Good morning, ladies and gentlemen, and welcome to Berkeley Results Presentation for the year ended 30 April 2025. I am Rob Perrins, Chief Executive of The Berkeley Group. I will cover four areas today. Firstly, Berkeley has delivered a strong performance, with our results in line with guidance and on track for full year 2026. Secondly, government policy is increasingly supportive, and the planning environment is improving. We welcome the positive steps taken so far, but there remain some key challenges to resolve if we are to realize the universally held ambition of increasing housing supply. These include accelerating the completion of Section 106 agreements and clearing pre-commencement conditions, as well as speeding up the Building Safety Regulator's new gateway approval system. Thirdly, we announced in December our new 10-year strategy, Berkeley 2035, and we've made excellent start, laying down the foundations for delivering shareholder value over the long term.
I'm particularly pleased with the progress made in establishing our own market-leading Build-to-Rent platform, which I will cover later. Finally, we have adapted our business plan to current market conditions and the operating environment we have experienced over the last 18 months. This is reflected in our medium-term guidance, which is unchanged. I am positive about the long-term outlook for Berkeley, and we have a clear agile framework for capital allocation, which will enable us to create shareholder value over the next 10 years while navigating short-term volatility. The operating environment remains volatile, and sentiment is finely balanced, given the geopolitical and macroeconomic backdrop. There are plenty of reasons to be positive about the long-term outlook. In a very unsettled world, London remains a world-leading city where people aspire to live and want to invest.
Market fundamentals are strong, both for sale and for rent, with incomes rising coupled with huge undersupply of new homes. The mortgage market is also strong, with very good availability, higher borrowing limits, and interest rates decreasing, and they are forecast to come down further in the medium term. The government has placed housing supply at the center of its growth agenda, with a clear brownfield-first commitment and a number of positive policy initiatives now underway. This was reinforced at last week's spending review, which confirmed a significant increase in affordable housing funding and key measures to strengthen housing associations' finances. The government's sustained focus on housing delivery has triggered a more positive mindset and approach within the planning system, with a renewed focus on achieving viable planning consents, which embrace higher densities and maximize affordable housing delivery.
In this improving environment, we are bringing forward planning applications across all of our portfolio and pipeline to accelerate and increase delivery. However, to achieve the government's ambition, it will require focused action in a number of key areas. We need planning authorities to agree on realistic and deliverable development priorities that reflect the operating environment we are in today. This includes using Section 106 agreements instead of charging the Community Infrastructure Levy on complex brownfield sites. This approach would make a huge difference, enabling more affordable homes to be delivered and reflecting the very significant on-site infrastructure and amenities these sites deliver. Removing duplicate layers of policy and withdrawing prescriptive and inefficient design guidance would also be a significant step forward.
The process of finalizing planning consents, after the planning committees have approved them, must be faster and more certain, including the completion of Section 106 agreements and clearing pre-commencement conditions. The Building Safety Regulator's new gateway approval system for tall buildings must be dramatically improved and sped up. This needs to be resolved quickly, and this is a key barrier to delivering homes in this Parliament. We also need all levels of government to recognize that ongoing regulatory change will increase risk and uncertainty, which will in turn deter investment and reduce housing supply. High levels of stamp duty are a drag on transaction levels, and the level of corporation tax, along with the residential property developer tax, means the effective tax rate on our profits totals 29%, making investment less attractive. These challenges are all solvable, and we are working with government to help them deliver against their objectives.
Overall, I'm therefore positive on the long-term outlook, given the market fundamentals, which underpin Berkeley's 2035 strategy, which provides an agile capital allocation framework to enhance investment in the near term to increase profits and shareholder returns over the long term. The strategy targets investment of up to GBP 5 billion in London, Birmingham, and the Southeast of England, and returns to shareholders of at least GBP 2 billion over the next 10 years. In the short term, we all know that consumer confidence is finely balanced and remains sensitive to the economic and geopolitical backdrop. In our view, the all-important feel good factor is now within reach, and this government can achieve its growth mission through nurturing positive sentiment. Operating performance in this period has been extremely resilient.
