Barratt to book £412m remediation charge

A trading update today for the year to 30th June 2022 reveals that Barratt will book a £395m charge in addition to the £17.4m already accounted for in the half-year results.

“The second half charge includes reinforced concrete frame remediation works but mainly reflects costs in relation to the Department for Levelling Up, Housing & Communities’ Developer Pledge,” Barratt said.

Barratt has signed the pledge committing it to take responsibility for undertaking or funding remediation and/or mitigation works to address fire-safety issues on all buildings of 11 metres and above, built over the past 30 years.

Barratt has also set up a building safety unit (BSU) within the company, at a cost of £10m a year. which have not been included within the adjusted item costs charged in the second half. The annualised BSU operating costs, which will be expensed as incurred through administrative expenses, will increase by approximately £10m per annum from 1 July 2022.

While the remediation costs are heavy, they do not seem out of Barratt’s reach. Adjusted profit before tax for the year, excluding that £412m charge, is expected to be in the range of £1,050m and £1,060m, the company said, which is slightly ahead of current market consensus expectations.

Total home completions in the year to 30th June 2022 returned to pre-pandemic levels, with 17,908 homes completed (FY21: 17,243 homes). This output is expected to grow by 3-5% over the medium term.

Chief executive David Thomas said: “We have delivered an excellent performance this year, reflecting the strong customer demand for our homes and the productivity of our sites. We are delighted that completions have now returned to pre-pandemic levels and I am grateful for the hard work and dedication of our teams and partners over the past two years to achieve this important milestone.

“While there are clearly macro-economic uncertainties ahead, the housing market remains robust, our forward order book is strong and we have the resilience and flexibility to react to changes in the operating environment. Our focus remains on addressing the UK’s housing shortage with the high-quality, energy-efficient, sustainable homes and developments which we pride ourselves on building.”

Barratt’s annual results for the year to June are scheduled to be published on 7th September 2022.

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