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Stock of the day 10/06/2016 – Berkeley Group Holdings PLC/h1>



Can the Brexit-fearing Berkeley Group Holdings get back on track with its full year figures next week?


It’s been a fairly ugly year for Berkeley Group. While the stock managed to hold out around £35 through January (a respectable achievement given the turbulence that greeted the start of 2016), February was a different matter entirely, Berkeley plunging over 13% to hit a 3 month low of £29.85. The house-builder managed to rise back to £33 by the beginning of April, only to once again suffer a sharp fall, slumping to an 11 month nadir of £28.20. Since then a robust round across the start of May saw the stock briefly graze £34, before the increased uncertainty over the UK’s EU referendum gave Berkeley another shove downwards, leaving the company at a current trading price of £31.81 (IT-Finance.com, 10/06/2016).

Berkeley Group Holdings PLC Chart June 2016 Spreadex Financial Spread Betting
(Source: IT-Finance.com 10/06/2016)

In among all that choppiness Berkeley released its interim management statement in the middle of March, and investors weren’t impressed. For the 3 months to the end of February the company saw a 4% drop in forward reservations, Berkeley blaming the increase in transaction taxes (such as the stamp duty reforms announced in George Osborne’s 2014 and 2015 Autumn Statements) for the decline. The house-builder did reiterate that it was on track to total £2 billion in pre-tax profit for the 3 years to 2018, though investors were far more concerned with the present-day slowdown than the promise of future-earnings.

On top of those high end tax-changes Berkeley is also suffering under the uncertainty of the UK’s pre-referendum landscape, especially since a sharp drop in house prices is predicted if the country opts for a Brexit at the end of June. Investors can expect Berkeley’s full year statement to address these concerns, something that may overshadow the company’s headline figures. Revenue also may have taken a hit, with reports that Berkeley has begun to offer ‘stamp duty paid’ deals (amounting to around a £30,000 discount on a £800,000 according to the Financial Times) on its Luxury Riverlight project in Battersea.

Berkeley Group Holdings PLC has a consensus rating of ‘Hold’ with an average target price of £37.54.

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