Good morning, ladies and gentlemen, and welcome to Berkeley's results presentation for the six months ended thirty-first of October, 2023. I am Rob Perrins, Chief Exec of the Berkeley Group. These are a great set of results. Profit before tax is slightly ahead of guidance at GBP 298 million, with an operating margin of 19.5%. Net cash has been maintained at above GBP 400 million. This underscores the value of Berkeley's unique long-term operating model and allows us to add a further year to our guidance, which is now to deliver at least GBP 1.5 billion of pre-tax profit over the three years ending thirtieth of April, 2026. The sales market, as we know, is cyclical and depends on the feel-good factor. At the moment, it lacks any sense of urgency due to elevated interest rates and macro volatility.
Our private sales are a third lower than last year, but sales prices remain stable and build cost inflation is now negligible. Of equal importance in today's operating environment is the uncertainty in the current planning and regulatory system, which is resulting in delays and increased costs. While we have visibility over the short term, the supply side challenges in our industry are impacting the medium-term outlook, where currently new investment is not viable for a responsible business, which is also facing increased taxation. We have positioned the business accordingly. This recognizes Berkeley's inherent value, which is rooted in its unrivaled land holdings, but current conditions are impacting the pace at which homes are delivered. We will continue to seek to optimize each of our sites to protect margin and add value.
We will run the business efficiently and have reduced operating costs by 10% compared to last year. We will maintain balance sheet strength and be ready to pivot our capital allocation priority to new investment should the conditions for growth present themselves. Currently, this is not the case, and we are not investing in new opportunities. If this continues, we will make additional returns to shareholders. I will now hand over to Richard Stearn, our Chief Financial Officer, to run through the results.
Thank you, Rob, and 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 period, we have delivered GBP 298 million of pre-tax profit in the six months. This is ahead of both the same period last year and the guidance provided in the September trading update, reflecting a strong finish to the period by our production teams on a number of London sites. Earnings per share decreased by 1% to 198.3 pence, with share buybacks largely offsetting the impact of the higher corporation tax rate.
The operating margin is unchanged from the comparative period at 19.5%, and our pre-tax return on equity was 17.7%, which is ahead of our 15% long-term baseline. Looking at the financial position of the group, shareholders funds or net assets are GBP 3.4 billion, an increase of GBP 82 million in the period, with profit after tax of GBP 212 million, exceeding the shareholder returns in the period of GBP 128 million. Shares in issue, net of treasury and those held in the EBT, have reduced by 1.4% to 106 million as a result of the acquisition of 1.7 million shares in the period, undertaken at an average price of GBP 39.01 per share.
As a consequence, net asset value per share has increased by 3.8% to GBP 32.19. Net cash is GBP 422 million, up from GBP 410 million at the 30th of April, 2023, and higher than guided in the September trading update due to the aforementioned timing of delivery in the year. This slide sets out our two important operational measures of financial strength. First, we have cash due on forward sales covering the next three years of GBP 2 billion, only slightly less than at the year-end, when it was GBP 2.1 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, not a revenue figure. It does not include reservations, nor does it include affordable housing contracts or commercial properties, and it excludes joint ventures. Approximately 40% of the forward sales relates to the remainder of this financial year and the remainder thereafter. Secondly, the estimated future gross margin in our land holdings has reduced by GBP 384 million to GBP 7.2 billion, largely due to the sales in the period. This slide highlights the key components of revenue and profitability. We sold 1,785 homes at an average selling price of GBP 624,000 in the first half.
This compares to 2,080 homes at an average price of GBP 560,000 for the first half of last year. As always, the ASP reflects the mix of properties delivered in the period, compared to the same period last year, as opposed to the underlying sales price movements. In June, I indicated that volumes for FY 2024 and FY 2025 would be around 8,000 combined, weighted slightly towards FY 2025. This remains my expectation. Pricing also remains in line with previous guidance, which was to remain above GBP 600,000 in the current year before reducing below this thereafter. Today, we have extended our guidance a further year to cover the three-year period up to the end of FY 2026, for which we are targeting the delivery of at least GBP 1.5 billion of pre-tax profit.
