TIDMBKG
RNS Number : 5114A
Berkeley Group Holdings (The) PLC
22 January 2020
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
THE BERKELEY GROUP HOLDINGS PLC
Proposed Capital Return
-- GBP1 billion to be returned to shareholders over the next two
years; an increase of GBP455 million
-- 50% increase in production and delivery over the next six
years, requiring significant investment
-- Underpinned by portfolio of 25 large, complex, long-term regeneration sites
-- Unique blend of expertise and financial strength to deliver
lasting contribution to society, the economy and natural world from
these sites
Introduction
The Berkeley Group Holdings plc ("Berkeley") is proposing to
increase its returns to shareholders by approximately GBP455
million over the next two years. Under its existing programme,
returns of GBP125 million were due to be made by 31 March 2020
(GBP155 million already having been made) and GBP280 million in
each of the following financial years. Under today's proposals,
approximately GBP500 million will be returned to shareholders by
means of a B Share Scheme in March 2020 and a further GBP500
million to shareholders in March 2021. Following this, the
intention is to revert to making annual returns of GBP280 million
in six-monthly instalments of GBP140 million through either share
buy-backs or dividends. The first of these regular GBP140 million
payments will be made for the six month period ending 31 March
2022; with subsequent payments of GBP140 million (GBP280 million
per annum) then made each six months up to and including 30
September 2025. Berkeley will continue to review its capital
allocation policy to determine if it is appropriate to return
additional capital to shareholders.
Current Proposed Cumulative
GBP'million Schedule Schedule increase
---------------------------------------- ---------- ---------- -----------
Paid for six months to 30 September
2019 140 140 -
Paid for six months to 31 March
2020 15 15 -
---------------------------------------- ---------- ---------- -----------
To be paid for six months to 31
March 2020 125 500 375
To be paid for six months to 30
September 2020 140 - 235
To be paid for six months to 31
March 2021 140 500 595
To be paid for six months to 30
September 2021 140 - 455
---------------------------------------- ---------- ---------- -----------
To be paid for six months to 31
March 2022 140 140 455
Thereafter six monthly to 30 September
2025 140 140 455
Strategy
Berkeley's purpose is to create homes, strengthen communities
and improve lives, using its sustained commercial success to make
valuable and enduring contributions to society, the economy and
natural world. To achieve this, Berkeley's long-term strategy is to
invest in opportunities with the right risk-adjusted returns, while
ensuring its financial strength reflects the prevailing macro
environment, and to make returns to the shareholders who support us
to achieve our purpose, through either dividends or share
buy-backs.
Since the end of the financial crisis in 2011, Berkeley has
acquired a number of long-term regeneration sites, a number of
which are now in, or coming into, production. In total, Berkeley is
in the process of bringing forward 25 large and complex
residential-led developments, of which 20 have been acquired since
the start of this period.
These sites typically deliver between 1,000 and 5,000 homes and
their development can take up to 30 years to complete. Their
complexity often means that it can be five or six years before the
first homes are delivered. They require significant upfront capital
investment, coupled with the unique expertise that Berkeley has
accumulated over the last twenty years and which is embedded
throughout its 21 autonomous operating companies. Berkeley is
transforming neglected industrial and brownfield land into thriving
new communities which deliver quality homes of all tenures,
biodiverse open spaces and a mix of shops, offices and amenities
for local people.
The successful transformation of these sites is founded on
trusted partnerships with local authorities and communities and
their development is directly aligned to the Government's strategy
for increasing the supply of good quality homes across all tenures.
Berkeley is now the only developer undertaking major brownfield
regeneration at scale in London and the South East as the
increasing risk and complexity of these activities has seen those
with lesser expertise and resources leave this area of the market.
The delivery of these sites is vital to meeting the housing needs
of our towns and cities, while relieving pressure on greenfield
land.
As noted in its Interim Results announcement of December 2019,
Berkeley has begun construction on 20 new sites, including a number
of the new large regeneration sites referred to above, over the
last 18 months. The execution of this strategy will see Berkeley
increase its annual housing delivery (including in its joint
ventures) by as much as 50% over the next six years. The majority
of its sales from these regeneration sites are at a lower average
selling price than properties completed in recent years.
With the land in place for the next phase of its business plan
and continued robust trading, last year Berkeley announced the
extension of its GBP280 million (GBP2.22 per share) annual
shareholder returns programme to 2025, with a targeted pre-tax
return on equity of at least 15% over this period. This return is
commensurate with the investment required to bring forward this
next generation of sites, their longevity and relative risk
profile, alongside Berkeley's lasting commitment to investing in
the wider community benefits that good development brings.
