Barratt's 'record' profits omit fire safety costs

It is impossible to look at Barratt Developments (BDEV) finances without thinking about the Grenfell fire tragedy. Just as the burned-out tower casts a shadow over Kensington, so, too, do fire safety costs loom over the housing developer’s full-year results.

The government has listened to the victims and their families who have been calling for developers such as Barratt to cough up cash to fund the removal of flammable cladding on buildings they have developed over the last 30 years. For Barratt, these costs amount to £396mn for the year to 30 June. Combined with other costs related to building safety for that period, Barratt has paid out £408mn.

By its in-house measure, the developer ignores this elephant in the room to post a “record” £1.05bn in pre-tax profit. In its statutory figures, however, the £408mn figure is included – lopping 39 per cent off the adjusted version.

How much more will Barratt be liable to pay for fire safety or general building safety costs on its buildings in future? The housebuilder admits it does not know. This is a prudent position to take considering the government’s flip-flopping on the issue since the fire five years ago. A big part of the reason for this is staff turnover. Prime minister Liz Truss’ newly appointed housing secretary is the sixth since 2018 and there have been 12 housing ministers since 2010.

If the housing department somehow manages to keep hold of its staff for long enough, shareholders, developers and campaigners alike will get some much needed clarity. This would be welcome. After all, away from the cladding issues, Barratt’s business looks good. Hold.

Last IC view: Hold, 483p, 20 Jul 2022