Berkeley Interims

[Horsey]

Looking good to me, except perhaps the fall in forward sales and the annoying tinkering with the promised capital return program which to me seems well covered by net cash.


• Profit before tax - £392.7 million, up 33.9% from £293.3 million

• Net cash - £207.9 million (April 2016: £107.4 million) after dividend payments of £137.0 million and £20.1 million of share purchases

• Forward sales - £2.90 billion (April 2016: £3.25 billion)


The Board of Berkeley has reviewed the mechanism for making the remaining £10.00 per share payments under the Shareholder Returns Programme that was put in place in 2011, and enhanced this time last year from £13.00 per share to £16.34 per share. The current heightened macro uncertainty has led to significant market volatility and there is a dislocation between this and both underlying market conditions and the strength of Berkeley's operating model.


As a consequence, the Board is proposing to introduce flexibility such that the remaining £10.00 per share payments can be made through a combination of share buy-backs and dividends, as opposed to solely dividends. This recognises that, at certain price points, the Board is of the opinion that the Company is materially undervalued and share buy-backs will be in the best interests of all shareholders. In making this change, the Board is also proposing that the payments should be re-characterised from being a value per share, to be an absolute value per annum. This ensures that the same quantum of cash will be returned as previously anticipated, but on a smaller number of shares, to the extent share buy-backs occur. This absolute value will be increased appropriately for any new shares issued.


http://www.investegate.co.uk/berkeley-g ... 00097649Q/

[Davidsb]

As a (theoretically, at least) never-selling capital-doesn't-matter HYPer, the concept of "shareholder returns" coming from share buy-backs is just not helpful.

It looks like the interim dividend is £1.00 per share, but I couldn't see any XD or payment dates in the announcement, and there is nothing obvious on the company website. Last year's Interims included the statement "...the Board has declared a further interim dividend of 100 pence per share (£136.5 million), payable on 22 January 2016 to shareholders on the register on 18 December 2015." No similar statement is made in the current Interims.

So, anyone got any clues?

[Horsey]

I think the changes will be subject to shareholder approval in February

"The Board believes that this change will ensure that Berkeley's shareholders fully benefit from the value embedded in the business. The Company will consult with Shareholders on consequential changes to the 2011 LTIP to ensure this reflects these changes, prior to a General Meeting of the Company in the New Year....

In these proposals announced today, the Board confirms that the next £1 per share, equating to £138.8 million, will be returned by 31 March 2017 with the amount of this to be paid as a dividend to be announced in February, taking account of the cost of any share buy-backs made in the intervening period."

[Gostevie]

I don't fully understand the concept of share buy backs - perhaps my task for the weekend should be to educate myself - but my initial thought is I'd rather have the dividend as cash in my bank account.

[djtoshi]

Hi,

The way it looks to me is that there is a pot of £138.8m for dividends and buy backs.

In February they will announce what the actual dividend payment will be once the buy backs in the period have been totted up.

[TheWildshot]

It looks like the interim dividend is £1.00 per share, but I couldn't see any XD or payment dates in the announcement, and there is nothing obvious on the company website. Last year's Interims included the statement "...the Board has declared a further interim dividend of 100 pence per share (£136.5 million), payable on 22 January 2016 to shareholders on the register on 18 December 2015." No similar statement is made in the current Interims.

So, anyone got any clues?

The announcement includes:
"In these proposals announced today, the Board confirms that the next GBP1 per share, equating to GBP138.8 million, will be returned by 31 March 2017 with the amount of this to be paid as a dividend to be announced in February, taking account of the cost of any share buy-backs made in the intervening period."

[Davidsb]

Right - in the section headed "Chief Executive's Statement", the "Summary of Performance" section includes a table with financial data for "Six Months Ended 31 October" . Columns are headed "2016 £m", "2015 £m", "Change £m" and "Change %".

In this table, there is a line for Dividend per Share, and in the column headed "2016", the figure of 100p is shown. I naively took this to mean that the dividend declared in respect of the six months to 31 October 2016 was 100p per share.

