Good morning, ladies and gentlemen, welcome to Berkeley's results presentation for the year that ended April 30, 2023. I am Rob Perrins, Chief Executive of the Berkeley Group. These are a strong set of results from Berkeley in a very challenging operating environment. We have delivered GBP 604 million of profit and increased net cash to GBP 410 million. Our operating model is unique among large home builders, in that we focus on creating fantastic places from neglected brownfield land. We have unrivaled land holdings in the country's most unsupplied markets. We have world-class talented people who have the expertise and resilience to deliver this most sustainable form of development. Notwithstanding the current operating environment, we are in great shape to meet our guidance over the next two years, with forward sales of over GBP 2 billion.
Looking forward, the increasingly uncertain and bureaucratic planning and regulatory environment will constrain investment into new regeneration sites and the supply of homes where they are most needed. I'll return to these points later, will now hand over to Richard Stearn, our Chief Financial Officer, to run through the results.
Thank you, Rob, good morning, everyone. I will take you through the results today, beginning with a summary, then touching on the drivers of revenue and profitability before looking in more detail at the income statement, cash flow, and balance sheet, finishing with the land holdings. Beginning with a summary of performance for the year. We have delivered GBP 604 million of pre-tax profit, in line with our guidance at the start of the year, and 10% higher than the GBP 551 million delivered last year. Earnings per share is up 2% at 427 pence. The impact upon EPS of share buybacks in the year has more than offset the impact of the introduction of the 4% Residential Property Developer Tax and a higher underlying effective corporation tax rate, which I will revisit later.
The operating margin is 20.3% and our pre-tax return on equity, 18.7%, which remains ahead of our 15% long-term baseline. Looking now at the financial position of the group, shareholders funds or net assets are GBP 3.3 billion, an increase of GBP 196 million in the year, with profit after tax of GBP 466 million, outweighing the shareholder returns in the financial year of GBP 254 million. Shares in issue, net of Treasury and those held in the EBT, have reduced by around 3% to 107 million as a result of the acquisition of 4 million shares in the year, which were undertaken at an average price of GBP 38.25. As a consequence, net asset value per share has increased by 10% to GBP 31.
Net cash is GBP 410 million, up from GBP 269 million at the start of the year. I will look at the cash flow in more detail later in the presentation. This slide sets out our two important operational measures of financial strength. We have cash due on forward sales covering the next three years of GBP 2.1 billion, only slightly less than last year's GBP 2.2 billion. This provides strong visibility on near-term earnings and cash flow. It is underpinned by our customer deposit strategy, whereby we take up to 20% on a staged basis if the customer is purchasing more than 12 months from completion. As a reminder, this figure represents the cash still to collect on our exchanged private sales only. It is therefore a cash figure, not a revenue figure.
It does not include reservations, affordable housing contracts, or commercial properties. It excludes joint ventures. Approximately 60% of the forward sales relate to the 2023, 2024, and the remainder thereafter. The estimated future gross margin in our land holdings is GBP 7.6 billion. I will talk more on this later. This slide highlights the key components of revenue and profitability. We sold 4,043 homes at an average selling price of GBP 608,000 in the year. This compares to 3,760 homes sold at an average selling price of GBP 603,000 last year. As always, the ASP reflects the mix of properties delivered in the year, as opposed to any underlying sales price movements.
