Berkeley shares down 8% as FY25 profit slips and forward sales decline

Investing.com -- Berkeley Group (OTC:BKGFY) shares dropped over 8% on Friday following the release of its FY25 results, as pre-tax profit declined 5% year-on-year to £528.9 million and forward sales fell sharply to £1.4 billion from £1.7 billion. 

Despite meeting or exceeding most forecasts and reaffirming profit guidance through FY27, the fall in key metrics weighed on the stock.

Revenue rose slightly to £2.49 billion from £2.46 billion. Operating profit reached £500 million, with operating margin up to 20.1% and gross margin increasing to 26.6% from 26.2%.

Cost of sales was £1.83 billion, 1% lower than expected. Operating costs fell 3%, while build costs remained stable.

Berkeley delivered 4,047 homes (excluding joint ventures), up 15% year-on-year and slightly ahead of consensus. Joint ventures contributed an additional 282 units. 

The average selling price dropped 11% to £593,000, 3% below estimates, reflecting changes in product mix.

Earnings per share were 371.8p, down slightly from 373.9p. Return on equity stood at 14.9% and return on capital employed at 16.5%. 

Net cash was £337.3 million, lower than consensus estimates of £396.4 million, after £381.5 million was returned to shareholders via dividends and buybacks.

Land holdings total 52,714 plots, with a future gross margin potential of £6.72 billion. Berkeley replaced £0.5 billion of the £0.7 billion gross profit extracted from land during the year. 

The group acquired three new sites and secured five planning consents, including in Earls Court, Leyton, and Stratford.

Under its “Berkeley 2035” strategy, the group has allocated £5 billion toward land investment, build-to-rent (BTR), and shareholder returns. 

Four BTR buildings totaling 762 homes were transferred to the rental platform in FY25, with two more added post-year-end. 

The first rental launch is planned for spring 2026, with 1,122 homes in active production and a pipeline of 2,878 units.

Joint ventures added £14.7 million to pre-tax profit. Investment properties were valued at £145.7 million following BTR transfers.

The company reaffirmed pre-tax profit guidance of £450 million for FY26 and similar levels for FY27. 

It continues to target a 17% operating margin and 15% return on equity over the cycle.

Leadership changes were confirmed: Rob Perrins will become Executive Chairman after the September AGM, while CFO Richard Stearn will succeed him as CEO.

“A new CFO has not been announced, but we suspect an internal appointment will be made between now and the AGM,” said analysts at RBC Capital Markets in a note.