Sales rates have improved gradually over the year, with successful launches at Trillium in Marylebone, Bermondsey Place in Southwark, and 12 Trees Park in Newham. Sales prices are stable, as are our build costs, with subcontractors absorbing any underlying inflation on materials and labor. We have reduced overheads by 3% in an inflationary environment. We are also investing for the future. We have acquired three new sites. We are focusing on accelerating planning activity, as I noted earlier, and I'm delighted that we have obtained five new consents alongside over 30 revisions that improve our existing consents. We have moved five sites into production, and we have transferred some 800 new homes across four sites onto our Build-to-Rent platform, which I'll cover on the next slide. Berkeley has moved at pace to create a market-leading Build-to-Rent platform, which reflects our passion for customers, quality, and communities.
We already have around 20% of the initial 4,000 homes transferred to the Build-to-Rent platform. This is 800 homes across four sites, with a further two sites exchanged since the year end. These homes have been delivered across well-located urban regeneration sites within strong rental markets. We have appointed the operational board, a mixture of existing Berkeley directors, and three external hires from the Build-to-Rent industry. We have developed a high-quality amenity offer for each site and a bespoke Build-to-Rent specification. This slide depicts the internals of Horlicks Quarter in Slough. We'll be launching our first development in the spring next year: 187 homes for rent at Alexandra Gate Haringey . This slide shows our Build-to-Rent brand, Berkeley Living, which leverages Berkeley's existing brand strengths while establishing a distinct identity as we target the rental market.
Our brand offer is based on exceptional customer service, build quality, and the highest standards of placemaking. In other words, we'll be offering the Berkeley experience to the rental market. Our Build-to-Rent communities will benefit from welcoming and attractive places, well-connected urban locations, and high-quality private amenities and co-working spaces. We will offer a seamless customer experience based on digital communication and highly trained in-house customer service teams. We'll also provide a mix of community events and activities to help establish a welcoming social environment for our residents to enjoy. Finally, this slide brings together our guidance. We remain on target to meet our guidance for full year 2026, with full year 2027 likely to be similar based on current market conditions. We expect operating margins to be in the historic range over this period.
Under Berkeley 2035, we have a minimum shareholder return target of GBP 2 billion by September 2034, with the first GBP 900 million to be returned by September 2030. GBP 260 million of this is due to be paid by September 2025. With GBP 139 million of this paid prior to the year end, GBP 121 million remains to be paid by the end of September. This will also complete the 2011 shareholder returns program. Our next return hurdle is GBP 640 million over the next five-year period to September 2030 to complete the first GBP 900 million under Berkeley 2035. Net cash will depend upon the pace of investment in new land and share buybacks. We are targeting net cash of around GBP 300 million at the end of full year 2026. This will be after a further GBP 250 million is spent on land creditors, reducing the outstanding balance to below GBP 500 million.
Cash job for sale is likely to moderate further in current market conditions. Finally, the future gross margin in our land holdings will be above GBP 6 billion at the end of full year 2026. Thank you very much, and I will now hand over to Richard Stearn, our Chief Financial Officer.
Thank you, Rob, and good morning, everyone. I will take you through the results today, beginning with a summary, then going through the drivers of revenue and profitability before looking in more detail at the income statement, cash flow, balance sheet, and land holdings, then concluding with the BTR strategy. Beginning with a summary of performance for the year, we have delivered GBP 529 million of pre-tax profit in line with our guidance at the start of the year.
Earnings per share decreased slightly to GBP 3.72, reflecting lower profit partially offset by share buybacks in the year and September's share consolidation. The operating margin at 20.1% is consistent with the first half and slightly higher than last year. Pre-tax return on equity was 14.9%, with return on capital employed of 16.5%. Looking at the financial position of the group, shareholders' funds are GBP 3.6 billion, unchanged in the year, with profit after tax of GBP 382 million being offset by shareholder returns at a similar level. Shares in issue, net of treasury and those held in the EBT, have reduced by 6.5% to GBP 99 million. This is due in equal parts to share buybacks and the September share consolidation. As a consequence, net asset value per share has increased by 7% to GBP 35.95. Net cash is a healthy GBP 337 million, and I will talk through the drivers of this later.