Looking ahead at the next two years, expectations for volumes continue to be at around 8,000 combined for the 2 years, in line with the guidance provided at the half year. This will be weighted slightly towards FY 2025. pricing also remains in line with previous guidance, which was to remain above GBP 600,000 for FY 2024, before reducing below this in FY 2025. Our overall guidance for FY 2024 and 2025 combined, therefore, remains unchanged. This is to deliver at least a GBP 1.05 billion pre-tax profit for this 2-year period, weighted more towards FY 2024. It is clearly difficult to be more specific in these markets, and as we have said many times, we will always prioritize cash flow and quality of profit ahead of annual profit targets in any one year. Turning now to joint ventures. Our St
Edward JV delivered 594 homes in the year, at an average selling price of GBP 885,000. This compares to 303 sales at a similar ASP in St Edward last year. The balance of the 872 JV homes reported last year were St William sales, which are now reported within the group's numbers following the acquisition at the end of last year. In the year, St Edward delivered the penultimate block at Royal Warwick Square, as well as a large number of completions at Millbank, hence the high average selling price. Both of these sites will substantially complete during FY 2024, and therefore, from FY 2025, St Edward will predominantly be delivering out of London sites and the JV profit will be more modest. Berkeley's share of St
Edward's profits for FY 2023 was GBP 97 million, and anticipates profits of around GBP 60 million for the coming year, and then materially lower thereafter. Turning now to the income statement. Revenue has increased by 9% to GBP 2.6 billion due to the increased volumes as just set out. Gross profit has increased by 5% to GBP 697 million, representing a gross margin of 27.3%. The increase in operating expenses is a direct result of the consolidation of St William for the first time. Operating margin is 20.3%, which is slightly above the top end of the long-term historic range of between 17.5% and 19.5%. We anticipate margins to be at similar levels for the next two years.
Our net finance costs are GBP 11 million, compared to GBP 13 million last time, and this includes GBP 10 million of non-cash imputed interest on land creditors. The effective tax rate for the year was 22.9% and incorporates the 4% Residential Property Developer Tax that was introduced at the beginning of the year. From FY 2024, the effective tax rate will increase to around 29%, to take into account the corporation tax rate increase of 6% for all companies. As mentioned previously, the effective tax rate this year is higher than the 12.5% in FY 2022, which was reduced due to the accounting remeasurement of deferred tax assets following the announcement of these tax changes. This slide sets out the cash flows for the year, which increased net cash by GBP 142 million to GBP 410 million.
GBP 604 million has been generated from pre-tax profits, with a GBP 50 million net increase in working capital. There are two offsetting movements within this working capital increase. These are a GBP 168 million increase in investment in inventory, which was largely offset by a corresponding increase in land creditors. I will run through both of these in a moment. During the year, we paid GBP 134 million of tax. The other significant item is the GBP 253 million of shareholder returns, which comprises dividend payments of GBP 98 million and GBP 155 million of share buybacks. Looking forward, we are targeting being broadly working capital neutral over the next two years.
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 2 slides. The other significant movement in the year is the GBP 58 million reduction in debtors. This related to VAT recoverable on the acquisition of the St William sites at the end of last year. This slide analyzes the GBP 168 million increase in inventories in more detail. The overall land cost in the balance sheet has decreased by GBP 34 million, as other than the 11 St William sites at the start of the year, we have not added any new sites. These additions, therefore, largely account for the increase in the value of land not under development.
There is no cash impact to this increase, as the purchase of these sites was on deferred terms and is therefore matched by an increase in land creditors. There's one remaining St William site, which is due to legally complete in 2025. Build work in progress has increased by GBP 217 million, as we've continued the investment in our regeneration sites. Completed stock has decreased by GBP 15 million and reflects a level that we are very comfortable with. It is spread across a number of sites. Creditors have increased by GBP 76 million in the year. The main driver for this is a net GBP 100 million increase in land creditors, as just mentioned, largely in respect of the legal completion of the acquisition of 11 St William sites, net of payments to existing creditors. Land creditors now total GBP 900 million.
Looking at the aging of these, approximately GBP 40 million is due for payment in the current financial year, and this slide then graphically shows the payment profile thereafter. Creditors also include provisions of GBP 194 million, largely representing post-completion development obligations, including those related to building fire safety matters. In terms of our financing, the group's borrowing capacity is GBP 1.2 billion, and this is unchanged from the prior year. It comprises GBP 400 million of 2031 dated Green Bonds with a 2.5% coupon, and a GBP 800 million banking facility, consisting of a GBP 260 million drawn green term loan and a GBP 540 million undrawn revolving credit facility. The bank facilities are in place to February 2028.