Pre-tax ROE will be above 15% for the period as a whole, although likely to fall slightly below this for FY 2026. 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. Our St Edward joint venture delivered 204 homes in the period at an average selling price of GBP 1.2 million. This compares to 251 sales at an ASP of just over GBP 1 million in the comparative period. As I have previously indicated, this half year saw St Edward deliver the final block at Royal Warwick Square. With the Millbank development also now substantially completed, St Edward will now predominantly be delivering out of London sites, and the JV profit will be more modest.
Turning now to the income statement and comparing to the last half year, revenue has decreased by 1% to GBP 1.2 billion, with lower volumes being partially offset by the higher ASP, as just set out. Gross profit is GBP 312 million, representing a gross margin of 26.1%. Overheads have decreased by GBP 10 million to GBP 80 million. This has facilitated the operating margin remaining at 19.5%, notwithstanding the reduction in revenue. This is at the top end of the long-term historical average of 17.5%-19.5%, a strong performance in this current environment. Our net finance income is GBP 5 million, compared to a net finance cost of GBP 11 million in the prior half year.
With our high cash balances and fixed coupon on the green bond, this reflects average interest rates in the period of 5%, compared to 1.5% last time. The effective tax rate for the period was 29%, which now fully reflects the new corporation tax rate of 25% and the 4% residential property development tax introduced last year. This slide sets out the cash flows for the period, which show an increase in net cash of GBP 12 million to GBP 422 million. GBP 298 million has been generated from pre-tax profits, with a GBP 73 million net increase in working capital. As you can see, the key components within this increase are a GBP 68 million increase in inventory, a GBP 52 million increase in customer deposits, and a net GBP 57 million movement in other debtors and creditors.
During the period, we paid tax of GBP 88 million, and the other significant item is the GBP 128 million of shareholder returns, which comprises dividend payments of GBP 63 million and GBP 65 million of share buybacks. I will not dwell on this balance sheet slide as I'm going to run through the two key numbers, inventories and creditors, in the next two slides. This slide analyzes the GBP 68 million increase in inventories in more detail. The overall land cost in the balance sheet has decreased by GBP 95 million, as we have not invested in new land in the period. Build work in progress has increased by GBP 141 million, as we have continued steady, controlled investment into our existing regeneration schemes to meet our forward sales.
Completed stock has increased by GBP 22 million, and remains at a relatively low level, spread across a number of sites. Creditors have decreased by GBP 12 million in the period, and this slide sets out the offsetting movements. Of note within these is the GBP 52 million increase in deposits and on-account receipts. This increase arises from payments on account from institutional investors. You may have seen the announcement by Long Harbour of their acquisition of the remaining 370 homes at Beaufort Park and housing associations, rather than on private sales, where deposits have reduced slightly in the period. The slide also sets out the payment profile for the GBP 893 million of land creditors. The current year sees very little repayment, followed by some GBP 200 million being repaid in each of FY 2025 and FY 2026, with a gentler profile thereafter.
Creditors also include provisions of GBP 208 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 of GBP 1.2 billion is unchanged from the year end, and comprises GBP 400 million of 2031-dated green bonds with a 2.5% coupon. An 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 until February 2028, with an option to extend this to 2029. At the half year, Berkeley was ungeared on a net basis, with net cash of GBP 422 million, and total available liquidity, therefore, of just over GBP 1.6 billion. Finally, this slide summarizes our land holdings.
