Homebuilders looking for cash injection

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.'

Construction firms fined £129.5m for bid-rigging

The Office of Fair Trading (OFT) have imposed fines of £129.5 million on 103 construction firms in England for 'bid-rigging'.

The largest trade association in the building industry, however, has hit back at the OFT's announcement, saying it is 'unfair' because they 'reflect old practices'.

The fines were made for cover pricing, or bid-rigging, where one or more bidders in a tender process obtains an artificially high price from a competitor.

The OFT said such cover bids are priced so as not to win the contract but are submitted as genuine bids, which gives a misleading impression to clients as to the real extent of competition. This distorts the tender process and makes it less likely that other potentially cheaper firms are invited to tender.

The regulator said it found infringements affected projects across England, worth in excess of £200 million, and included schools and hospitals.

Simon Williams, the OFT's senior director for this case, said: 'Our investigation has uncovered significant infringements of competition law on nearly 200 projects across England.

'Bidding processes designed to ensure clients and in many cases taxpayers receive the best possible choice and price were distorted, creating a real risk of increased prices.

'This decision sends a strong message that anti-competitive and illegal practices, including cover pricing, must cease.'

However, the Federation of Master Builders (FMB) have hit back at the OFT's announcement, saying the construction industry has already moved on ahead of today's announcement.

Richard Diment, director general of the FMB said: 'Today's fines reflect old practices in the construction market which have since been changed.

'It is unfair that some firms have been singled out for fines when cover pricing was a widespread practice across the construction industry and was known to the OFT but the fundamental issue now must be to ensure that these companies are not further penalised by public sector clients refusing to do business with them.

'Given the current economic climate and the fact that the construction industry has already taken positive action to address the issue of cover pricing today’s fines serve little purpose other than adding to the industry's woes.'

One of the companies fined was Mansell, a subsidiary of Balfour Beatty, one of the UK's largest construction groups.

Mansell was fined £5.2m for practices that took place before its acquisition by Balfour, the company said.

A statement for Balfour Beatty reads: 'The company and its operating businesses have co-operated fully with the OFT in all aspects of its investigation.

'In light of the investigation, Balfour Beatty carried out a thorough and detailed audit of all its businesses to ensure that it is fully compliant with all aspects of competition law.

'Balfour Beatty neither promotes nor condones anti-competitive behaviour.'