In the year, the company exercised the first of two one-year extensions, with one further option to extend to 2029. At the year-end, Berkeley was ungeared on a net basis, with net cash of GBP 410 million, and total available liquidity, therefore, of just over GBP 1.6 billion, taking into account this borrowing capacity. This slide summarizes our land holdings at the 30th of April, 2023. Estimated future gross margin is GBP 7.6 billion across 58,000 homes on 73 sites, down from GBP 8.3 billion and 66,000 at the 30th of April, 2022. We have not added any new sites to the land holdings in the year following the St. William transaction at the end of last year. There was a net reduction in gross margin of GBP 629 million.
With around GBP 850 million being taken to profit through this year's income statement, the balance is accounted for by planning, market movements, and the transfer of seven sites to the longer-term pipeline, with an associated gross profit of around GBP 300 million. This recognizes that in the current environment, these sites will now take longer to come through the planning and regulatory systems. The pipeline now comprises approximately 14,000 plots across 14 sites. Thank you very much, and I will now hand back to Rob.
Thank you, Richard. Today, I'd like to set out Berkeley's strategy and how we operate in these volatile and uncertain times. By using our development at The Oval as an example, I'll explain how brownfield regeneration delivers significant, lasting benefits for all our stakeholders and is the most sustainable form of home building. Following this, I will clearly set out how we are implementing the strategy to create value in the current environment. Finally, I'll conclude with our outlook and guidance. Berkeley has a long-term approach, to which there are five key aspects. We're the only U.K. home builder focused on brownfield regeneration at scale, which is the most sustainable form of development. Our core markets are undersupplied. Our financial strength provides the business with optionality. We have unrivaled land holdings.
We are an added value developer, which means we have a bottom-up approach, which maximizes absolute returns on every development. Our operating strategy is encompassed in Our Vision 2030. This decade-long ESG strategy covers 10 fundamental priorities for our business and reinforces our position as the country's most sustainable developer. Our disciplined approach and financial strength enables us to respond to the varying market conditions and operating environment through the rate of investment in new land and construction. In doing so, we protect and enhance long-term value for our shareholders. Oval Village is one of Berkeley's 32 large, complex brownfield developments. Berkeley assembled this site through separate acquisitions from SGN and Tesco. with whom we agreed to reprovide a highly efficient new store, thereby releasing the current store location for future development.
Unlocking this eight-acre inner London site, which includes four derelict gas holders and an adjacent supermarket and warehouse, required a complex package of enabling works, highly sensitive working practices, and extensive engagement with the surrounding community. Berkeley, with the local community and Lambeth Council, created a master plan with a vision to reintegrate the site with the surrounding street network and restore the on-site listed gas holder, which will form the centerpiece of Oval Village. In the last seven years, we've invested over GBP 150 million into the development before the delivery of the first home in 2022. I won't run through all the specific outcomes of Oval Village. Suffice to say that successful brownfield regeneration can deliver lasting, positive change.
Berkeley will transform this brownfield site, delivering more than 1,300 homes set around car-free streets, public squares, and biodiverse landscaping, along with a 80,000 sq ft BREEAM excellent office building that will provide workspace for over 700 people. This is all located a short walk from three stations at Vauxhall, Kennington, and Oval, which enables our customers to adopt a low-carbon lifestyle. As I said earlier, our operating strategy encompasses Our Vision 2030, Transforming Tomorrow, and today I'll briefly touch on four points which demonstrate Our Vision 2030 in operation. We place our customers at the heart of the business, and I'm delighted we achieved a world-leading Net Promoter Score of 79.2.
Achieving our science-based target is a key priority for the business, and to this end, I'm delighted to report we've already met our absolute Scope 1 and 2 direct emission reduction target. We continue to lead in net biodiversity net gain, demonstrated by having 54 developments committed to this, which together deliver more than 550 acres of new or measurably improved natural habitats. Training our people and workforce continues to be a key priority, and we are very pleased to have been awarded a gold member status of the 5% Club this year, with 10% of our people working as apprenticeships, graduates, or sponsored students. I will now look at the operating environment, beginning with the sales market. For Berkeley, underlying sales for the year were 15% down from the previous year.
