Barratt Cuts 1,200 Jobs, Scraps Final Dividend
Britain's Barratt Developments will cut nearly a fifth of its workforce to cope with the housing market downturn, joining other builders taking similar measures, and will not pay a final dividend for 2007-08.
Barratt also said with its house sales running at half the level of a year ago it expected prices to fall 10 percent from their peak.
As a result, it will write down the value of its land holdings by about 85 million pounds ($168 million).
The comment came before the Bank of England kept interest rates on hold at 5 percent and after nearly 4,000 job cuts by UK housebuilders in the past two weeks.
Barratt, which is cutting 1,200 jobs, said on Thursday it had agreed more relaxed covenants with its bankers for a new 400 million pound loan "as an appropriate, prudent response to current market conditions".
"Specifically, under this agreement, the interest cover covenant is replaced with a cashflow covenant and the gearing and minimum tangible net worth covenants are relaxed."
Barratt shares, which peaked at 1,310 pence in February 2007, rose 24.1 percent to a two-week high at 67 pounds, valuing the company at around 134 million pounds.
Cazenove analysts said news of the new financing "will steady some nerves.
However, the forward order book has declined 50 percent year-on-year and the group remains extremely operationally and financially geared".
Housebuilders' share prices have collapsed this year, partly on fears of big writedowns on land bought at the peak of the housing market.
A 10-year boom in Britain's housing market began slowing last summer before the global credit crunch choked off the supply of cheap and easy money that had helped triple prices in a decade.
The "collapse" in residential construction, and a contraction in the United States, forced Austria's Wienerberger, the world's largest brickmaker, to issue a profit warning on Thursday.
House prices have fallen for several months as competition in the mortgage market all but disappeared and availability dried up.
Halifax, Britain's biggest mortgage lender, said on Thursday house prices fell 2.0 percent in June to be 6.1 percent lower year-on-year in the second quarter.
It said the market continued to be underpinned by sound fundamentals.
The Bank of England said on Wednesday the cost of a two-year fixed-rate mortgage rose 0.37 percentage point in June to 6.63 percent, the highest since February 2000.
Barratt, reporting on full-year trading, said its total completed sales rose 8.3 percent to 18,588 in the year to end-June.
Private sales were 3.3 percent higher at 14,803, while social housing completions rose a third to 3,785.
Chief Executive Mark Clare said at the current sales rate, 2008-09 volume would drop close to 14,000.
Barratt's jobs cuts, which will take its headcount to 5,500 from 6,700, will cost 15 million pounds and lead to about 40 million pounds of annual savings.