Brick by Brick reports £25m losses as debts rise to £229m

CROYDON IN CRISIS: The council’s bungling house-builders sneaked out their latest accounts on Christmas Eve, which show they expect the council to pay them £72m for the Fairfield Halls fiasco. By STEVEN DOWNES

As Colm Lacey got up from his desk in Brick by Brick’s £1million offices in George Street for a final time, the over-promoted ex-council exec left behind another steaming turd – a £25.26million loss in the company’s latest annual accounts.

The Brick by Brick accounts to March 2021 were released by Companies House this morning, in the latest crass attempt by the council-owned house-builders to sweep the bad news under a Christmas carpet. Which can be marked down as another Brick by Brick failure, because here are the bullet points…

Even since the council’s financial collapse in November 2020 and the admission that Brick by Brick is a busted flush, there has been some shuffling of the deck as far as the company’s loans after its latest audit six months ago, with a new facility arranged, repayable by 2025.

But now, borrowings payable within one year amount to £229million.

As the directors’ report states, “This facility consolidates numerous historic loan agreements and informal lines of funding. The facility agreement provides the company with the security of funding, based on its cashflow projections, to continue to build out and sell its developments in an orderly manner to maximise potential returns to the lender.”

Still building: Brick by Brick’s failures to complete projects on time and to budget has created crippling costs for the council

And this is a nice bit, “Sufficient flexibility has been included within the agreement to allow for variations that may arise.” Which is handy.

According to the report, as at March 31 this year (the company’s financial year-end), it was working on 14 construction sites, 12 of which are supposed to be completed by the end of March 2022. Brick by Brick sold £20million-worth of flats in 2020-2021, while also writing off “approximately” £20million “of costs incurred that relate to projects that are no longer going to be acquired for development”.

In 2020-2021, after being in existence for nearly six years, Brick by Brick completed 187 homes across seven sites. “The company is on target to complete a further 291 homes across 12 sites in the year to March 31, 2022.” Most of its projects are at least one year behind schedule, some as much as three years late.

In the red, in back and white: from Brick by Brick’s accounts, published on Christmas Eve

Under “current assets”, the accounts list “inventories and work in progress” worth £145.9million. This, though, is £51million less than was on the books in 2019-2020, the year before.

The accounts show income from “Property sales and refurbishment” to March 2021 of £92,788,823, up from £23,031,968 in 2020.

The accounts again disguise the salaries and pension contributions paid to Brick by Brick’s top earners, thought to be Lacey and his deputy CEO, Chloe Phelps, both of whom announced their intention to leave the company.

Yet while 500 staff at the council were receiving their P45s since 2020, Lacey’s empire-building at Brick by Brick continued, with the company’s staff numbers going up from 27 in 2019, to 38 in 2020, to 43 by March this year.

Staff costs – salaries, NI and pensions – rose from £2.2million (for 38 staff) in 2020 to £2.6million by March 2021.

The annual report also suggests that the costs of the bungled and over-budget Fairfield Halls fiasco has now reached £72million, as Brick by Brick awaits payments “arising from the refurbishment… and associated works”.

Big bill: Brick by Brick reckons the council owes it £72m for its botched and over-budget refurbishment of the Fairfield Halls

This money is to come from, yes, you’ve guessed it, the tax-payers of Croydon.

The directors – Ian O’Donnell and Duncan Whitfield, appointed 12 months ago when Lacey, the company’s CEO, was kicked off the board – say that the £25.26million net loss for the year,  is “in large part due to the decision by the shareholder…” (that is, the council) “…to cease all new construction activities.”

It day-to-day language, that’s called cutting your losses.

The company under Lacey, despite being handed dozens of council-owned sites on the cheap – some for as little as £1 a time – has failed to make a penny profit since it was formed in 2015.

When O’Donnell first delved into Brick by Brick’s paperwork in early 2020, he discovered that Lacey had been running the operation without proper records or a finance director for around two years. Today’s report states, “The board monitor the profit and loss by means of detailed monthly management accounts and forecasts.” Which is nice.

It was Brick by Brick’s failure to repay a single penny of the original £200million-worth of loans from the council that led to Croydon becoming only the second local authority for 20 years to be forced to issue a Section 114 notice, effectively admission that they had gone broke.

But the warning signs had been there long before.

Steaming turd: Brick by Brick’s CEO Colm Lacey

Even in July 2018, a council meeting was told, by the then cabinet member for finance, Simon Hall, that Brick by Brick’s “slippage” amounted to £63million, money that should have been in the council’s coffers, but wasn’t. This was largely because of the failures of Brick by Brick to build houses on time and to budget.

Tony Newman, the then leader of the council who was chairing the meeting, blocked any further questions. Which suggests that even then, Newman and his numpties knew how bad things were, but they just didn’t want anyone to find out.

To generate profits, Brick by Brick needs to sell homes. No dividend can be paid to the council without profits. But according to the 2018-2019 accounts, Brick by Brick had yet to sell a single property.

Back in 2018, Inside Croydon reported, “The harsh reality is that Brick by Brick’s failure to deliver even a single new home in the three years since the company was established could mean that Croydon’s Labour-run council will be forced to make more, and deeper, cuts in other council services.”

You sort of can see why Newman’s Croydon Labour has tried its utmost to ban this website from reporting on their serial incompetence.

