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Barratt shares up after £600m loss on landbank writedowns

Barratt’s share price rose by more than a third within a day of the house builder reporting a near £600 million loss last week.

The share price was 65p before Barratt reported its results for the six months to 31 December. But after revealing its £592.4 million loss, its shares shot up to 90p. Analysts said Barratt’s results were better than expected, prompting a flurry of activity at the stock exchange.

The company’s loss would have been £80 million without impairment costs, which totalled £494.5 million in landbank writedowns and £17.5 million in restructuring costs. MF Global had been expecting an £85 million loss with £700 million of writedowns.

MF analyst Andrew Gardner said: “It was encouraging to see a number of positives in Barratt’s results and we are now cautiously optimistic.”

Barratt said it had seen an encouraging start to 2009, with chief executive Mark Clare saying
that there were “some signs of life in the market”.

The message echoed that of other house builders, and came after Northern Rock announced that it would start mortgage lending again to a total of around £14 billion during the next two years.

Panmure Gordon analyst Rachael Waring said: “Barratt did really well on generating cash, which is the most important thing for a house builder.

“Barratt and Redrow both commented on a pick up in trade, and with Northern Rock providing mortgages again, there are reasons to be positive.”

Barratt’s sales were ahead of expectations for the half-year at 6,905 units, but a 23.8 per cent decrease on the 9,056 for the same period in 2007.

Housing market is steadying

  • After a terrible 2008, house builders have reported the early signs of a steadying market.
  • Firms who have reported results so far have talked of some signs of stability during the past eight weeks.
  • Funding is beginning to return, with the likes of Northern Rock re-entering the lending market, and a number of consumers are starting to look for a potential bargain.
  • Visitor numbers are up atBarratt, Redrow and Galliford Try, but as Barratt’s chief executivevcommented, it is perhaps still too early to talk of “green shoots”.