A long-expected £495m writedown of land and work in progress, combined with restructuring costs of £17.5m, largely explained the hefty half-year loss. Going forward, chief executive Mark Clare said Barratt's strategy is to "drive sales, cut costs and reduce debt". Yet Barratt Developments insists that it's not planning to raise equity to shore up its balance sheet, even after reporting such grisly figures.
Indeed, Barratt's debt burden dropped 14 per cent in the period to £1.42bn, chiefly through selling commercial property assets in the Wilson Bowden portfolio. Barratt renegotiated its debt covenants last August, switching to a cash flow-related model, though no details have been provided. Accordingly, the interest charge rose 49 per cent year-on-year to £96.2m. "We are operating within our covenants, and expect to continue to do so," insisted Mr Clare. "We have no plans to do a rights issue."
Mr Clare added that current trading is above planned volume and pricing levels. However, he conceded that a "material step down in the market", causing further restrictions of mortgage credit, cannot be ruled out. A further £80m of savings have also been targeted by the year-end, although there's no target for year-end net debt. "We don't want to put too much pressure on prices by trying to go too fast," says Mr Clare.
Before the impact of exceptional costs, operating margins fell to a pitiful 1.3 per cent - down from 16.6 per cent a year previously. First-half completions fell 23.8 per cent, and average sales prices have dipped 27 per cent since their June 2007 peak.
The writedowns assume an average price reduction of 27 per cent, with city centre flats outside London seeing the greatest falls. Mr Clare assured investors that sales executed within the first six weeks of 2009 had been achieved above these levels and averaged 250 properties sold a week. Promotion of the government's Homebuy Direct assistance scheme on 3,000 homes has netted 12,000 pre-registrations from customers.
Broker Panmure forecasts a full-year loss per share 27.9p.
| BARRATT DEVELOPMENTS (BDEV) | ||||
|---|---|---|---|---|
| ORD PRICE: | 78p | MARKET VALUE: | £270.4m | |
| TOUCH: | 78-79p | 12-MONTH HIGH: | 457p | LOW: 35p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 676p* | NET DEBT: | 61% | |
| Half-year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 1.65 | 195 | 38.8 | 12.23 |
| 2008 | 1.26 | -592 | -123 | NIL |
| % change | -24 | - | - | - |
Ex-div: - Payment: - *Includes intangible assets of £892m, or 257p a share | ||||
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