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sancho panza

Berkeley at 'peak profits' as it warns on London housing market

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https://www.telegraph.co.uk/business/2018/06/20/berkeley-hikes-profit-forecasts-warns-london-housing-market/

'London-focused housebuilder Berkeley Group unveiled a strong set of financial results but admitted its profits had reached their peak amid a slowdown in the capital’s property market.

Pre-tax profits came in at £935m for the year to April 30, 15.1pc up on last year and ahead of analyst expectations, despite broadly flat revenues of £2.7bn.

But the company said this year’s results “represent a peak for Berkeley” after it splurged on new sites between 2010 and 2013. It expects profits to return to “normal levels” of around 30pc lower next year.'

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On 14/06/2018 at 23:21, Alifelessbinary said:

I just thought I’d add some information about the Berkeley Group and specifically shorting them. It worth noting that this is just based on market experience and I haven’t looked at their accounts.

While they have been the main perpetrator selling luxury £1000+ sq ft flats off plan during the last boom, over the last few years they have been diversify away from this market. They are now heavily active in zones 2-6 and are focusing on areas where sold prices range between £400-£800 sq ft, which the banks deem ‘domestic’, where as £1000+ is ‘exotic’.

I’m not a huge fan of their product, but Tony Pidgley is a legend of the industry and has perfectly called two crashes previously. He has setup the various internal divisions so that they directly compete with each other and drive results. All bids are cross reference centrally though, as embarrassingly a few years ago they were found to be bidding against each other!

 They are phenomenal lobbiests and are connected at the highest levels. While they are susceptible to a property crash like all of the house builders, I would say there are better targets that are run by muppets. I hate to say but Berkley are impressive operators (machiavellian) in pursuit of returns and are a handful to manage. I wouldn’t be surprised if they had a contingency plan to deliver government targets as a method to fight and survive another day if/when the crash appears.  DYOR as they still might go through the floor but check their development pipeline first as I’m not sure they are as heavily exposed to prime central as they once were.

I managed to make some nice returns after brexit on both Barratt and Perssimon shares the later becoming a bagger in just under 12 months. I’ve since sold them as working in the game and owning a place in London my exposure is already breaking all my diversification rules. I’ve gone pretty bearish on property over the last few months, but the last 10 years have proven time and time again that ‘the markets can stay irrational for a lot longer than you can stay solvent’.

 

 

 

11 hours ago, Alifelessbinary said:

Sancho I wasn't intending to spam this thread with praise for Pidgley, but was rather sharing my ' edge' in the sector. By being net sellers of their own stock the directors are showing that  they know the game is up. They called the top of the central London market about 3 years ago and have divested away from the high end foreign pre-sold flats to sites that can be converted into HA stock to ensure survival.

Chart analysis is a fantastic tool but I've always found that it is useful to combine it with discussions with decision makers in the industry where possible. If you follow the money it is clear that some of the house builders know the worlds is changing.

Your recent charts on gold miners were extremely eye opening and something that I'm now exploring seriously.

On the 14/6/18 they closed at £41.99,currently down 5%+ at £39.63.

Not having a go,just saying that when you short,you aim for the bubbleicious.

 

 

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To be fair to @Alifelessbinary I think his points are generally valid. Berkeley are a well run company, and of the listed builders probably have the best quality product. However, they charge a premium for this. 40% gross profit margins, and that after having to build a pile of social housing is a complete joke. It’s a flat and no one should be making profits of that scale. 

I do think this is as good as it will get for them, and I think Pidgley and Perrins know this too, thus the huge volume of share sales by the duo (and Perrins wife) over the past year or so.

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35 minutes ago, Castlevania said:

To be fair to @Alifelessbinary I think his points are generally valid. Berkeley are a well run company, and of the listed builders probably have the best quality product. However, they charge a premium for this. 40% gross profit margins, and that after having to build a pile of social housing is a complete joke. It’s a flat and no one should be making profits of that scale. 

I do think this is as good as it will get for them, and I think Pidgley and Perrins know this too, thus the huge volume of share sales by the duo (and Perrins wife) over the past year or so.

Both Rob Perrins and his wife are actually very charming people.

If he hadn't made it at Berkeley he would have been successful elsewhere. His work ethic is extraordinary (though to be fair, for that kind of money so would mine be)

At least he isn't a landlord.

 

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2 hours ago, Castlevania said:

To be fair to @Alifelessbinary I think his points are generally valid. Berkeley are a well run company, and of the listed builders probably have the best quality product. However, they charge a premium for this. 40% gross profit margins, and that after having to build a pile of social housing is a complete joke. It’s a flat and no one should be making profits of that scale. 

I do think this is as good as it will get for them, and I think Pidgley and Perrins know this too, thus the huge volume of share sales by the duo (and Perrins wife) over the past year or so.

ALLB was saying don't short,they're well run.

I was saying they were overvalued.

Boeing are well run,but they're overvalued.

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Sancho I completely agreed. I think I shared this information, as someone was putting Berkeley in the idiot bracket which is a dangerous move and saying the were an obvious short.

it worth stating that I’ve never actually shorted a share, as I find that sort of stuff is best left for the insider trading hedge funds.

Over the last 6 years I built quite a sizeable portfolio of housing building shares, but sold most of them before Christmas. Working in property the market just feels saturated and I’m already over exposed due to my job being pegged to the market.

I’m still holding onto Telford Homes for now, but that’s only because they became a multi-bagger and I’ll probably see there next few schemes delivered before I sell and revel in a conviction but that actually worked!

