Barratt books £494m writedown on land bank

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The Independent Online

Barratt compounded the gloom around real estate and housebuilding yesterday when it wrote down the value of its land by almost half a billion pounds.

The Leicestershire-based housebuilder reported a pre-tax loss of £592.4m in the second half of 2008, compared with a £194.6m profit in the year-earlier period. The result included a £494m writedown.

"The focus is on the scale of the land writedowns," Kate Moy, an analyst at Arbuthnot Securities, said. "It's probably within people's estimates."

Shares in Barratt rose 14 per cent to 81.25p.

The housebuilder, which was left saddled with debt from the £2.2bn acquisition of its larger rival Wilson Bowden in 2007, crucially added that it is within its banking covenants and has no plans for a rights issue this year.

Analysts still fear Barratt may come close to breaching its loan-to-value banking covenants.

Barratt said it had cut a further 700 jobs on top of the 1,200 it announced in July that it would make following site closures as developments are completed.

Barratt said the housing market remains "intensely difficult" with little forward visibility, constrained by lack of mortgage availability, consumer confidence and falling prices.

But in line with its peer Redrow, which announced job cuts and a loss as it reported results on Tuesday, trading since the start of the year has been slightly more upbeat.

"The new calendar year has got off to a reasonable start with a step up in reservation and visitor rates, and while that is comforting, it's still too early to predict anything other than there are signs of life out there," Mark Clare, Barratt's chief executive, said.

A shortage of loans has prevented potential first-time buyers entering the market, hurting housebuilders.