Jump to content
House Price Crash Forum
Sign in to follow this  
Ked

Builder Barratt Devt Cuts 1,200 Jobs, No Final Dividend

Recommended Posts

LONDON, July 10 (Reuters) - Britain's Barratt Developments Plc 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 as the Bank of England's interest rate-setting committee votes at its monthly meeting 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 as much as 30 percent to a two-week high in early trading before losing most of the gains to 54.5 pence by 0829 GMT, 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".

COLLAPSE

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. (Editing by Sue Thomas)

((dan.lalor@thomsonreuters.com; +44 20 7542-2737)) ($1 = 0.5068 pound)

Share this post


Link to post
Share on other sites
With a shrinking payroll there will be more profit.

Its called short term thinking.

With a shrinking payroll there will be hopefully less debt you meant...

Share this post


Link to post
Share on other sites
With a shrinking payroll there will be more profit.

Its called short term thinking.

Very common over in the UK. Anyone who is a product of the IoD/CBI schools of thought knows the best way to save money is outsource/cut the head count/bring in consultants/contractors. Unfortunately what they don't teach at the IoD/CBI is that this works only in the short term and really fncks up any chance of company recovery in lean times. Also screws up the country in which they live. The last MD who had any clue in all the UK was Lord Weinstock. When he was replaced at GEC by someone popular with Shareholders in "the city" anything of value was sold off and the nation became much poorer for it.

Seriously I could write papers on why the BMW/Mercedes/Suzuki models of manufacturing are so consistent at providing growth in the long term.

Share this post


Link to post
Share on other sites

3 months ago they where at nearly 400p , now they are "up" to 75p.

Barratts is dead, i don’t know how book keeping works but imo they have more debt than assets so are worth negative sums.

land value has fallen 25%, Taylor wimpy have written their land down 15%, barrats has written its land down 2%!!

2%??? ******ing house prices are down more than that!

Who chooses what the land is "valued at?"

Share this post


Link to post
Share on other sites
Very common over in the UK. Anyone who is a product of the IoD/CBI schools of thought knows the best way to save money is outsource/cut the head count/bring in consultants/contractors. Unfortunately what they don't teach at the IoD/CBI is that this works only in the short term and really fncks up any chance of company recovery in lean times. Also screws up the country in which they live. The last MD who had any clue in all the UK was Lord Weinstock. When he was replaced at GEC by someone popular with Shareholders in "the city" anything of value was sold off and the nation became much poorer for it.

Seriously I could write papers on why the BMW/Mercedes/Suzuki models of manufacturing are so consistent at providing growth in the long term.

Inevitable as long as the doctrine of corporate personhood exists, I am afraid.

Share this post


Link to post
Share on other sites

Anyone know which banker lent the company £400 million.

I must :

A Get my money out of this bank

B Ask them for a loan - how about a £500,000 equity loan on my 5 year old nissan

Edited by natasha's dad

Share this post


Link to post
Share on other sites
3 months ago they where at nearly 400p , now they are "up" to 75p.

Barratts is dead, i don’t know how book keeping works but imo they have more debt than assets so are worth negative sums.

land value has fallen 25%, Taylor wimpy have written their land down 15%, barrats has written its land down 2%!!

2%??? ******ing house prices are down more than that!

Who chooses what the land is "valued at?"

Bascially, they value it, subject to what their auditors will agree to.

It should be "the lower of cost and net realisable value", I presume they look at the original cost of the land, plus any work in progress that has increased it's value, and then index that in current terms or get a surveyors current opinion of what it is worth and the lower is passed as it's value. The latter is the sticking point, as it determines how much should be written down and wether the company's liabilities exceed it's assets and are insolvent.

There's a big difference between 15% and 2%, however some surveyor must have agreed it's worth that value, and some accountant has signed off that value as being correctly calculated.

Share this post


Link to post
Share on other sites
3 months ago they where at nearly 400p , now they are "up" to 75p.

Barratts is dead, i don’t know how book keeping works but imo they have more debt than assets so are worth negative sums.

land value has fallen 25%, Taylor wimpy have written their land down 15%, barrats has written its land down 2%!!

2%??? ******ing house prices are down more than that!

Who chooses what the land is "valued at?"

http://www.barratt-investor-relations.co.u...nt.aspx?id=1538

Land

The Group¹s land bank totalled 78,700 plots at the year-end, of which 86% was owned and 14% was agreed subject to contract. The Group is only investing in new land to the extent that it is contractually committed to do so. Total land spend for the 12 months to 30 June was approximately £1.0 bn (2007: £1.3bn on a like-for-like basis). Contractually committed land spend in the 2008/09 financial year will be significantly lower at approximately £600m.

The Group has taken a conservative approach to land acquisition and valuation. It has minimal exposure to large, owned, tranches of strategic land without planning permission, and has limited exposure to high-rise flatted developments outside of London.

The Group has reviewed the year-end carrying value of land and work-in-progress. This has been completed in accordance with normal valuation practices and the relevant accounting standards.

The review has been carried out on a site-by-site basis, using valuations incorporating forecast sales rates, and average selling prices that reflect current and anticipated trading conditions. Particular attention has been directed towards large, more complex sites, apartment blocks outside London, sites with low sales rates, and sites where upfront investment is relatively high. Whilst assumptions are site specific, on a broad portfolio basis, a decline of approximately 10% has been incorporated (note: this reflects a c. 5% decline already experienced in the latter part of 2007/8 and an anticipated c. 5% further decline in 2008/09). The review indicates that the Group will incur a pre-tax write-down in the value of land and work-in-progress of approximately £85m for the financial year ended 30 June 2008.

We are currently assessing, for the limited number of larger, more capital intensive sites included in the review above, whether it may be more appropriate to realise cash through the sale of the assets, rather than developing them through to completion. Should we decide to realise cash more quickly, then additional pre-tax provisions of approximately £50m at 30 June 2008 would be required.

Nice. Lots of apartment blocks with high upfront investment. The BTL mugs ?

Share this post


Link to post
Share on other sites
The last MD who had any clue in all the UK was Lord Weinstock. When he was replaced at GEC by someone popular with Shareholders in "the city" anything of value was sold off and the nation became much poorer for it.

Very true. The people who wrecked GEC were criminals in my eyes.

Share this post


Link to post
Share on other sites

Despite the realities there is nothing like dire news to give investors confidence:

TAYLOR WIMPEY 48.00 7.75 +19.25%

PERSIMMON PLC 334.50 42.50 +14.55%

WOLSELEY PLC 321.75 36.00 +12.60%

BARRATT DEV PLC 10.75 +15.36%

BOVIS HOMES GROUP 32.50 +8.84%

To look at it you would think the market was turning around with increased borrowing rather thasn the crash of 32% reported this morning. I suppose the investors see the massive layoffs in the above as a good thing as they will more easily make payroll in the few months they have left before calling in the receivers?

Edited by Realistbear

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.