But housebuilder admits more writedowns will be needed after further dip in market
Mark Clare, chief executive of Barratt, says the housebuilder will continue to operate within lending agreements despite an “intensely difficult” market.
Speaking after a trading update on Tuesday, Clare said Barratt would have more breathing room with debt next year and that its banks had shown flexibility.
He said: “We expect to stay within existing covenants. After the reduction of borrowing and work in progress we announced, debt headroom in 2009 will grow quite significantly.”
At 30 June 2008, the company’s debt was £1.65bn. When asked how flexible Barratt’s banking arrangements were, Clare said: “The banks have provided good levels of flexibility. You have to consider at what point covenants need to change again, but that’s a long way off.”
Last month Building revealed that the company’s lenders would adjust lending terms if they were in danger of being breached.
The trading update, which covered the period from 1 July to 9 November, said average selling prices will have fallen by between 15% and 20% by the end of this year and discounts being offered to home buyers would affect operating margins.
It warned that more writedowns would be announced next February as a result of the falls. Mark Pain, Barratt’s finance director, said it was too early to tell how big the writedowns would be.
As a result of discounts and incentives, reservation levels were down just 6.6% since September.
1 July – 9 November 2008
5.8% drop in visitor levels
197 average net reservations per week – down 23%
7.5% rise in visitor levels
233 average net reservationsper week