TIDMBDEV
RNS Number : 5072H
Barratt Developments PLC
06 April 2022
6 April 2022
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Barratt Developments PLC
Building Safety - Industry Pledge
-- Barratt has today signed an industry pledge(1) to address
necessary fire-safety issues on all our buildings of 11 metres and
above
-- We further commit to withdraw our buildings from, and/or
reimburse, the Building Safety Fund and ACM Funds
-- This reflects four years of constructive engagement with
Government and other stakeholders to address this complex issue
-- The incremental cost of remediating buildings or funding remediation where Barratt is taking responsibility for doing so is in a range of GBP350m to GBP400m
-- These are positive steps which align to our belief that
leaseholders should not have to pay for necessary remediation works
caused by the design, construction or refurbishment of
buildings
Since the Grenfell Tower tragedy in 2017, building safety, and
in particular cladding and external wall systems on multi-storey
and multi-occupancy buildings, has come under scrutiny and
investigation. Government policy has evolved and been updated
frequently in the intervening period while surveyors, lenders and
insurers have also made changes to their policies and procedures
for dealing with multi-storey, multi-occupancy buildings against
this uncertain and changing backdrop. Investigations by freeholders
and developers of buildings added further complexity and
uncertainty. Regrettably, leaseholders have been, and continue to
be, adversely impacted; often facing significant charges for
remediation, interim safety measures and increased insurance
premiums.
All of our buildings, including the cladding and external wall
systems used, were signed off by approved inspectors as compliant
with the relevant Building Regulations in place when they were
built. As we have previously made clear, Barratt believes that
leaseholders should not have to pay for necessary remediation to
fix building safety issues caused in the design, construction or
refurbishment of their buildings. Since the Grenfell tragedy, we
have been working closely with the Government and other
stakeholders to address this complex issue for the benefit of
leaseholders.
We welcome the action taken by the Department for Levelling Up,
Housing and Communities ("DLUHC") in recent months to introduce
proportionality to the building safety environment. We also welcome
DLUHC's further commitment to continue with their work and to set
out a fair approach to remediation including a robust and
independent arbitration process to provide clarity for all parties
where there are areas of uncertainty.
With that commitment to proportionality shown by Government in
recent months we confirm that in line with our belief that
leaseholders should not have to pay for remediation, we have signed
the industry pledge(1) and are committed to the principles that we
will:
-- take responsibility for undertaking or funding remediation
and/or mitigation works to address critical fire-safety issues on
all our buildings of 11 metres and above that we have developed or
refurbished over the last thirty years ("Our Buildings"); and
-- to the extent not already withdrawn and/or reimbursed,
withdraw Our Buildings from, and/or reimburse, the Building Safety
Fund and ACM Funds.
These commitments remain subject to our agreeing with DLUHC the
necessary legal documentation in respect of the principles set out
above, and over the coming weeks we will therefore work with
Government and officials at DLUHC to agree as quickly as possible
legally binding, full form documentation in order to give effect to
the above principles of both self-remediation, mitigation and
withdrawal from the relevant Funds.
Costs associated with our new commitments
This is a complex area requiring judgements with respect to both
the individual remediation requirements of each building and the
costs associated with that remediation. Following a review of
buildings above 11 metres developed by Barratt over the last 30
years in England, Scotland and Wales, the incremental cost of
remediating buildings where Barratt is committing to take
responsibility for doing so, or funding reimbursement of costs
incurred, is expected to be GBP350m to GBP400m (2) .
We expect to reflect all of these incremental costs within our
Building Safety provision in our results for the year ending 30
June 2022. Further details with respect to the number of
developments and buildings under review, as well as the
distribution of this expected incremental cost of GBP350m to
GBP400m, are included in Appendix I.
We intend to seek recoveries from other entities involved in the
development process who may have a responsibility to share the
costs of remedial works, however this recovery is uncertain and
therefore has not been included in our expected incremental
costs.
In order to expedite the remediation programme we will also be
deploying additional resources in our dedicated BSU, which are not
included within the expected costs above. The annualised BSU
operating costs, which will be expensed as incurred through
administrative expenses, will increase by approximately GBP10m per
annum to around GBP20m per annum from 1 July 2022, the start of our
next financial year.
Commenting on today's commitments, David Thomas, Chief Executive
said: "We have always been clear that we do not believe
leaseholders should pay for remediation of their homes and are
committed to helping affected leaseholders living in the buildings
we developed. Through constructive engagement between industry and
Government, a proportionate and sensible approach has been found
and we look forward to completing the remediation process as
quickly as possible.
