CHIEF EXECUTIVE'S REVIEW

 

Purpose, Long-term Strategy and Capital Allocation

 

Berkeley's purpose is to build quality homes, strengthen communities and make a positive difference to people's lives, using our sustained commercial success to make valuable and enduring contributions to society, the economy and natural world.

 

We are the only large UK homebuilder to prioritise brownfield land, as we progress 32 of the country's most complex regeneration projects, 26 of which are in delivery.  Each of these neighbourhoods is uniquely designed in partnership with local councils and communities and includes valuable public amenities and infrastructure, alongside tenure-blind private and affordable homes. 

 

We have made strong progress across this portfolio in the period as we transform neglected land into welcoming and sustainable neighbourhoods.

 

-    At Alexandra Gate, Haringey we are transforming a derelict 12-acre gasworks into a welcoming mixed-use neighbourhood with over 1,800 private and affordable homes, 125,000 square feet of commercial space, and 2.5-acres of parks and public open space. Over 800 homes have been delivered to date, along with a community hall, nursery, food store, coffee shop and the popular Hornsey Park.  The masterplan has evolved to include 187 build-to-rent homes with high quality communal facilities including a swimming pool, gym and co-working space that will represent the first delivery of homes in the Berkeley Living portfolio.

 

-    At Oval Village we have unlocked three neighbouring sites, including a former gasworks and Tesco supermarket, to create an eight-acre mixed-use neighbourhood next to The Kia Oval Cricket Ground in Zone One.  The masterplan includes 1,350 private and affordable homes, high quality public spaces and 170,000 square feet of commercial space, all within walking distance of Oval and Vauxhall stations.  Over 500 homes have been delivered, as well as a replacement Tesco, and a highly sustainable 70,000sqft office building.  

 

Berkeley is a unique, asset-focussed development business that seeks to manage risk and generate value through market cycles, with its inherent latent value rooted in its unrivalled land holdings.  We seek to find the optimum development solution for each site in terms of the social, environmental and economic value for all stakeholders, alongside the returns we deliver to our shareholders. We firmly believe these objectives are mutually compatible and reinforcing. The pace at which we deliver homes from our land holdings is determined by the prevailing operating environment and we will always adopt a long-term approach, prioritising financial strength above annual profit targets.

 

Our capital allocation policy is clear:  first, ensure financial strength reflects the cyclical nature and complexity of brownfield development and is appropriate for the prevailing operating environment; second, invest in the business (land and work-in-progress, including build to rent assets) at the right time; and third, make returns to shareholders through share buy-backs and dividends.

 

Strategy Positioning - "Berkeley 2035"

 

In December 2024, Berkeley announced a 10-year strategy to drive long-term shareholder value by using its operating expertise and balance sheet strength to capitalise on investment opportunities as they arise while taking account of the volatility that persists in the operating environment.

 

Berkeley 2035 is underpinned by an agile capital allocation framework that identifies £7 billion of free cash flow to deploy over the next 10 years to drive value, based upon the following initial allocation:

 

		£'billion
Land investment to broadly replace land holdings used over 10 years		2.5
Existing BTR commitment for initial 4,000 home portfolio		1.2
Minimum level of shareholder returns committed		2.0
Flexible allocation to be invested or returned to shareholders		1.3
Free cash flow to be deployed over 10 years to 2035		7.0

 

 

As indicated by the £1.3 billion identified for flexible allocation, Berkeley will adopt an agile approach able to flex a greater allocation to new land, its BTR platform or shareholder returns as the operating environment evolves. Capacity for further investment or shareholder returns will be created to the extent third party funding (debt or equity) is introduced to the BTR platform over the next 10 years.

 

Berkeley 2035 comprises three principal value drivers:

 

(i)         Increase return on capital in the core business by:

 

·    Optimising the value of existing sites through re-planning activity, alongside the delivery of high-quality placemaking and customer service;

 

·    Securing the inherent value within our pipeline sites and bringing them forward into delivery; and

 

·    Selective investment in new sites where Berkeley can use its added-value development expertise to create great places and homes, and value for shareholders.

 

(ii)        Establish our own market-leading BTR platform of 4,000 high-quality rental homes and significantly grow its value by:

 

·     Creating a permanent route to market with income generating assets attractive to institutional core capital; in order to capture the fundamental BTR value drivers of rental growth and stabilised investment yields;

 

·     Identifying multiple and flexible exit routes post stabilisation, including:

 

-    Disposal of individual BTR buildings or a series of portfolios;

 

-    Introducing third-party equity, Berkeley retaining management under a fee arrangement; or

 

-    Debt introduction, with allocation to the BTR assets; and

 

·     Maximising the opportunity to capture superior returns through best-in-class platform and service.

 

(iii)        Make returns to shareholders, through share buy-backs or dividends; a strategy that will grow the long-term value of the Company, while retaining financial strength:

 

·    Targeting a minimum level of shareholder returns of £2.0 billion over 10 years;

 

·    £0.9 billion of which will be returned on a phased basis by 30 September 2030;

 

-    £121 million of the £132 million of share buy-backs in the period complete the first £260 million

 

-    £11 million contributes to the remaining £640 million to be paid by 30 September 2030

 

·    £1.1 billion to be paid by 30 September 2034.