Estimated future gross margin is GBP 7.2 billion across 56,000 future homes on 71 sites, down from GBP 7.6 billion and 58,000 plots at the 30th of April, 2023. Two sites were added to the land holdings in the period. A site for 199 homes in Maidenhead, following receipt of planning consent, and a 470-home St Edward Joint Venture site in Guildford being transferred from the pipeline following receipt of a re-resolution to grant planning consent in October. In addition, we received planning consent for 550 homes at Paddington Green Police Station, adjacent to our West End Gate development in Marylebone, and have achieved some 20 amendments to planning consents on existing sites.
There was a net reduction in gross margin of GBP 384 million in the period, with just over GBP 400 million taken to profit. The difference is accounted for by the two new sites, planning and market movements, offsetting the cost of regulatory changes, including the accommodation of second staircases in buildings over 18 meters. The pipeline now comprises 13,500 plots across 13 sites. Thank you very much, and I will now hand back to Rob.
Thank you, Richard. I would like to start by looking at the key features of Berkeley's strategy and our approach to creating long-term value. I will then look at the current operating environment and its impact on Berkeley. I will conclude by bringing these together to set out our guidance for profitability and our flexible approach to capital allocation. My main message is that while today's operating environment is highly volatile and unpredictable, Berkeley is well-placed to navigate this and continue to deliver returns and value for its shareholders. Berkeley's core principles remain the same. We have an unrelenting focus on the customer, placemaking, and brand. We have an added value model that prioritizes enhancing the value of each development.
The maps in the appendix set out our sites, including the 32 large brownfield regeneration projects in and around London, with over 40,000 future homes still to be delivered under existing planning consents. We prioritize financial strength above annual profit targets. We execute efficiently through motivated, experienced, and autonomous management teams who have the expertise to deliver the complex projects we undertake at scale. We have established strong relationships over many years and have a hard-earned reputation for delivering. Our Vision 2030 covers the economic, environmental, and social value we deliver to all of Berkeley's stakeholders. These key principles complement the market we operate in. We are focused on London and the South East. London is a fantastic global city with deep demand. The appendix sets out the current data on housing supply in London and the South East. The chronic shortfall in new homes is structural.
We are heavily focused on brownfield development. 86% of homes in our land holdings are on brownfield developments. This is fundamentally aligned with government and produces the best outcomes for society, the economy, and the environment. What we do is highly complex and capital intensive, and there are very high barriers to entry. Turning now to the operating environment. I will begin with the sales market. Sales rates are down by a third when compared to last year, but we are seeing very good levels of inquiries. The fall in sales rates is a direct result of higher interest rates. We are delighted these now appear to have peaked, and mortgage rates are falling below 5%. Customers are focused on homes closer to completion or more established sites, such as White City and Fulham Reach, where we've seen strong sales on new phase launches.
However, sales rates on new sites are back to historic levels. We have had two successful launches in the period at Camden Goods Yard and Broadway East in Bethnal Green, both already securing around 20 sales. When coupled with our strong forward sales position, these sales rates with stable pricing underpin our business plan targets. In terms of our routes to market, we continue to sell to private customers, both owner-occupiers and investors, locally and internationally, affordable housing providers, and institutional investors across the private, rented, and retirement living sectors. Our private sales are split broadly 60/40 in favor of own occupiers, with the majority of investors being international. Build cost inflation is now at negligible levels across the majority of trades. A number of contractors are under financial pressure, and we're working closely with our supply chain partners to manage any impact on build programs.
There is a very real risk at this point of the cycle of contractor failure. We see it as our responsibility to support the supply chain where possible and continue to pay weekly where required. We are all familiar with the macro events, domestically and abroad, that continue to impact U.K. business. Alongside this, the housebuilding industry has been adjusting to the combined impacts of fire safety considerations, the increasingly ineffective planning system, and changes to regulations across a number of interdependent and complex areas. These factors are deterring new investment, reducing the supply of new homes, and significantly affecting small builders. Looking first at planning, we have three layers of government all making planning policy, which, while largely well-intended, often conflict and add incremental burdens. This has resulted in planning applications now taking nearer four years, rather than the two years they took prior to COVID.