Read more: BxB’s collapse was predictable. Why did no one else notice?
Read more: Brick by Brick CEO says company has sold 6 houses. Or is it 5?
Read more: Brick by Brick faces ‘disaster’ as it misses sales targets by 83%
Read more: Building towards the council’s financial ruin, Brick by Brick

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16 Responses to Brick by Brick reports £25m losses as debts rise to £229m

  1. This “Basis for a qualified opinion” is tucked away in the annual report and financial statements.

    “The comparative financial information was unaudited as a result of a disclaimer of opinion and it has not been possible to obtain sufficient and appropriate audit evidence to confirm the accuracy of opening balances as at 1 April 2020 and comparative figures in the Profit and Loss Account. Any adjustment to the opening balances as at 1 April 2020 would have a consequential effect on the Profit and Loss Account for the year ended 31 March 2021.”

    Either they (Newman, Butler, Hall, Lacey, Phelps and others) knew that Brick by Brick was failing over 18 months ago but continued to gamble with our money by pouring it down the drain, or they didn’t know what they were doing, with the same consequences.

    That some of those responsible are still members of Croydon Labour Party, while others are earning a living as company directors, is beyond me.

  2. CentralCroydon says:

    Looking at the details notes in the accounts, point 6 on page 21, Directors renumeration, gives an indication of the amount the Lacey has enriched himself. There was only 1 director who was receding pension contributions. The total cost in 2020 was £210k (almost half a Negrini) with a further £140k in 2021. I assume the 2021 figure is less as Lacey was removed as a director in November 2020. Presumably he was still handsomely recompensed for his expert services until his imminent departure.

    Trebles all round!

  3. moyagordon says:

    Thank you Inside Croydon, for the marvellous work you do in keeping us locals in the know. Great journalism!

  4. wtf are, ‘informal lines of funding?’ Envelopes stuffed with cash?

  5. The council’s culture needs changing. It’s not changed much so far, as is evident from this kind of useless game playing. It’s Croydon people’s money. We should not become inured to flushing yet another £ 25 million down the toilet.

    It would take our Croydon Pension Fund 45 days to make that amount of money. £25 million lost is money that could be spent on 4 years and 4 months of not cutting council tax benefit to the most needy or 222 Neighbourhood Safety Officers employed for 5 years sorting out graffiti, anti social behaviour, fly-tips and overgrown hedges. It’s serious money and it’s absolutely tragic for Croydon.

    Publishing accounts on Christmas Eve to try to avoid attention is just childishly unfunny.

  6. scroydon says:

    From the FAQs on the Brick by Brick website, still live today:

    “Any profit realised by the development process creates a dividend which is returned to the council (as sole shareholder). This means 100% of the profit made by the company is returned to the Council and is available to fund the delivery of frontline services”

    And

    “We often purchase land from the Council, again at market value.”

    The company was run in a fantasy land, at our expense.

  7. Lorraine says:

    This is a present for the people of Croydon. A company that has potential to do well as soon as the “Blocking Incompetents” move out the way. Not long now… (although another turd has been baking for the last 9 months…)

  8. The things which stupidly tripped Brick x Brick up were:

    (I) poor leadership and crap non-executive directors on the Brick x Brick board who ran for the hills at the first sniff of it all going wrong. When I say bad, I mean really bad.

    (ll) choosing to develop technically challenging sites which proper developers would have turned away from – big fucking mistake repeated time after time.

    (Ill) relying on feasibility advice from their ‘in-house’ team of architects who weren’t much past the legal driving age – these guys have bugger all development experience and no technical know-how.

    For these reasons, the stupidly naïve Brick x Brick train came off the tracks and will cost Croydon residents £millions for years to come.

    Commentators on Inside Croydon were warning the council of this impending disaster 3, 4 years ago and Newman stuck his two fingers up. Now he’s suspended from his own party. That Newman tried to silence Inside Croydon demonstrates he was not just a bad politician, he was a manipulative Fuck-wit who thought he knew better than everyone else and has cost this borough countless millions that could have been spent on front line services and community needs.

    A disgraceful abuse of power in public office. He has killed the ‘strong leader’ model by being an exceptionally weak and unaccountable leader who closed down questioning and covered up his own mistakes and bad decisions.

    Let’s hope 2022 will be better for Croydon. This is the years we get rid of the remaining Newman stooges, Fitzstupid, Fraser, Ali et al.

  9. miapawz says:

    Wondering why BxB has not been shut/stopped/suspended given that it is a financial disaster?

  10. Dan Kelly says:

    The losses could be even bigger as the work in progress could be over valued. Per the accounts all incomplete buildings’ valuations include the full cost of inputs. It’s not until they are complete that the market value is used.
    Does any one who is qualified know what the statutory position is? Who did the market valuations?

  11. Robert says:

    If I were to put my comments on here as to my views on the “people” who were and are in charge of B2B, it probably would be me rather than they who would be arrested and charged. I suppose that’s the way things work nowadays if any innocent laymen mention the word corru*****.

    • It really wouldn’t be like that, Robert.

      And until or unless you have proof of your allegation of corruption, they remain just your baseless suspicion. And using asterisks doesn’t really make much difference to that position.

      • No one’s seriously accused BXB of C***, rather spectacular incompetence. Allegations of C***’ leave both yourself, Robert, and IC open to legal action, which would rather defeat the point

      • Luke says:

        Helpful it would be if you were to write an article advising those with founded suspicions on what they could do to ensure they are handled in the proper way?

        • Without wishing to unsettle your Yoda-ish request, it really doesn’t require an article to explain what is required by “evidence”: any documents, copies of emails or correspondence, minutes from meetings, contracts or invoices and receipts which might demonstrate questionable or unlawful practices and misuse of funds, or testimonies – written accounts – from witnesses to any such conduct.

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