However, I now notice that the "2015" entry for "Dividend per Share" is shown as 90p, whereas the dividend actually declared in the interim accounts released on 4th December 2015 was 100p. This went ex dividend on 17th December 2015, and was paid on 22nd January 2016.

So, now I'm really confused......

[Wasron]

I don't think I like this change in policy at all. It gives directors the leeway to spend all the cash we were expecting as dividends to prop up the share price.

Today's rise might be a good exit point to sell and divert the cash into something like British Land

One to ponder over the weekend

WasRon

[staffordian]

I don't think I like this change in policy at all. It gives directors the leeway to spend all the cash we were expecting as dividends to prop up the share price.

Today's rise might be a good exit point to sell and divert the cash into something like British Land

One to ponder over the weekend

WasRon

My thoughts too.

For any income seeker, whether that income is to spend or to reinvest, share buybacks, are a poor substitute for dividends; regardless of whether or not it has a material effect on the share price.

Having said that, I am still inclined to hold for the longer term unless an explicit policy of replacing dividends with share buy backs is announced.

Staffordian

[DiamondEcho]

I share your feelings DavidsSB, I am quite as lost as you. WTH is going on? This has not been well communicated at all well.

[BigPic]

Hi,

The way it looks to me is that there is a pot of £138.8m for dividends and buy backs.

In February they will announce what the actual dividend payment will be once the buy backs in the period have been totted up.

Yes but they could go the extreme either way, making it all cash or all buy back.

The inference is they will only buy back if the price is irritatingly low, in their view.

This is a company with a record of getting the big calls right. I'd rather have the cash but if they want to buy back, I trust them.

[Wasron]

The inference is they will only buy back if the price is irritatingly low, in their view.

But as a buyer of income shares I want it to be "irritatingly low" and there lies the paradox.

As a holder I'd like to see clearer guidance, similar to how Next have approached the matter of buybacks or bumper dividends.

WasRon

[DiamondEcho]

The inference is they will only buy back if the price is irritatingly low, in their view.

But as a buyer of income shares I want it to be "irritatingly low" and there lies the paradox.
As a holder I'd like to see clearer guidance, similar to how Next have approached the matter of buybacks or bumper dividends.
WasRon

Having now amassed the quantity of stock I want I don't mind the price going up, what irritates me is the way this change does not seem to have been well communicated which has led to uncertainty. That is after all why we're here trying to figure it out.

Also they appear to have shifted from an expected dividend pay-date of Jan/17, to only announcing what the cash div is going to be in Feb/17. I suspect this change will lead to wider confusion on sites that report div info, forward and historic yields etc.
For example, Digitallook have yet to update their div data for the stock, and I wonder when they'll feel able to.

http://www.digitallook.com/equity/Berke ... ldings_The

[Dod1010]

Buybacks also of course reduce the number of shares in issue as well as (sometimes) raising the price of the share. That will mean that for those continuing to hold, not only will the NAV per share rise with a buyback(all else being equal) but the money spent on dividends will need to service fewer shares and should therefore help to preserve the dividend I think that all is not lost for holders of the shares. I am not a holder.

[Wizard]

I see dividend data has now adjusted the dividend it uses to calculate yield down to 100p for the year, meaning they show a yield around 3.5% now for BKG.

Terry.

[DiamondEcho]

I see dividend data has now adjusted the dividend it uses to calculate yield down to 100p for the year, meaning they show a yield around 3.5% now for BKG. Terry.

So another website that hasn't recognised that BKG are paying out 200p/year - sigh

[Wizard]

Also they appear to have shifted from an expected dividend pay-date of Jan/17, to only announcing what the cash div is going to be in Feb/17. I suspect this change will lead to wider confusion on sites that report div info, forward and historic yields etc.

Isn't slipping the dividend like this a bit like cutting it, in that the same amount paid but covering a longer period is less on a per a hum basis? Notwithstanding the potential for the dividend to be lower if there are share buy backs out of the 'pot' made available for the two in combination?

Terry.