Barratt Developments annouces improved stability

Nov 18 2009 by Chris Knox, The Journal

BUILDER Barratt Developments has provided further signs of hope for the region's beleaguered housebuilding sector after becoming the latest firm to announce improved stability and increased reservations.

The Newcastle firm said in a trading statement yesterday that reservations were up a third during the 19 weeks to November 8, 2009.

It also said it had managed to reduce its debt mountain after a successful rights issue in September, which saw it raise £720.5m to help strengthen its financial position.

It now believes it can reduce its debt from £1.4bn to around £700m by the end of the year and that a recent agreement with the banks to renegotiate its facilities should help it to make further headway in the new year.

The statement revealed that average visitor levels per site stabilised at 1.88 per week during the period, while average private reservations were up from 197 to 204 across the country.

The company also reported a forward order book worth £846.6m at the start of November, against a £817.7m for the same period last year and said that it had made good on its promise to secure 12,000 completions in the year to June.

Chief executive Mark Clare said: “With the successful refinancing of the business now completed, we have substantially reduced debt levels and are in a strong position to buy land as opportunities emerge and to open new sites.

“While trading conditions in the housing market have improved, activity levels will remain constrained until the availability of mortgage finance increases, particularly at higher loan to value levels.”

The firm said the North East was performing in line with the national picture and the HomeBuy Direct scheme, which provides an equity loan so buyers can pay as little as 70% of the market price of a home, continues to prove popular among house seekers in the region.

It also confirmed that it had not made any further large scale job cuts since making 1,200 staff redundant across the country last year.

Despite the positive update, Barratt predicted that activity levels will remain constrained until the availability of mortgage finance improves, particularly among higher loan to value cases.

This belief is shared by city analysts, and Panmure Gordon maintained its prediction that the firm will report an underlying loss of £78.2m in the year to June 30, 2010.

The update mirrors figures from York firm Persimmon, which reveal that orders for new homes are currently up 50% on the same point last year and that the average selling price of homes reserved since the start of July being 6% higher at £173,000.

Patrick Law, director of corporate affairs at Barratt said: “Now that we have renegotiated our banking facilities, we believe we will continue to see improvements to the business.

“We are looking to launch a number of new developments in the North East and have been encouraged by our performance in the region.”