 

 

Berkeley 2035 incorporates the necessary resilience to navigate what remains a volatile near-term operating environment, while providing Berkeley with the flexibility to use its entrepreneurial property expertise to maximise the value and potential of our land holdings and BTR platform, grow net asset value per share over the investment phase of the 10-year period, growing profitability and delivering returns to shareholders at the right point in the cycle.  We continue to target operating margin of 17.5% to 19.5% and a long-term pre-tax ROE of 15%.

 

Shareholder Returns

 

Shareholder returns during the six-month period totalled £132.0 million which were delivered via the buy-back of 3.5 million shares (average price: £37.19 per share):

 

Shareholder Returns for the six months to 31 October	2025		2024
	£'m		£'m
Dividends paid	-		34.9
Special dividend paid	-		183.8
Share buy-backs undertaken	132.0		23.3
Shareholder return for the period	132.0		242.0

 

Berkeley has now completed the 2011 Shareholder Returns programme, and also the first £260 million of the £2.0 billion minimum shareholder returns target under the Berkeley 2035 strategy, launched in December 2024: 

 

Berkeley 2035 Capital Allocation		Target		Returned	Share	Dividends		Amount
Minimum target 10-year		Return		To Date	Buy-backs	Paid		Remaining
shareholder return		£'m		£'m	£'m	£'m		£'m
Due by 30 Sept 2025		260		260	227	33		-
Due by 30 Sept 2030		640		11	11	-		629
Due by 30 Sept 2034		1,100		-	-	-		1,100
Total		2,000		271	238	33		1,729

 

The next shareholder returns target is £640 million by 30 September 2030, which will be made through a combination of share buy-backs and dividends.  These will be phased over the intervening period in line with Berkeley's flexible capital allocation model.

 

 

Housing Market and Operations

 

Sales

 

In the September Trading Update, which covered the first four months of the financial year, Berkeley noted stable trading levels following a consistent pattern with the prior year.  Unsurprisingly, sales in the remaining two months of the period were more subdued, due to the uncertainty leading up to the Budget, and as a consequence, the value of sales reservations secured in the first six months as a whole is around 4% lower than the equivalent period last year; still some 30% down over the last two years.

 

Encouragingly, customer interest has been good, as evidenced by the level of enquiries and leads. With the Budget uncertainty behind us and the positive reaction of the Bond markets, we anticipate interest rates will resume their downward trajectory which, coupled with the real wage growth of recent years, will improve both affordability and sentiment. This in turn will create the conditions in which customers regain the confidence to commit to property purchases in anticipation of the market recovering.

 

Against this backdrop, forward sales have reduced to £1,137 million (30 April 2025: £1,403 million) with Berkeley maintaining a disciplined approach to pricing and achieving values slightly ahead of business plan assumptions set at the start of the financial year.

 

Turning to Berkeley Living, our new Build to Rent platform, we continue to see strong rental demand amidst reduced supply of homes for rent, reinforcing the attractiveness of residential investment.

 

Berkeley's outlook for its markets remains positive.  London's enduring global status, exceptional connectivity, and cultural vibrancy continue to underpin demand.  It remains the biggest financial centre in Europe and second biggest in the world. It is ranked similarly for inbound real estate investment and attracts almost three times as much Foreign Direct Investment as any other European City. Oxford Economics ranks it the number one city in the world for human capital and it is the leading global city for tech HQs over the last five years.

 

Coupled with the structural undersupply of new homes in the capital, these dynamics provide long-term support for capital values and rental growth. 

 

With a portfolio of high-quality, well-connected developments across London - available for both sale and for rent - Berkeley is well placed to capture demand as market conditions improve.

 

Land and planning

 

During the period, Berkeley has contracted to acquire two new sites, both subject to planning:

 

·        A 4.5-acre site in West London; and

·        A 145-acre site in the London Borough of Bromley, with capacity for a large-scale housing-led development.

 

Given the anticipated timescales to secure viable planning consents, both sites have been added to the pipeline, rather than the land holdings, and could potentially contribute to the second half of Berkeley 2035.

 

Berkeley has also secured three new planning consents at:

 

·        Borough Triangle (890 homes);

·        Hemel Hempstead (485 homes); and

·        Former Brighton gasworks site (480 homes).

 

Over the period, more than 30 planning amendments were agreed, including the next phase of the masterplan at Woodberry Down and additional homes at TwelveTrees Park (West Ham), London Dock (Wapping), Heron Wharf (Poplar) and Horlicks Quarter (Slough).

 

At 31 October 2025, Berkeley's land holdings comprised 51,719 plots across 60 developments (30 April 2025: 52,714 plots across 64 developments), including those in the St Edward joint venture.  The plots in the land holdings have an estimated future gross profit of £6.51 billion (30 April 2025: £6.72 billion), which includes Berkeley's 50% share of the anticipated profit from St Edward developments.

 

Through re-planning activity, Berkeley has replaced £0.1 billion of the £0.3 billion gross profit recorded through the Income Statement in the period.  The estimated future gross margin in the land holdings at the end of the period was 24.6% (30 April 2025: 24.7%).

