38 per cent share price premium to net asset value. That said, being the strongest player in a deteriorating market is no recipe for short-term growth so, until the housing sector improves, the shares are fairly priced.

FairlyPriced

Jonas Crosland

Source Citation
"Berkeley clings to cash." Investors Chronicle - magazine and web content 8 Dec. 2008. General OneFile. Web. 8 Dec. 2011.
Document URL
http://go.galegroup.com/ps/i.do?id=GALE%7CA190686635&v=2.1&u=22054_acld&it=r&p=GPS&sw=w

Gale Document Number: GALE|A190686635

Personalized MY M&M'S® Candies
ArabicChinese (Simplified)Chinese (Traditional)DeutchEspanolFrenchItalianJapaneseKoreanPortugueseRussian
(Web-Page) http://dinosaur.hunter2008.googlepages.comHoliday 2008
Lowest Prices and Hassle Free Returns at WWBW.com(Album / Profile) http://www.facebook.com/album.php?aid=10031&id=1661531726&l=cf90f7df9cShop the Official Coca-Cola Store!Email: leonard.wilson2009@hotmail.comWal-Mart.com USA, LLC

No comments: