Goldman Sachs-backed modular housebuilder sees turnover drop despite ambitious expansion programme

The business controlling TopHat’s modular factory operations has posted a deepening loss of over £20m on falling revenues, according to 2022 annual accounts for the firm.

TopHat Industries Ltd, which is responsible for running the factory operations of the Goldman Sachs-owned modular housebuilding start-up, reported a pre-tax loss of £20.4m for the year to 31 October, 4.6% up on the 2021 loss.

The losses came on turnover of 10.2m, down from £12.4m in 2021.

tophat factory

TopHat’s existing factory in Derby

The results come after the firm’s sister company, TopHat Communities, which oversees the company’s development operations, posted a loss of £5.1m for the year, and follows a turbulent period for the volumetric modular housing sector, with rivals L&G Modular and Ilke both closing in recent months.

The firm said that turnover was slightly lower “due to rules around revenue recognition”, with the firm’s Kitchener Barracks scheme’s sales only being able to be booked upon final completion.

It said the increased losses were “chiefly a result of the continued investment in future growth which is increasing the cost base of the company ahead of its existing operations”.

It added that it believed this investment was a necessary “strategic initiative” to deliver its business plan.

TopHat, which launched in 2019 with £75m of funding from Goldman Sachs and received a further £70m backing from investors including Persimmon and Aviva earlier this year, is embarked on plans to build a second modular housing factory in Corby. This will expand its production capacity from 800 per year currently to around 4,500.

The drop in turnover at the factory comes despite the fact revenue at the development business last year nearly doubled. Consolidated accounts for the TopHat business as a whole are contained in a Jersey-registered firm, TopHat Enterprises, the accounts for which are not visible.

TopHat Kitchener Barracks-B_09.01 (1)

TopHat’s Kitchener Barracks scheme in Kent

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.

“At 650,000 sq. ft, not only will this be Europe’s largest fully modular (volumetric) 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. Early in 2023 the business closed a £70 million 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.”