Berkeley's strong forward sales position has enabled us to take a very considered approach to new launches and maintain our discipline on pricing. Throughout the year, we have continued to sell above business plan levels, and this has been critical in protecting margins in an inflationary environment. The latest economic forecast for the U.K. see inflation taking longer to come down, which will also mean mortgage rates stay higher for longer, too. This means the market will be volatile over the near term, with conditions characterized by a lack of urgency rather than distress. We will therefore continue to be cautious on new launches, focusing on selling to owner-occupiers with their current motivation to move, or investors with immediately available funds. We anticipate that forward sales will moderate over the coming 12 months.
Looking forward, taking current sales rates into account, we anticipate sales levels for 2023, 2024 will be approximately 20% lower than this year. Looking at the supply side, the planning system is a significant barrier to both new entrants and growth. Whilst we support government's core aims in its current planning reforms, these must be balanced with the societal need for more homes and the wider benefits these deliver. The planning environment has clearly been negatively affected by the Secretary of State's announced changes to the NPPF in December. Berkeley continues to work on adding value to its land holdings and pipeline. Due to the higher planning tariffs, the improvements we seek to our developments increase gross profit, but do not necessarily enhance the gross margin percentage.
The pace of regulatory change in other areas, such as building regulations and carbon reduction, are compounding the supply-side constraints. They are well-intended, but all aspects must be fully considered as the current position is creating uncertainty. For example, the consultation on second staircases in building over 30 meters, also announced in December, lacked detail on the technical parameters of how this was to be achieved, requiring many tall buildings yet to be put into construction to be redesigned. The consultation notes that the redesign will affect the viability of certain buildings, which will result in lower levels of affordable housing. This is leading to delays in the construction of much-needed homes, delays for people trying to move, and increased barriers to entry for SME developers. Cost inflation has peaked and is moderating.
Although certain materials and trades remain under pressure, there is improved competition in the supply chain, especially on larger trade packages. We anticipate the build cost inflation will fall to negligible levels by the end of the year, but remain mindful of the cost of ongoing regulatory change. While there are signs of financial distress in the supply chain, we are working with and supporting our established partners to ensure the delivery on our developments. Unfortunately, despite this, over 20 of our supply partners have gone into receivership. These receiverships caused considerable delays to our programs. Turning to building safety matters, Berkeley signed the Self-Remediation Terms and contract on the 13th of March. This carrying out PAS 9980 assessments on all applicable historic buildings. The contract requires that we meet the historic funding commitments made by government, even where works exceed life-critical fire safety matters.
Our strong preference is to complete any required works ourselves, and we have good visibility of the works required based on our understanding of the agreement. We have a very clear strategy at Berkeley. This is unchanged since the interim results in December. We will continue to realize our forward sales and match production on existing sites to demand. We will add value to our existing land holdings and pipeline sites, protecting operating margins. We will limit new investment and focus on cash generation. We will operate as efficiently as possible, and operating costs are forecast to reduce by more than 5% after absorbing inflation. We are focused on being working capital neutral over the next two years. Cash generation brings Berkeley optionality.
We can either invest in the business when the conditions for growth return, or we can reassess the levels of returns to shareholders, depending on the prevailing operating environment. As I said six months ago, I personally do not see another investment phase until at least two years after the next election, when there'll be more clarity over the planning and regulatory environment. In addition, in spite of the government brownfield first narrative, there are no incentives to invest at present. With an ever uncertain and increasing complex planning and regulatory environment, coupled with taxation levels increasing to 29% and further increases being considered. Lastly, I'll conclude with a summary of our guidance. We are on target to deliver pre-tax profits of at least GBP 1.05 billion for the next two years as we match delivery to the prevailing market conditions.
Beyond this guidance period, we continue to target a sustainable 15% pre-tax return on equity. Berkeley is targeted to be working capital neutral over the next two years. Ongoing annual shareholder returns of GBP 283 million are forecast to continue to September 2025, which is currently equivalent to GBP 2.63 per share, an increase of over 30% since December 2016. Thank you very much for listening today. This concludes the presentation of Berkeley's results for the year ended 30th of April, 2023.