This slide sets out our two key operational metrics. First, we have cash due on forward sales of GBP 1.4 billion. This provides strong visibility on near-term earnings and cash flow, with over 75% of sales for FY 2026 already secured. As a reminder, this figure represents the cash still to collect on our exchanged private sales only. It is therefore a cash, not a revenue figure, and excludes reservations. Our customer deposit strategy remains 20% for forward sales, and the forward sales figure excludes affordable housing, institutional sales, and commercial properties, as well as joint ventures. Around 2/3 of the forward sales relate to FY 2026 and the remainder thereafter. The second important metric on this slide is the estimated future gross margin in our land holdings, which has reduced by GBP 200 million to GBP 6.7 billion. I will look at this movement later.
This slide highlights the key components of revenue and profitability. We sold 4,047 homes at an average selling price of GBP 593,000 in the year. This compares to 3,521 homes at an average selling price of GBP 664,000 last year. As ever, the change in ASP reflects the mix of properties delivered in the respective years as opposed to underlying sales price movements. Looking ahead, we expect volumes to be marginally lower and ASP around 5% lower next year. In the following year, 2027, volumes will be a little lower again, but pricing will be closer to FY 2025 levels. Operating margin will be within the historic range, and together with reduced contributions from JVs and interest income, you get to the guidance Rob gave a few moments ago for the next two years.
It's clearly difficult to be more specific in these markets, and as we've said many times, we will always prioritize cash flow and quality of profit ahead of annual profit targets. Turning now to the income statement and comparing this to the previous year. Revenue is similar at GBP 2.49 billion, with higher volumes being partially offset by lower ASP, as just set out. Gross profit is GBP 660 million, representing a gross margin of 26.6%, slightly ahead of last year. Operating expenses have decreased by 3% to GBP 160 million in what remains an inflationary environment as we continue to exert close control on all areas of cost. Our operating margin is 20.1%, higher than last year and above our long-term range of 17.5%-19.5%.
Our net finance income is GBP 14 million, compared to GBP 12 million in the prior year, with interest earned on gross cash exceeding our blended cost of debt, which includes our green bond with its 2.5% coupon. Looking forward, net interest will moderate in line with interest rate expectations. Our share of joint venture profits was GBP 15 million, which has reduced as previously guided, with St. Edward now delivering out-of-London sites only. It will remain at or below this more modest level. The effective tax rate for the year was 27.8%, and this fully reflects both the corporation tax rate of 25% and the 4% residential property developer tax. This slide sets out the cash flows for the year, which show a decrease in net cash of GBP 195 million to GBP 337 million. GBP 529 million was generated from pre-tax profits, with a GBP 216 million net decrease in working capital.
I will run through the key movements within working capital shortly. The other significant item is the GBP 381.5 million of shareholder returns, which comprises GBP 130 million of share buybacks, GBP 68 million of ordinary dividend, and September's GBP 184 million special dividend. We are looking to retain net cash at around GBP 300 million at the end of FY 2026. I will not go through each line on this balance sheet slide, as I will run through the two key numbers, inventories and creditors, in the next two slides. The other notable balance is investment proxy at GBP 146 million, reflecting our investment to date on the first four assets, which have been transferred to the new BTR platform. This has been transferred from inventory at cost and includes the relevant allocation of existing land and site costs, as well as around GBP 85 million spent on construction in the year.
As previously explained, we have adopted the cost option within IAS 40 and so will not revalue these assets, but will provide information on market value as the portfolio matures. This slide analyzes the GBP 232 million net decrease in inventories in more detail. This comprises a reduction in land and work in progress of GBP 359 million, of which GBP 144 million relates to the transfer of the first four BTR assets to investment property, as just shown on the previous slide. This reduction is partially offset by a GBP 127 million increase in completed stock. The overall land cost in the balance sheet has decreased by GBP 194 million, with three sites acquired in the year. We have also moved five sites into production, with Trillium in Marylebone moving in the second half of the year.
