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OUTLOOK Barratt Developments set to round-off torrid week for UK housebuilders
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LONDON (Thomson Financial) - Barratt Developments Plc will round-off a torrid week for the UK housebuilding sector when it issues a full year pre-close trading statement on Thursday and reveals whether it has been able to renegotiate a refinancing package with its bankers.
Barratt, which has debt of 1.7 billion pounds and a market capitalisation of just 140 million pounds, has already refinanced some 200 million pounds of debt and is aiming to secure another 400 million pounds by July.
However, given the parlous state of the market and the difficulties faced by Taylor Wimpey Plc last week after it failed to secure some 500 million pounds of additional finance through a fund-raising exercise, some doubts remain over the terms of any refinancing package.
As to trading, gloomy statements from Persimmon Plc, Bovis Homes Group Plc and Redrow Plc this week have underscored the severity of the downturn in the new homes market, as the credit crunch and the restricted availability of new mortgage finance has severely hit sales and reservations levels.
Bovis and Redrow both described the current trading environment as 'the worst period for housebuilders since the 1990s', and said the coming 12 months would offer little respite.
For Barratt, anlaysts look for total home completions of 18,300 units for the year to end-June 2008. The current earnings consensus is for pretax profits of about 395 million pounds for 2007-08.
Stockbrokers Panmure Gordon, which cut its earning estimates for the housebuilder last week, now looks for 79.7 pence of earnings for 2007-08 and a total dividend of 36.5 pence a share, although the group is likely to flag a cut in the payment for the current financial year. Panmure, which slashed its earnings expectations for 2008-09 from 36.0 pence to 16.9 pence a share because of the deteriorating trading conditions for housebuilders, believes the group may pass the dividend altogther.
'We remain concerned that the group will endure significant balance sheet pressure in 2008-09 and believe the group will breach its banking covenants at some stage. This is likely to put pressure on dividends and the group may have to source additional financing,' the broker said in a preview note.
The market will also be looking to see if Barratt will write-down the carrying values of its land bank and work in progress. Panmure Gordon believes a write-down of between 450 million and 550 million pounds may be necessary in the next six months, with a similar level required in 2009-10.
tf.TFN-Europe_newsdesk@thomsonreuters.com
ml/cmr
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