Berkeley Group Holdings (LSE: BKG) posted its latest trading update on Friday (14 March), and the share price moved up a couple of percent in early trading.
The shares had been sliding since last September’s trading update, though the outlook back then seemed reasonable.
December’s interim results didn’t do much to help, as the company said it was “on track to achieve our pre-tax profit guidance of £525 million for the full year and at least £450 million for FY26.” A forecast profit fall from 2025 to 2026 wasn’t what investors wanted.
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Guidance reinforced
In the latest update, Berkeley said it “reaffirms its earnings guidance” at those same predicted 2025 and 2026 levels.
The company also said it’s “seen the modest improvement in sales reservations that we noted at the time of the interim results continue through this trading period with sales rates ahead of those achieved last year.“
We also saw praise for “the government’s planning reforms and housing delivery ambitions.” The company is, however, concerned by the extent and pace of regulatory changes introduced following the Grenfell disaster. It says the new rules “place significant pressure on the delivery of new homes.“
Berkeley looks fine on liquidity, with “net cash anticipated to be around £300m at 30 April 2025.” It’s down from the £474m reported at 31 October 2024, but it seems that’s due to land creditor settlements and share buybacks.
And to me, few things suggest management confidence more than a buyback programme.
Rebound chances
I see other signs that the Berkeley Group share price could bounce back in 2025. The current crop of analyst forecasts is one, putting the price-to-earings (P/E) ratio at under 10 and with a generally bullish consensus.
The expected earnings fall in 2026 is the real fly in the ointment though. And even the modest return to growth pencilled in for 2027 seems too far ahead to make much difference right now.
The forecast dividend yield at less than 2% doesn’t scream out to income investors. At least, not when Taylor Wimpey can boast a forecast 8.3% with Persimmon on 5%.
I do see an advantage for Berkeley. It focuses its development mostly on relatively large-scale urban redevelopments in the London area. That’s where I see a housebuilding recovery mostly likely to start.
And the company prioritises brownfield regeneration, with some prime land holdings, and that accounted for 92% of its first-half housing completions. It’s got to be the way forward for urban development.
Maybe more wobbles
In the long term, I’m bullish about Berkeley Group’s future, along with the rest of the sector. And it does seem to have the cash needed to withstand today’s pressures.
Can the share price bounce back this year? I think it could, if we see the return of economic growth coupled with more interest rate cuts. The weaker year forecast for 2026 could keep the share price down for longer though. And the low dividend is an issue that might keep some investors away. Positive outlook, but short-term wobbles ahead, I suspect, but definitely one to consider.
