Berkeley Group chairman Tony Pidgley has denied calling the top of the South-east luxury homes market, after he sanctioned a
£1.7 billion shareholder dividend.
To analysts’ surprise, Berkeley unveiled the 10-year payout plan as part of the group’s preliminary results, which saw pre-tax profits climb 23.5 per cent to £136.2 million in the year ended 30 April 2011.
The new strategy means co-founder Mr Pidgley - who has a 5 per cent stake in the company - will receive £87m while Lloyds Bank, as a 12 per cent stakeholder, will get £205m.
But Mr Pidgley told Construction News: “We are not making any predictions and we are not calling the top of the market. It shouldn’t be interpreted like that.
“Housebuilding is cyclical; you just have to get your timing right and invest at the right time in the cycle… That means you can’t run it as a corporate, setting the policy and doing the same thing every day.”
He said that shareholders are now benefiting from supporting the company when it invested £500m in land in 2009.
“We did not make the last payment, we said to them [we should] keep it and invest it; we have invested it and now is the right time to reward them for their investment.”
Speaking about the London market, the chairman said “it was not a time to be pushing prices” and that some “trophy sites” have been overpriced.
“A lot of people are entering the London market because it is safe. I think on land prices we are being cautious, but we always have been,” he said.
Analyst Robin Hardy of Peel Hunt said he was surprised at the scale of the payout. “It says they are extremely cautious about the state of the market and it says if you carry on investing new capital into this market you will make diminishing returns.
“While the rest of the industry is piling into the South-east, the company that has always got it right is saying ‘no more’,” he said.
But Chris Millington at Numis Securities said Berkeley would not hold back from new investment in the South-east. “There is every chance they could be quite a bit bigger than now. The fact that the announcement was made this early was a bit of a surprise.”
In its financial report, Berkeley said the long-term threat to its cost base comes from building, design standard or planning tariffs and further regulation of the industry. But it also said the Localism Bill was in line with its ethos of working with communities.