Berkeley shares tank as profits fail to impress investors

(Sharecast News) - Shares in Berkeley slumped on Friday as investors were unimpressed with earnings forecasts for the next two years amid ongoing consumer caution. The company posted a 5% fall in pre-tax profit for the year to April at £530m compared to analysts' forecasts of £526.3m. New house sales rose to 4,047 from 3,521 in 2024.

Berkeley said it was confident about the future against a backdrop of falling interest rates and government plans to ramp up supply using brownfield sites.

The company also revealed that finance chief Richard Stern would become CEO, succeeding Rob Perrins, who will take on the role of executive chair as chairman Michael Dobson steps down in September after the group's annual general meeting.

"Berkeley is determined to play a full part in helping government meet its growth ambitions and has been greatly encouraged by the tone set by the brownfield-led housing agenda. Converting this into delivery is challenging particularly as it comes after a period of extreme cost inflation and complex regulatory change," the company said on Friday.

However, Interactive Investor head of markets Richard Hunter said consumer confidence was still cautious with the possibility of persistent higher interest rates keeping potential new buyers on the sidelines. Shares in the firm were down almost 10% in morning London trade.

Berkeley added it was on track for guidance for £450m in pre-tax profits for the current fiscal year, although this would mark a 15% drop year-on-year, with the group saying it expects a similar result for 2026-27.

"Even though the revitalised planning system is in train, it will take some time to bed in and the group has also pointed to the overhang of additional building regulations as part of the new industry regulator's formation," Hunter said.

"The share price has also wilted somewhat given the wider pressures, despite Berkeley's best efforts. The price is currently down by 33% from its most recent February 2020 pre-pandemic peak and has fallen by 15% over the last year, as compared to a gain of 6.3% for the wider FTSE 100."

"The damaging hit to the share price at the market open on Friday is further evidence that for the moment investors remain unconvinced by the outlook, and that the strategy is still a distant dream. As such, the market consensus of the shares unlikely to break out of its current rating as a 'hold', albeit a strong one."

Reporting by Frank Prenesti for Sharecast.com