Loss-making house-builders Brick by Brick have delayed the publication of their annual accounts, so it was more than mere coincidence that last night, just 30 minutes before a cabinet meeting was due to begin to discuss the cash-strapped council’s emergency budget and plans to “review” the company’s sorry performance, a piece of publicity appeared online that appeared to show everything is just hunky-dory.
Brick by Brick claim that they have made their first profit. Except that the somewhat modest £250,000 – set against loans of £260million from Croydon Council – that they claim is actually a pre-tax figure. After tax, in all likelihood, the loss-making builders will still be loss-making.
And the £250,000 is dwarfed in comparison with the figure Brick by Brick themselves produced in their business plan for the 2019-2020 financial year, when they predicted that they would be making a profit of £10.32million. Oh, how the company’s owners, Croydon Council, could do with a spare £10million now…
Simon Hall is the cash-strapped council’s cabinet member for finance, who over the past five years has arranged the huge loans to Brick by Brick.
During last night’s meeting, while he refused to answer detailed questions about Brick by Brick’s repayment of its loans, Hall managed to give the game away that the report published on the builders’ website was part of a coordinated effort to distort and mislead, as he suggested that Tory opposition councillors should go away and read about the company’s “profits”.
As an accountant by profession, Hall really should know better than rely on dubious press releases, rather than a profit and loss account written in black and white. And red.
But then, the signs of desperation have been showing for some months among Hall and his closest colleagues in their council cabal.
“Successful year for Brick By Brick, defying wider economic sentiment” the company trumpeted on its own website, the release apparently orchestrated for them by the expensively hired crisis managers at spinners ING.
Until those audited accounts are available through Companies House, we only have their word for that.
And as contractors who have walked away from Brick by Brick sites in dispute over payments, or the house-buyers who put down deposits for shared ownership houses only to be left out-of-pocket and house-less, or the environmentalists who exposed false claims in planning reports, Brick by Brick’s word can rarely be relied upon.
“We’re pleased to reflect on a year of completions – 283 homes, of which 131 are affordable (including 107 council homes) – and turning a profit, proving our innovative model works at a challenging time for public sector finances,” they tweeted last night.
Until the annual report sees the light of day, it is all just froth.
But it is a narrative that council leader Tony Newman, Hall and others in the clique that controls the Town Hall have also tried to push out there.
In January, Alison “Lying Cow” Butler, the cabinet member for housing, claimed that Brick by Brick “is delivering homes and is delivering profits to the council, and continues to be on target”, a statement which included one outright lie and a couple of highly debatable points.
Butler made her own misleading statement after getting Hall to borrow yet another £6million in order to buy up 24 flats in Longheath Gardens from Brick by Brick, flats which the company had failed to sell under shared ownership schemes because … they forgot to register themselves as a supplier.
It is £6million of public money that will have arrived on the books of Brick by Brick just in the nick of time to bolster their latest annual report. There was to be another council bail-out, this time worth a total of £39million for 165 unsellable Brick by Brick homes, in July (though this should be outside the 2019-2020 financial year).
Last night’s cabinet meeting did confirm that it will be a very long time before the council is ever allowed again to borrow more money to lend to Brick by Brick, or to use public cash to buy them out of their next episode of incompetence.
The fact remains that, by the end of 2019, nearly five years after the company was formed, they had managed to deliver just three purpose-built council flats. It’s a return on investment that will impress no one.
And Brick by Brick have never been “on target”. Even according to their own figures published last night, they delivered 69 units fewer in 2019-2020 than they said that they would in their business plan.
It took Brick by Brick just two paragraphs of the article published last night before they publish their first outright lie, as they try, not for the first time, to pretend that the company was not set-up in 2015.
“The range of schemes represents a key milestone for us, since we were established in 2016…”. It is as if they believe that their performance is any less woeful when measured over four, rather than five, years.
But then, as they remind us, the company was set up “… with the aim of increasing the pace and quality of supply of new and affordable homes in Croydon”.
They also state that, “Under our innovative business model, all revenues and profit from development activity are returned to the council to be reinvested in Croydon.” The only trouble is, Brick by Brick has so far failed to generate any such profits.
They note, with an element of imprecision which may raise questions, that their “development activity creates c£6million of surplus land value, to be returned to the council as overage”. This would be a significant improvement on what they predicted in the business plan: £3.04million.
But the figure of £14million “to be returned to the council as interest on loans on sales completion” may be a cause for concern, since it appears that Hall agreed to let Brick by Brick off making any loan repayments until after they had secured sales of the homes that they have built, on council-owned property that they acquired at significantly below market price, and then developed with huge chunks of public money.
And this is where this (calendar) year’s council bail-outs totalling £45million could yet come to bite Hall & Co in the arse: as an accountant, Hall will know that you cannot report profit made by selling to yourself. So it will be informative to see how these amounts will be treated in the council’s consolidated accounts.
The council itself has broken the law by failing to make its own, unaudited, accounts available in the first 10 days of September. They say that they hope to publish the 2019-2020 accounts before the end of the month, though they are running short of time to achieve that now.
In previous years, Brick by Brick has published its annual financial report at the start of August.
Last year, they reported a loss of £774,952 to March 2019. So even the modest £250,000 they are claiming for 2019-2020 will only claw back one-third of that loss.
Nowhere in their piece of froth and spin last night have they offered any explanation for the latest figures to be delayed by two months. It is unlikely to be because everything is hunky-dory.
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