Barratt hit by credit crunch

Barratt has reported falls in revenue, completions and private reservations in a grim interim management statement.

Private reservations have been worst hit, with an average of just 276 per week over the 19-week period from 1 January 2008 – a 33% fall against the figures over the same period last year. The average sunk to 206 over the six weeks to 11 May.

Total housebuilding revenues were down from £893m in the 19-week period to 11 May last year to £825m this year, a decrease of 7.6%. Completions were down 5%.

Barratt reported it made a “relatively encouraging” start to the year, but that market conditions had “deteriorated significantly” since the end of March. It blamed an “unprecedented” reduction in mortgage availability, a tightening of lending criteria and a decline in consumer confidence.

The group also announced it had agreed with its bankers to roll over two-thirds of the remaining £600m debt resulting from the acquisition of Wilson Bowden Developments into a new two-year facility with a one-year extension option.

It announced last month it would extend its acquisition financing facility until 25 April 2009, but said this further option to extend £400m of the facility until 2010 “effectively deals with the Group’s short term financing requirements”.

In relation to Barratt’s planned financing restructure, Kevin Cammack, an analyst at Kaupthing said: “It’s not out of the woods yet but has bought itself time.”

It did not rule out a sell-off of Wilson Bowden Developments. It said it was “exploring all opportunities to maximise value” and trying to realise cash from its portfolio.

Mark Clare, group chief executive, said: “Despite the deterioration in current trading conditions, we expect to deliver a satisfactory outcome for the current financial year. Against the difficult market backdrop, we continue to prioritise margin management and cash generation by focusing on efficient and effective selling, reducing costs, and tightly controlling land spend and work-in-progress.”