CROYDON IN CRISIS: Council-owned house-builder releases some financial figures that show they have missed their latest annual revenue targets by £113m and have delivered 377 fewer homes than they predicted.
By STEVEN DOWNES
There is not a single representative of Croydon Council remaining on the board of Brick by Brick, Inside Croydon has discovered.
Julia Pitt, the director of the council’s Gateway Services who was only appointed as a director of the loss-making house-builder on May 1 this year, resigned as a director on October 6, according to Companies House records.
It is an extraordinary position for the corporate governance of a company, which is wholly owned by the council, not to have any representative of the council on its board.
Croydon’s Labour-run council has borrowed at least £260million to lend on to Brick by Brick since the company was formed in 2015.
Brick by Brick’s latest accounts (for 2019-2020) have yet to be published, and the company is subject to a formal review of its activities by PwC, though it is clear from its own business plans and public statements that the company is more than £100million short of its own revenue targets for the last financial year, and it is hundreds of homes short of its target for completions.
Pitt’s resignation leaves just two directors for the loss-making company – chair Martyn Evans and managing director Colm Lacey, who has worked on the Brick by Brick scheme since its inception, when he was a council employee working closely with his then-boss, Jo Negrini.
The appointment and resignation of directors of any publicly listed company is usually a mundanity, as individuals move on or have other responsibilities to deal with. That would be the reasonable explanation behind most of the previous resignations from Brick by Brick’s directors.
Indeed, if the council even tried to explain the situation (there has been no announcement of Pitt’s resignation from the council nor Brick by Brick), it could be plausible that her decision to stand down is wholly related to work pressures. With the council undergoing wide-ranging redundancies, faced with a £70million overspend on its budget this year because of covid-19, Gateway Services is facing heavy job cuts, and it may be that Pitt feels she needs to focus her energies on that job in hand.
But in the case of a council-owned company, particularly one with such massive debts to the local authority, there would usually be an expectation of some board-level oversight from the council, involving council execs or even elected councillors.
But after three resignations in recent times, and no replacements installed, now there is none at all.
Pitt’s exit swiftly follows Shifa Mustafa, the council’s exec director for Place and therefore the council official responsible for Brick by Brick and housing provision.
Mustafa stood down as a director on September 4, soon after Negrini quit as council CEO and at a time when she was led to believe that she would be her interim replacement.
The council’s third appointee on the board, Mark Norrell, resigned as a director in November last year. He had only joined the board in July 2019. So slack is the admin by the Lacey-run company that notice of Norrell’s resignation was not submitted to Companies House until 10 months later – September 2020. It transpires that Norrell, who was Croydon’s director of facilities management and support services, had quit his job and taken up a new position, with Sutton Council.
The absence of any council replacement appointees, though, when taken together with the KPMG review, does appear as if the council may be attempting to distance itself from the poorly performing company.
With his protector, “Negreedy” Negrini, gone from the council, Lacey appears to be concerned for his future. As well he might, as the difference between the promises made by Brick by Brick and their actual delivery becomes greater by the day.
Yesterday, Brick by Brick put a statement out under the heading, “Croydon Council’s financial position is under review – how this relates to Brick By Brick”.
Of course, there is a brief answer to that: the council’s money taps has been turned off, and the company will therefore struggle to continue to operate, and pay Lacey’s over-inflated salary. Croydon Council has provided £36million of bail-outs for Brick by Brick this year, including £6million towards the end of the 2019-2020 financial year, buying up flats which the company had failed to be able to sell itself.
Those additional council millions put Lacey’s claim that the company will report a £250,000 profit, before tax, into a more realistic perspective.
When he and his company have been subjected to (somewhat mild) public scrutiny, by a council committee, Lacey has lied over land purchase prices and refused to release the company’s draft accounts. At least two elected councillors on the scrutiny committee were shrewd enough to air their displeasure at this.
In the company’s statement yesterday, it said, “Brick By Brick is in good financial health, and has strong revenue forecasts for the current financial year.” By that, they mean 2020-2021 – and without having yet released their figures for 2019-2020, we only have their word for that. Brick by Brick’s record shows that they have never delivered on any of their forecasts.
As the statement continued, they coughed up some figures. “To date we have completed 283 homes across 15 sites, and we generated £23million of revenue in FY19/20…”.
This figure, if it survives an audit and eventually makes it into published accounts, ought to cause grave concern to KPMG, the Council Tax-payers of Croydon and Hamida Ali, the new leader of the council.
Any profit Brick by Brick makes is supposed to be paid over to the council. In the more than five years since the company was formed, it has made only losses.
In Brick by Brick’s own 2018-2019 business plan, they predicted that in 2019-2020 they would generate £135.3million in revenues. Twelve months later, that revenue projection was revised down to £132.3million.
For Lacey now to be claiming just £23million – £113million than he had boasted Brick by Brick would achieve as recently as 18 months ago – could prove to be a disaster for cash-strapped Croydon Council.
Back in early 2019, Brick by Brick’s business plan was predicting cumulative sales of £223million. Yesterday’s company statement – “in good financial health”, remember – shows that they have missed that target by a cool £200million.
The statement continues, “We are really proud of our rate of housing delivery for Croydon.” Really?
Back in 2018, Brick by Brick’s business plan was predicting that by the end of March 2020 they will have delivered 663 homes.
By the start of 2019, dogged by delays, BxB revised that forecast figure down to 440 homes.
Now, they are admitting that the actual number of homes they have built is 283 – 377 fewer than Brick by Brick’s own predictions made in early 2018.
“Development takes time,” the rookie developers bleated, in their pitch for first prize in this week’s NSS* Awards. They added a claim of “creating significant value to the council”, too, which does not stand up to any scrutiny.
“We are now at a tipping point with many more homes due to be completed and more revenue expected for the council,” they said, in their latest “jam tomorrow” promise.
It’s unlikely to impress the serious auditors from KPMG, nor the various contractors in and around Croydon who have learned, to their cost, that dealing with Lacey and his development company novices is often more trouble than it is worth.
And with no council-appointed directors on the board, it seems that Croydon Council may have belatedly arrived at that conclusion, too.
*NSS = No Shit Sherlock
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