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Losses at Goldman Sachs-backed modular builder top £25m
Modular house builder TopHat has posted multimillion-pound losses for both its factory operations and development businesses.
TopHat Industries, which runs the factory operations for the Goldman Sachs-owned builder, reported deepening losses and lower turnover.
The firm recorded a pre-tax loss of £20.4m for the year to October 31 2022, an increase of 4.6% on the previous year’s loss. It also reported a turnover of £10.2m, down from £12.4m in 2021.
The firm said it was able to double its production over the course of the year and claimed that the lower revenue was a result of rules around revenue recognition, with some sites only able to be logged upon final sale.
Meanwhile, TopHat Communities, the sister company responsible for development operations, posted a pre-tax loss of £5.1m for the year, following a profit of £7.8m the year before, despite nearly doubling revenue to £13.4m, an 89% increase.
TopHat Communities said the previous year’s profit had come as the result of the reversal of a previous provision for losses on contracts.
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The two businesses are consolidated in a parent company, TopHat Enterprises, which is registered in Jersey, therefore its accounts are not visible.
The accounts described TopHat as “a young ambitious company that is still in its growth phase”, alongside one that “continues to invest ahead of revenue” to grow capacity and develop its product offering.
It said TopHat was not yet profitable or cash generative due to “investment in future growth and innovation,” but added that delivery of a second factory in Corby will enable the company to become profitable “within the next three years”.
The accounts reiterated that TopHat last year had committed to building a second factory in Corby, further to its existing facility in Derby, which will increase production capacity from 800 homes per year to 4,500 when it opens in 2024.
In June, TopHat announced it had completed a deal with France’s largest house builder as it seeks to expand into Europe.
The firm said it had made an exclusive partnership with Nexity to “accelerate the development of offsite construction in France”.
Despite recent challenges for TopHat’s modular competitors, including the closure of Legal & General Modular Homes and Ilke Homes in the past three months, TopHat said: “The directors are confident in the TopHat business plan, underpinned by the development of the second factory and the strong pipeline.”
Its accounts said the 2022 calendar year was “a strong year for TopHat”, with production doubling “despite global supply challenges on key materials”.
Unlike Ilke – which used a land-led delivery model in which it buys land, secures planning permission and develops the site – TopHat only sells houses to third parties.
About a third of its output is bought by housing associations, another third by developers and the final third by build-to-rent providers.
A TopHat spokesperson said: “The current financial year has started with further important milestones being achieved as we continue to build the business and invest in future growth and innovation.
"Early in 2023, the business closed a £70m fundraising round, in which Persimmon, Aviva Capital Partners and existing shareholder Goldman Sachs participated. The construction and commissioning of the new factory proceeds to plan and we also expect to further develop our exclusive partnership with Nexity, France’s largest house builder.”
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