Citiscape problems continue to dog Barratt

Barratt’s Citiscape development in Croydon, as captured by Google Streetview

For the six months to 31st December 2020 Barratt Developments completed 9,077 housing units (2019: 8,314 units) and generated revenue of £2,494.7m, up 10% on the previous year.

These numbers were helped by the earlier pause in work and higher forward sales position created by the first national lockdown delaying completions.

The result was a profit before tax of £430.2m (2019: £423.0m), after the deduction of £77.0m for exceptional items, primarily relating to cladding replacement works and problems with reinforced concrete frames.

As previously reported, Barratt discovered last year that eight high-rise blocks that it built had problems with their reinforced concrete frames. Defects were found first on the Citiscape development in Croydon during post-Grenfell replacement of aluminium composite material (ACM) cladding. A subsequent review found similar but lesser problems on seven other developments.

Barratt’s annual results for last year, announced in September, included a £39.9m exceptional costs primarily related to this issue. In its half-year results today, a further £56.3m exceptional cost has been taken into account.

It has promised not to pass these costs on to leaseholders.

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The company said today: “Detailed reviews are ongoing and, in line with our commitment to put our customers first we will ensure that the costs associated with any remedial works from these reviews are not borne by leaseholders.

“Additionally, with the evolving government advice on fire safety for multi-storey buildings, we continue to work with building owners and management companies on the assessment of buildings we have constructed. We have borne the cost of some remedial works at a small number of developments where we have a legal liability to do so or where relevant build issues have been identified.”

The other exceptional item in the interim results was £26m of furlough money booked as income in the 2020 accounts but since paid back to the government. As the company began 2021 with net cash of £1,106.7m (compared to £433.8m a year before), it hardly needed the state support.

During the July-December 2020 period, Barratt companies operated from an average of 342 active outlets (2019: 372) including eight joint venture sites. This slight reduction reflects the delay to site starts created by the initial national lockdown period.

It opened 63 new sites (2019: 45 outlets) in the half year, which was ahead of expectations..

Chief executive David Thomas said: “We have achieved a fantastic first half performance, with a strong rebound in completion volumes and good progress towards our medium term targets. We have also made a solid start to the second half and are now over 95% forward sold for our financial year. Whilst we are mindful of the continued economic uncertainties, the housing market fundamentals remain attractive and our outlook for the full year remains in line with expectations.”

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