Barratt's latest six-month results show £590m loss

Barratt Developments has run up a pre-tax loss of £590m in the space of the last six months.

There were two elements to Barratt’s woeful figure:

• £80m of operating loss
• £510m of write-downs in the value of land and work-in-progress

Mark Clare, chief executive, said Barratt had “factored down” the value of its assets by 27% on average – reflecting the scale of the fall in sales prices nationally.

The biggest write-down percentages were 25%-35% in part-built, unsold flatted developments and a similar figure in city-centre projects outside of London.

Barratt’s latest interim results cover the six months to 31 December 2008.

Turnover of £1.3bn was down on the previous comparable period by 24% (2007 interim figure: £1.7bn)

Barratt’s year-end is 30 June and during the 12 months prior to that deadline in 2008 even after soaking up a hit of £260m there was still a pre-tax profit of £140m as margins on new houses –as in the rest of the in the boom years - were remarkably high.

The latest set of interim figures shows that the average selling price decreased by 9.7% to £160,700 (2007: £178,000).

However on a like-for-like basis and after stripping out the effect of product mix changes, the average was 27% lower than in June 2007.

Net debt has reduced by £320m since 31 December 2007 and £230m since 30 June 2008 to now stand at £1.4bn.

Clare said: “The group continues to operate within its banking facilities and debt covenants and has repaid, ahead of schedule, the £200m term loan facility due in April 2009.”

At the end of December it was announced that Barratt had been allocated funding for 3,000 units under the HomeBuy Direct Scheme with an approximate sales value of £520m.

“Our pre-registration initiative has already attracted initial interest from around 12,000 potential customers,” said Clare

The cost reduction programmes have trimmed the divisional office structure down to 25 compared with 44 at the time of the Wilson Bowden acquisition.

Employee numbers are 29% lower - the headcount has fallen by 1,900- in the past six months and the tally is now 38% lower than when the over-priced, top-of-the-market bid was launched for rival Wilson Bowden.

That figure represents 2,900 job losses.

The cost-saving battle is still being fought and Barratt is looking to strip out a further £80m a year of costs in the coming months.

Barratt’s supply chain can expect to bear the brunt of that hit.

“We are already in discussions with our supply chain,” said Clare, reporting that once there is any sniff of a recovery and a lift in volumes he will anticipate Barratt’s bulk-buying power will warrants discounts.

Overall, 54% of the group's first half completions were flats (2007: 50%).

Outside central London, flats accounted for 50% (2007: 46) of completions.

Sales to investors formed 24% (2007: 15%) of the group's completions.

Average selling prices in the three main regions were:

• north - £143,000 (down by 14%)
• south - £165,000 (down 11%)
• central London - £249,000 (up 14%)