As well as committing to remediating buildings we were
responsible for developing, we will be paying around GBP400
million(3) over the next ten years through the Residential Property
Developer Tax to help fund remediation of buildings built or
refurbished by other organisations. As Government continues to work
through policy developments in this area, it is vital that it
considers the burden of this taxation on UK housebuilders and how
it might impact the ongoing construction of homes that the UK
needs."
Note on forward looking statements
Certain statements in this announcement may be forward looking
statements. By their nature, forward looking statements involve a
number of risks, uncertainties or assumptions that could cause
actual results to differ materially from those expressed or implied
by those statements. Forward looking statements regarding past
trends or activities should not be taken as a representation that
such trends or activities will continue in the future. Accordingly
undue reliance should not be placed on forward looking statements.
Unless otherwise required by applicable law, regulation or
accounting standards, the Group does not undertake to update or
revise any forward looking statements, whether as a result of new
information, future developments or otherwise.
Notes:
(1) Refer to
https://www.barrattdevelopments.co.uk/about-us/our-approach-to-building-safety/industry-building-safety-pledge
for further information.
(2) The incremental remediation costs and the number of
developments and buildings include our JV commitments.
(3) Assuming annual profits subject to RPDT, in each year over
the ten-year period, equate to company compiled FY22 consensus
profits adjusted for applicable additional and deductible RPDT
items.
The person responsible for arranging the release of this
announcement on behalf of Barratt Developments PLC is John
Messenger (Group Investor Relations Director).
For further information please contact:
Barratt Developments PLC
Mike Scott, Chief Financial Officer 07881 327 748
Analyst/investor enquiries
John Messenger, Group Investor Relations Director 07867 201 763
Media enquiries
Tim Collins, Head of Corporate Communications 020 7299 4874
Brunswick
Jonathan Glass / Rosie Oddy 020 7404 5959
Financial reporting calendar
The Group's next scheduled announcement is a trading update on 5
May 2022.
Notes to editors
Barratt Developments PLC is the country's largest housebuilder.
Barratt is committed to building high quality sustainable homes and
we were awarded 93 NHBC Pride in the Job Awards on our sites in
2021, more than any other housebuilder for the 17(th) consecutive
year. Barratt is also committed to customer service and we are the
only major housebuilder to be awarded a HBF 5 Star rating for
customer service for 13 years in a row. Barratt is at the forefront
of sustainability, attaining industry-leading scores in the latest
2021 CDP results and being named "Sustainable Housebuilder of the
Year" at the Housebuilder Awards in December 2021. For more
information visit:
www.barrattdevelopments.co.uk
Barratt Developments PLC LEI: 2138006R85VEOF5YNK29
Appendix I:
The number of developments and buildings under the EWS, ACM and
associated reviews, at the date of this announcement, are
summarised in the following table:
EWS, ACM and associated reviews - number Developments
(1) Buildings
------------------------------------------ ------------- -----------
Under review
Above 18 metres (2) 128
11-18 metres 83
Total under review 66 211
------------------------------------------ ------------- -----------
Remediation completed
Above 18 metres (2) 11
11-18 metres 8
------------------------------------------ ------------- -----------
Total remediation completed 7 19
------------------------------------------ ------------- -----------
In addition, there are 28 developments under the Group's
Citiscape and associated review.
The total costs incurred, or expected to be incurred, with
respect to building safety since 1 July 2017 with respect to EWS,
ACM and associated reviews, are summarised in the following
table:
Cumulative legacy costs
incurred or provided from Costs to Costs estimate Costs
1 July 2017 GBPm (1) 31 December 2021 increase total
------------------------------- ------------------ --------------- ----------
EWS, ACM and associated
reviews:
Above 18 metres (2) 67 250-280 317-347
11-18 metres 12 100-120 112-132
Total EWS, ACM and associated
reviews 79 350-400 429-479
------------------------------- ------------------ --------------- ----------
Citiscape and associated
reviews 122 0 122
------------------------------- ------------------ --------------- ----------
Total 201 350-400 551 - 601
------------------------------- ------------------ --------------- ----------
(1) The number of developments and buildings under the EWS, ACM
and associated reviews include our JV commitments.
( (2) This includes 43 developments equating to 85 buildings
that we have now agreed to take back from the Building Safety
Fund.
The timing of cash outflows in relation to the expected charge
of GBP350m to GBP400m will reflect:
-- Initial reimbursement of costs incurred by the Building
Safety Fund and Private Sector ACM Cladding Remediation Fund, which
are estimated at GBP35m, are likely to be settled in the current
financial year ending 30 June 2022; and
-- The current and future availability of remediation resources
including fire safety expertise, solution design and the delivery
of the remedial build solutions. As a result, this remediation
programme is expected to be delivered within 3 to 5 years, with
building safety considerations paramount in the prioritisation and
scheduling of works.
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