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HYB was an absolute boon for the volume builder and has allowed a few decidedly average Chief Exes make off with money only really deserving for company creating entrepreneurs.

The development market is a strange beast in London at the moment. Sites over £1000 sq ft are dead, but circa £500 are still hotly contested over.

Having survived the 2009 credit crunch my gut is now saying the next 12-18 months are dangerous times. Sadly people memories are very short and heavily leveraged buyers are amazingly still prowling the market. 

The one recent abnormality is that Housing Asscoiation have started to creep back into the bidding process and are now able to provide competitive bids for the first time in years, although is a side effect of Sadiq’s 50% (35%) affordable rule.

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HTB was an absolute boon for the volume builder and has allowed a few decidedly average Chief Exes make off with money only really deserving for company creating entrepreneurs.

The development market is a strange beast in London at the moment. Sites over £1000 sq ft are dead, but circa £500 are still hotly contested over.

Having survived the 2009 credit crunch my gut is now saying the next 12-18 months are dangerous times. Sadly people memories are very short and heavily leveraged buyers are amazingly still prowling the market. 

The one recent abnormality is that Housing Asscoiation have started to creep back into the bidding process and are now able to provide competitive bids for the first time in years, although this is one  side effect of Sadiq’s 50% (35%) affordable rule.

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Pidgley’s history is fascinating, as a Barnardo boy he managed to not just thrive but dominate an industry previously controlled by the landed elite.He’s battled many takeover bids over the years and even had to contend with one lead by his own son.

It is now looking like he has called the market perfectly for a third time in a row, which deserves anyone’s begrudging respect. 

Berkeley have always been a real handle to deal with, but it was also the reason why I brought shares! It turned out to be a great little strategy. I’m certainly going to try and have the same success with the goldies and that’s why I have to salute Sancho for the recent charts and data, as provided a great spring board.

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11 hours ago, Alifelessbinary said:

Sancho I completely agreed. I think I shared this information, as someone was putting Berkeley in the idiot bracket which is a dangerous move and saying the were an obvious short.

it worth stating that I’ve never actually shorted a share, as I find that sort of stuff is best left for the insider trading hedge funds.

Over the last 6 years I built quite a sizeable portfolio of housing building shares, but sold most of them before Christmas. Working in property the market just feels saturated and I’m already over exposed due to my job being pegged to the market.

I’m still holding onto Telford Homes for now, but that’s only because they became a multi-bagger and I’ll probably see there next few schemes delivered before I sell and revel in a conviction but that actually worked!

I said they were an obvious short which the last week has proved they were.

Never said Pidgeley was an idiot.Anyone who sells £60mn of stock ahead of the top is nobody's fool.

This is where when it comes to shorting-in my opinion-you have to detach yourself emotionally from the company and what you know of it.

Is it going up,is it going down,is it ready to fall.

The UK builders have a long way to go.I'm not short Berkely yet,but I most likely will be by year end at the latest.

10 hours ago, Alifelessbinary said:

HYB was an absolute boon for the volume builder and has allowed a few decidedly average Chief Exes make off with money only really deserving for company creating entrepreneurs.

The development market is a strange beast in London at the moment. Sites over £1000 sq ft are dead, but circa £500 are still hotly contested over.

Having survived the 2009 credit crunch my gut is now saying the next 12-18 months are dangerous times. Sadly people memories are very short and heavily leveraged buyers are amazingly still prowling the market. 

The one recent abnormality is that Housing Asscoiation have started to creep back into the bidding process and are now able to provide competitive bids for the first time in years, although is a side effect of Sadiq’s 50% (35%) affordable rule.

I love this sort of in depth knowledge that average punters like myself would never know if it weren't for these forums.Fascinating.

 

10 hours ago, Alifelessbinary said:

Pidgley’s history is fascinating, as a Barnardo boy he managed to not just thrive but dominate an industry previously controlled by the landed elite.He’s battled many takeover bids over the years and even had to contend with one lead by his own son.

It is now looking like he has called the market perfectly for a third time in a row, which deserves anyone’s begrudging respect. 

Berkeley have always been a real handle to deal with, but it was also the reason why I brought shares! It turned out to be a great little strategy. I’m certainly going to try and have the same success with the goldies and that’s why I have to salute Sancho for the recent charts and data, as provided a great spring board.

He's done it again imho.I've been waiting the best part of ten years to move shorts on-besides my annual options hedges.

I think his £60mn sale confirms he and I are on the same page depsite what he's telling people about how great Londinium is to live in B|

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15 hours ago, Cunning Plan said:

Both Rob Perrins and his wife are actually very charming people.

If he hadn't made it at Berkeley he would have been successful elsewhere. His work ethic is extraordinary (though to be fair, for that kind of money so would mine be)

At least he isn't a landlord.

 

Is he the ex-pikey / raised by pikeys guy?

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2 minutes ago, spunko2010 said:

Is he the ex-pikey / raised by pikeys guy?

It's Pidgley who is an ex-Bernados boy/ pikey. I met him about two months ago, as they were looking at some sites I was selling. Very mild mannered and calm in the flesh, but was pretty much revered by everyone in the room.

I went to a Savills seminar the other day where they were celebrating a 7% return for London resi over the next 5 years. When I asked what the project real returns were they mumbled and moved on to the next slide. As long as they can show a numerical improvement most people remain calm.

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36 minutes ago, spunko2010 said:

Is he the ex-pikey / raised by pikeys guy?

No. Rob is a Wellington boy. Vanessa (Mrs Perrins)  started life as a nurse. They met before Rob had made any money.

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