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Barratt cuts debt by £230m but warns of writedowns

Barratt today revealed it has reduced its debt by £230 million, but has warned it will need to make further writedowns to its landbank.

The house builder said in a trading update today it had reduced its debt over the last six months to £1.42 billion adding that it has repaid early a £200 million loan facility due in April.

Barratt completed a £400 million refinancing package in 2008, with new covenants in place until 2011.

Bosses said they anticipated further landbank writedowns and that a review is being carried out on a site-by-site basis.

In addition Barratt anticipates that additional write-downs will also be required against the assets of Wilson Bowden Developments.

Good progress has been made in the disposal of assets from the Wilson Bowden Developments portfolio, with net sales proceeds of approximately £171 million.

In a separate statement, Barratt said that its group finance director, Mark Pain, will leave the company at the end of June.

Group chief executive Mark Clare said: “Conditions in the housing market remain extremely challenging with little short term prospect for recovery.

“However, our visitor levels and sales rates have been above expectations, and we have generated significant cash flow and reduced debt.”

The housebuilder reported a pick-up in sales during the Autumn selling period, but total completions fell by 23.8 per cent to 6,905 in the six months to 31 December.

It added that despite cost savings, operating margins for the full year are seen lower than its previous guidance.

The company, one of the more heavily indebted UK housebuilders, said its focus remains on cash generation.

The trading update added: “Whilst it was encouraging to see a pick-up in our sales during the autumn selling season, market conditions remain challenging, impacted by a combination of poor buyer confidence and restricted access to mortgage finance.

“Until these issues ease we remain of the view that there will be no sustained recovery in the housing market.

“Over the last six months we have focused on reducing stock and work in progress and generating cash. Over the next six months we will continue to focus on cash generation whilst seeking best value for our products.”

Further reading:

Barratt sells £46m of assets to reduce debt – click here

Barratt reduces debt with £109m asset sale – click here

Barratt to make further landbank writedown – click here

Barratt rules out more job losses – click here