The long-term nature of the business, with an unrelenting focus
on the customer and communities, coupled with the complexity
associated with delivering tall buildings, means that Berkeley has
always focused on long-term value creation, as opposed to annual
profit targets. Over the six years to 30 April 2025, we are
targeting the delivery of GBP3.3 billion of pre-tax profit, with
the profit in any one year ranging between GBP500 million and
GBP700 million, depending upon the timing of delivery.
Shareholder Returns
Under the existing long-term programme Berkeley had planned to
return, through a combination of share buy-backs and ordinary
dividends, GBP280 million to shareholders each year up to and
including 30 September 2025. The returns are currently made in six
monthly amounts of GBP140 million by 30 September and 31 March in
each year. In the current financial year, Berkeley completed the
scheduled return to 30 September 2019 and has already returned
GBP15 million of the GBP140 million originally planned to be
returned by 31 March 2020.
Since 2016, like all responsible businesses, Berkeley has been
mindful of the volatile operating environment and has been cautious
in its investment, increasing its net cash position from GBP107.5
million to in excess of GBP1.0 billion.
In light of the progress made in bringing forward its new sites,
and its assessment of the prevailing operating environment, the
Board of Berkeley has reviewed its net cash position and future
requirements and now proposes to return GBP4.00 per share (approx.
GBP500 million) by the end of March 2020 via a B share scheme,
followed by a share consolidation. This would take the total
shareholder returns for the current financial year to GBP655
million.
Berkeley plans to return a further GBP4.40 per share (approx.
GBP500 million, taking into account the proposed B share
consolidation noted above) via a C share scheme by March 2021,
similarly followed by a share consolidation. The next shareholder
return, after these enhanced returns, is planned to be GBP140
million to be paid by 31 March 2022. This increases the amount of
capital being returned to shareholders by GBP455 million during the
Shareholder Return Programme through to September 2025.
The share consolidation is being calculated by reference to
Berkeley's share price, with the intention that the share price
after the share consolidation is approximately equal to the share
price beforehand.
Following the enhanced capital returns, Berkeley intends to
revert to a return of GBP280 million per year through to September
2025. However, Berkeley will continue to review its capital
allocation policy to determine if it is appropriate to return
additional capital to shareholders.
The Board of Berkeley views share buy-backs as an important part
of its ongoing strategy for capital allocation, reflecting the
benefit to shareholders of long-term value creation within the
business.
Remuneration Policy Review
In line with its commitment made following Berkeley's Annual
General Meeting in September and at the interim results for the six
months to 31 October 2019, the Board will consult with shareholders
on its Remuneration Policy, ensuring that it remains closely
aligned to Berkeley's strategy, including capital allocation.
Berkeley expects to send a circular to its shareholders by the
end of February 2020, seeking shareholders' approval to the
proposed amendments. This is expected to include resolutions to
enable the creation of the B and C shares and to consolidate the
existing ordinary share capital, with a view to completing the
payment of the B share cash return of GBP4.00 per share during
March 2020 and the C share cash return of GBP4.40 per share in
March 2021. A further announcement with full details of the
proposals will be made in due course.
Enquiries
The Berkeley Group Holdings plc 01932 868555
Richard Stearn
--------------
Novella Communications 020 3151 7008
--------------
Tim Robertson
--------------
UBS AG London Branch 020 7567 8000
--------------
John Woolland
--------------
Thomas Raynsford
--------------
The person responsible for arranging for the release of this
announcement on behalf of Berkeley is Richard Stearn, Group Finance
Director.
About UBS AG London Branch
UBS AG London Branch is authorised and regulated by the
Financial Market Supervisory Authority in Switzerland. It is
authorised by the Prudential Regulation Authority and subject to
regulation by the Financial Conduct Authority and limited
regulation by the Prudential Regulation Authority in the United
Kingdom. UBS AG London Branch acts as corporate broker to Berkeley.
In connection with its role as corporate broker, UBS AG London
Branch, its affiliates and its or their respective directors,
officers, employees and agents will not regard any other person as
their client, nor will they be responsible to any other person for
providing the protections afforded to their clients or for
providing advice in relation to the proposed B Share Scheme, the
contents of this announcement or any other matter referred to
herein.
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END
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