Modular developer TopHat Communities falls to £5.1m loss

The principal development subsidiary of Goldman Sachs-owned modular housebuilder TopHat fell to a pre-tax loss of over £5m in the 2022 calendar year despite nearly doubling revenue.

Accounts published for TopHat Communities Ltd show the business fell to a pre-tax loss of £5.1m, following a profit of £7.8m last year, despite turnover increasing by 89% to £13.4m.

The results come after a period of extreme turmoil in the market for volumetric housing developers, with the last 18 months having seen the closure of many of the most high-profile new ventures in the sector, including the Urban Splash-Sekisui joint venture, L&G Modular, and most recently Ilke Homes.

However, the TopHat Communities’ accounts statement said it was satisfied with a “strong” financial performance, with the firm producing a gross profit “in line with accounting policies”. The firm also pointed out that the previous year’s profit had been as the result of the reversal of a previous provision for losses on contracts.

The publication of results comes after the business having in April raised a further £70m from investors including its existing owner Goldman Sachs, plus listed housebuilder Persimmon and institutional investor Aviva. Goldman Sachs had already put £75m into the firm in 2019, and is still the ultimate controlling party of the business.

TopHat Communities, which oversees development, is one of two principal subsidiaries in the TopHat Group, with sister firm TopHat Industries Ltd controlling the modular factory itself. The accounts are only consolidated in a parent company, TopHat Enterprises Ltd, which is registered in Jersey, and therefore for which accounts are not visible.

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TopHat Communities confirmed in the accounts that it had committed last year to building a second factory in Corby, further to its existing facility in Derby, which will increase its production capacity from 800 homes per year to 4,500 when it opens in 2024.

Its accounts said the 2022 calendar year was “a strong year for TopHat”, with production doubling “despite global supply challenges on key materials”. It added that the development of the 650,000 sq ft second factory, which will be equipped with the “latest robotics”, was proceeding according to plan, and that production at the existing facility is expected to increase again this current year “notwithstanding market headwinds”.

The firm said it was developing and diversifying its pipeline of orders, “through increasing the number of framework agreements it has in place”, but didn’t put a number on confirmed orders. It said TopHat was a “young ambitious company” in a growth phase that “continues to invest ahead of revenue, both in growing its capacity and developing its product offering”. The accounts admitted the company was neither profitable nor cash generative, but said the delivery of the new factory will enable TopHat to “deliver strong profitability and cash flow within the next three years”.

Despite recent turmoil, which has seen L&G Modular and Ilke close in just the last 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.”

A TopHat spokesperson said: “FY22 was another important year for TopHat, during which we doubled output at our manufacturing facility in Derby and began work on Europe’s largest modular housing factory which will enable us to deliver over 4,000 of the beautiful, green, precision engineered homes the country so badly needs.

“Not only will this be Europe’s largest fully modular homes manufacturing facility, but also TopHat’s proprietary technology and state-of-the-art robotics will make it the most advanced.

“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.”