Homebuilders looking for cash injection

Homebuilders Barratt and Redrow have announced they are looking to raise millions from new shares

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Wednesday, 23, Sep 2009 10:46

By Sarah Garrod.

Homebuilders Barratt and Redrow have announced plans for a multi-million pound cash injection.

Redrow announced proposals to raise £150 million through the issue of new shares, while Barratt look to accrue £720.5 million from the issue of 618.4 million new ordinary shares.

Construction of new homes has been hit particularly hard by the recession, as one of the sectors most significantly affected by job losses and by the state of the housing market.

Redrow's rights issue has been supported by its founder and chairman of Steve Morgan, who owns 29 per cent of the company. He said: "The proposed rights issue will strengthen Redrow's balance sheet and position Redrow for growth.

"We are returning Redrow to its traditional focus on a great product in the market for family housing. We now need to enhance our ability to acquire land through selected acquisitions. This is all part of our strategy to steer the business back to delivering a much improved return on capital employed."

Barratt Developments said the second half of 2009 had seen stability return in the UK housing market, adding that overall reservation prices were running ahead of internal expectations.

Mark Clare, chief executive of Barratt Developments, said: "This has been an intensely difficult year for the group following the sharp decline in the UK housing market. In the first half, as prices fell, we drove sales and reduced stock and debt levels. In the second half we have been able to maintain price levels and increase our reservation rates, with these encouraging trends continuing through the summer into the autumn.

'The board has therefore decided it is now an appropriate time to substantially strengthen the company's balance sheet and reduce its debt levels via a placing and a rights issue. This will also enable the group to develop a number of its existing sites and to take advantage of land purchasing opportunities as they arise."