Completed stock is at similar levels to the half year and is spread across a number of sites, providing immediately available product for those in the zone to move and for when the market inflects. Creditors have decreased by GBP 321 million in the year, and this slide sets out the two key movements. First, there's been a decrease of GBP 196 million in customer deposits. This reflects both the mismatch between current sales rates and the amount of revenue taken to the profit and loss account, and secondly, the completion of institutional sales at two of our sites. The second significant movement is the net GBP 168 million reduction in land creditors, with GBP 213 million settled in the year. The slide also sets out the future payment profile for the remaining GBP 714 million of land creditors. As previously noted, some GBP 250 million is being repaid in FY 26, with a gentler profile thereafter.
Provisions representing post-completion development obligations, including those related to building fire safety matters, have increased by GBP 20 million in the year. In terms of our financing, the group's traditional borrowing capacity of GBP 1.2 billion is unchanged from last year. It comprises GBP 400 million of 2031 dated green bonds with a 2.5% coupon and a GBP 800 million banking facility, which consists of a GBP 260 million drawn green term loan and a GBP 540 million undrawn revolving credit facility. These bank facilities are in place to February 2029. At the year-end, Berkeley was ungeared on a net basis with net cash of GBP 337 million and total available liquidity, therefore, of just over GBP 1.5 billion. We have a borrowing facility with Homes England for the financing of infrastructure costs on three of our London developments. This facility totals GBP 126 million, and GBP 18 million was drawn at the end of the year.
This slide summarizes our land holdings. Estimated future gross margin is GBP 6.7 billion across 53,000 future homes on 64 sites, down from GBP 6.9 billion and 54,000 at the 30th of April 2024. This means we have replaced GBP 0.5 billion of the GBP 0.7 billion gross profit delivered through the income statement in the year. The GBP 0.5 billion comes from a combination of the three sites added, planning optimizations, including net pipeline progression and market movements. We've secured five new planning consents in the year and over 30 amendments to existing consents. Most notable among these are the consent for 2,150 new homes at Bromley by Bow, which we transferred from the pipeline, and additional homes at 12 Trees Park, London Dock, and Poplar Riverside. The pipeline now comprises 12,000 blocks. Given its importance to Berkeley 2035, I've included some slides on the BTR strategy.
Rob focused in his speech on the progress with the operating platform, and I wanted to reaffirm the financial characteristics underpinning the strategy. First and foremost, this is an additional sales channel for Berkeley that capitalizes on structural shifts in the housing market and investor appetite. There are some slides on this in the appendix with data with which you will likely be familiar. What I wanted to focus on here is the attraction for Berkeley. First, our land holdings are ideally suited to BTR through their location and overall design. Through this strategy, we are able to accelerate delivery and move through our sites more quickly, with a beneficial impact on placemaking and animation. It is incremental to our core for sale business. Next, it is in line with government policy, which wants to see a greater variety of housing tenures, and this should assist in planning discussions.
The final point is how our strategy allows us to maximize value from this opportunity, which I summarize on the next slide. This slide looks at a snapshot of the development cycle and illustrates how we are looking to maximize value by creating a stabilized institutional asset. Under a traditional forward fund model, there can be value leakage of up to 20% of open market value, as pricing is fixed based on early rental assumptions and a yield that includes an allowance for delivery risk. By holding the asset over the relatively brief period of stabilization, we can fully capture the value drivers for shareholders. In this example, three to four years of rent inflation and yield compression to reflect a proven income-generating asset. Of course, the longer stabilized assets are held, the more development returns may be diluted from a rocky perspective.
With our own platform, we have the flexibility to dispose of the assets or introduce third-party capital at the most value-accretive point. This might be through individual building sales, sales of mini portfolios, the introduction of third-party capital where we may continue to manage, or simply the introduction of gearing linked to the income generation. All routes provide optionality to dispose at any point in the market cycle in order to maximize returns for shareholders. For modeling purposes at this stage, very broadly, I see around 1,000 homes being completed by the end of FY 2028, with the remainder progressively over the following five years. This is, of course, subject to change, but gives an indication of current trajectory. Build cash will be highest in the middle years. Thank you very much. This concludes today's.