At the national level, the proposed changes to the NPPF have meant that many local authorities have put their local plans on hold, resulting in huge uncertainty and delay. The final changes to the NPPF are expected to be announced shortly, which should provide clarity and we hope will include specific provisions to support the government's Brownfield First policy. The Levelling-up and Regeneration Act has now become law, but many of the headline policies, such as the infrastructure levy, are not expected to come into force for a number of years. In London, the GLA new design guide standards include a number of aspirational targets, such as increased homes with dual aspects and homes which are larger. These cannot all be achieved when coupled with other competing demands, such as affordable housing and CIL, but many local authorities are applying these standards as if they were policy rather than guidance.
Turning now to regulation, there are three particular areas I'd like to focus on. Firstly, the new Building Safety Regulator powers are now in force, and from April 2024 will require all buildings to pass through the new Gateway Two. Berkeley support these changes and are working with the regulator to fully understand all aspects of the requirements, with the aim of minimizing any delays and upfront costs. Secondly, the reduction in energy and low carbon emissions required under Part O, L, and F of the building regulations will be added to by the introduction of the Future Homes Standard in 2025, all of which add cost and technical complexity. Thirdly, in terms of tall buildings, we are pleased that we now know the height at which buildings will require a second staircase, and that there will be a long transition period.
We still await final technical details, but believe only a second standalone staircase is required, as tall buildings are fundamentally safe based upon historic data, and particularly given the recent ban on combustible materials and requirements for sprinklers. On fire safety more broadly, we remain very concerned that the government is still considering plans to introduce an additional Building Safety Levy, with the target of raising an additional GBP 3 billion from the industry. In the meantime, Berkeley are addressing any life-critical fire safety defects in the buildings it has developed over the last 30 years, in line with the contract it signed with DLUHC. Berkeley has third-party assessments in place for over 90% of its buildings and has carried out its own risk assessment on the remainder. Berkeley continues to engage proactively with the Competition and Markets Authority on its market study.
I will now conclude with how we are positioning Berkeley for today's environment. Berkeley's inherent value is rooted in its land holdings. The operating environment is currently impacting the pace at which we deliver the homes on our land holdings, and therefore our earnings in the medium term. In this context, Berkeley will continue to realize our forward sales over the short term, maintaining strong control over operating costs, matching them to the size of the business, maintaining our operating margin above 17.5%, invest in work in progress on our existing sites in a controlled manner, and maintaining balance sheet strength, focusing on cash generation, and seeking to preserve and increase value on our existing land holdings and pipeline sites. We are currently working on over 50 planning amendments. Our updated guidance is set out on this slide.
The key feature is that our profit guidance has been extended by one year to incorporate full year 2026. We are targeting to deliver at least GBP 1.5 billion of pre-tax profits across the three years ending 30 April 2026, while maintaining net cash above GBP 400 million. Beyond the three-year period, we expect profitability to remain around full year 2026 levels until the planning and regulation environment unlock, alongside an inflection in the sales market. Berkeley's ongoing annual shareholder returns of GBP 283 million continue till September 2025, which is currently equivalent to GBP 2.67 per share. We will pay GBP 0.66 of this as a dividend in two equal tranches in March and August each year.
From this point onwards, if the remainder of the scheduled annual return has not been delivered through share buybacks, the balance will be returned in September each year and be accompanied by a share consolidation. This is consistent with the approach taken with the 2021 B share return of capital. Most importantly, Berkeley is well placed to respond quickly and pivot its capital allocation focus to new investment if the conditions for growth materialize. If, however, Berkeley does not undertake any significant new investment by April 2027, we'll expect to return 100% of net profit earned across the four-year period of full year 2024 to full year 2027 to shareholders. This will ensure we deliver our cross-cycle 15% pre-tax return on equity. Thank you very much for your time today, and this concludes Berkeley's interim results presentation.