Barratt Developments is cutting 1,200 jobs, scrapping its final dividend and writing down the value of its land bank by £85m, as sales plummet to just half the level of a year ago.
The whole housebuilding sector is reeling from the effects of the credit crunch on the property market and Barratt's redundancies take the number of jobs shed by the construction industry to more than 6,000 in the past week alone. Redrow and Bovis Homes are cutting 450 and 400 jobs respectively, Taylor Wimpey is to lose 900 and Persimmon a massive 2,000 staff across its operations.
But Barratt's news is not all bad. Last month the group's shares went into freefall as investors were spooked by the level of debt and there were widespread expectations of an emergency rights issue to keep the company going.
Such drastic measures have been averted by renegotiated banking covenants, and a new £400m loan, the company said yesterday. The stock closed up 24 per cent at 67p.
Mark Clare, the chief executive, said: "In terms of housing volumes, margins and debt, we have delivered a satisfactory performance in an intensely difficult market.
"By enhancing our sales capability, reducing our costs and agreeing a new financial package, we have now substantially improved our competitive position and are better placed to deal with what will be a very challenging period ahead."
The numbers are grim. Total completions in the year to June dropped by 13.8 per cent, and private completions were down by 18.4 per cent. Average private sales in the second half were 211 per week, 42.9 per cent lower than the year before and 13.5 per cent below the previous half. The company says that the less marked drop in visitor levels points the finger of blame firmly at the shortage of mortgages.
The deal with the company's bankers is regarded as crucial. "Barratt has won a reprieve through which it will be able to restructure and it will now survive," Simon Brown, an analyst at Landsbanki, said.
"It should be able to trade its way out of a difficult market because it is probably one of the better marketing operations in the industry. It is not going to be pretty, but it should be cash generative."
With the new financing package in place, Barratt's focus will be on paying off some of its debts, a large chunk of which date from the £2.2bn purchase of Wilson Bowden in February last year.Reuse content