House builder Berkeley Group has been cracking on with development at its Grosvenor Waterside site on the outskirts of Chelsea, as a result of which this year's earnings are likely to be towards the top end of brokers' forecasts.
Trading since the beginning of May have been in line with the board's expectations, Chairman Tony Pidgley is set to tell shareholders at the firm's annual general meeting (AGM) on Wednesday.
Out of the 185 remaining properties at Grosvenor Waterside which had previously been forecast to be delivered over the next three years, 149 have already been completed, benefitting earnings in the current year. All of these properties were paid for in full at the year-end and no additional cash will be generated by the business from the acceleration of these sales, although it is nice to get the cash in early.
Panmure Gordon said it would not be making any changes to its earnings forecasts, but then it was already at the top of the range of earnings forecasts. It is forecasting fiscal 2013 earnings per share (EPS) of 129.1p; the median forecast among analysts covering the stock prior to Berkeley's AGM statement was 125.28p.
Market conditions continue to remain resilient,especially in London, which has seen its appeal enhanced by the Queen's Diamond Jubilee celebrations and the Olympics, Pidgley believes.
A limited supply of quality new housing, particularly in the best locations in London and the South East, continues to provide strong support for house prices despite the underlying economic conditions and lack of "feel good" factor.
Berkeley has acquired three sites since the beginning of the year, predominantly on deferred terms, in Wapping, Hammersmith and Chiswick, and is on target to achieve its aim of growing the value of the potential gross margin in its land holdings to £3bn by April 2014.
Pidgley's AGM statement threw down a challenge to the government, calling for more help to the house-building industry to help kick-start the economy.
"Every home built by Berkeley creates some 3.5 jobs alongside the associated benefits of affordable housing, infrastructure improvements, creating fantastic new homes and vibrant places," Pidgley notes.
"The government has a vital role to play in stimulating investment by creating a stable, consistent and transparent platform to allow housing to be developed, however the changes in planning and the consultation on the taxation of residential properties have introduced uncertainties for businesses such as Berkeley," he grumbles.
"Consequently, this is expected to lead to lower levels of investment in house building generally. This means for Berkeley that we will maintain a strong and flexible balance sheet while investing more selectively in land and construction and therefore expect to be cash generative in the first half," Pidgley reveals.
The group has announced its intention to return £13 per share to shareholders by 2021 while maintaining balance sheet strength at a similar level to that seen at the end of April 2011, and said it remains on course to achieve this.