 

The estimated future gross margin represents Management's risk-adjusted assessment of the potential gross profit for each site, taking account of a wide range of factors: current sales and input prices, political and economic conditions, the planning and regulatory frameworks, and other market forces - all of which could have a significant effect on the eventual outcome.

 

The pipeline comprised approximately 14,000 plots at 31 October 2025 (30 April 2025: 12,000 plots), following the conditional acquisition of the two sites noted above and the transfer of Hemel Hempstead into the land holdings. The pipeline includes the first phase of the St William site at Beckton (2,800 homes), which received a recommendation for approval at Committee during the period.

 

Construction

 

Berkeley has experienced highly competitive tendering across most trades during the period, as our supply chain looks to secure near-term work in an environment where housing and wider construction activity remain subdued, particularly in London. These conditions have offset the inflationary impact of increases to the National Living Wage and employers' National Insurance contributions, and with material prices stable, build costs remained flat during the half year.

 

We expect these competitive market conditions to continue into 2026, with build costs likely to remain broadly unchanged. However, we remain mindful of ongoing regulatory changes, including the Building Safety regime and Gateway 2 requirements, and recognise that prolonged weakness in construction activity increases the risk of skills and experience leaving the industry.  A lack of new project starts and delays to live projects is placing financial strain on the supply chain, and Berkeley continues to work closely with its trusted partners to maintain delivery capability.

 

Build to Rent Platform

 

Berkeley has continued to advance its BTR strategy, with the first six buildings now transferred to the BTR platform, which includes two transfers during the period at Grand Union and Silkstream, bringing the platform to 1,122 homes currently in production:

 

Sites in the BTR Platform	Location	Initial BTR	Total BTR
As at 31 October 2025		Homes	Homes
-  Alexandra Gate, Haringey	Zone 3	187	419
-  Kidbrooke Village, Greenwich	Zone 3	90	206
-  Eden Grove, Staines	Surrey	158	158
-  Horlicks Quarter, Slough	Berkshire	327	327
-  Grand Union, Wembley	Zone 3	177	351
-  Silkstream, Hendon	Zone 3	183	183
Allocated to the BTR platform - in production		1,122
-  BTR future production		2,878
-  Other sites		-	2,356
Indicative initial BTR portfolio		4,000	4,000

 

The platform brand - Berkeley Living - has been established to combine Berkeley's build quality and place-making expertise with exceptional customer service, to deliver a seamless rental experience.

 

Berkeley Living's first building will launch to the rental market in Spring 2026 at Alexandra Gate, Haringey.

 

During the period, four additional planning consents have been obtained to revise the amenity provision or optimise the unit mix and layouts for the rental market.  The initial BTR portfolio homes are included in the land holdings plots and future estimated gross profit.

 

 

Self-Remediation Terms and Contract

 

On 13 March 2023 Berkeley entered into the Self-Remediation Terms and Contract with MHCLG, under which developers have responsibility for any life-critical fire safety defects in buildings they have developed in the 30-year period to April 2022.

 

For the 824 relevant buildings Berkeley has developed over this period, we have third party assessments on over 95%.  All of the remaining buildings are where Berkeley is not the freeholder and has not yet been provided access.  There are 46 buildings where works are still to be completed, 11 of which are buildings where Berkeley is reimbursing Government for the works under the Developer Remediation Contract.  Where works are required and yet to commence, Berkeley intends to begin works as soon as reasonably possible, subject to access being provided by the freeholder.  It is Berkeley's preference to take full responsibility for all its relevant buildings and to complete any required works itself as this will speed up the overall process of remediation.  We are seeking recoveries from the supply chain and insurers where appropriate.

 

We continue to work closely with Government and the BSR to complete any required remediation work as quickly as possible which, together with the actions taken to date, should restore trust and confidence to the housing market, enabling it to operate efficiently, effectively and fairly for all.

 

 

Outlook

 

Berkeley is determined to play a full part in helping Government meet its growth ambitions and we remain greatly encouraged by a number of important policy and regulatory initiatives during the last six months.  It is critical that these are finalised as soon as possible to reverse the dramatic decline in new housing starts over recent years.  In terms of demand, interest rates are taking too long to adjust to economic reality, and this risks hampering the pace with which growth returns to the housing market and wider economy.

 

Notwithstanding this, we are positive about the future.  Whilst happening more slowly than we would like, these headwinds will recede and the feelgood factor will return.  London retains its global standing and the fundamentals of the housing market in London and the South-East are compelling; be it homes for sale or for rent.

 

The Government is right - housing can be the engine for growth across the country, breathing new life into towns and cities and creating better prospects for young people. This is particularly the case in London where productivity and wages are highest, and the benefits of increased labour mobility are greatest. To unleash this potential, we need certainty and pace around the necessary policy interventions and regulatory reforms, alongside a stable and supportive fiscal environment.

 

We have a clear plan for the next 10 years to create value for both our shareholders and wider stakeholders, with considerable capital available for investment into both our core business and new BTR platform, to deliver the new homes the country needs.

 

  

Richard Stearn

Chief Executive