Volumetric builder still three years away from making a profit

Founded in 2016, the company has yet to make a profit, such are the start-up costs of such enterprises.

Shareholders, principally Goldman Sachs, have put £130m into TopHat as of October 2021.

Results filed for TopHat Industries Ltd for the year to 31^st October 2021 show that its losses are still greater than the revenue it generates , but the ratio of sales to losses has reduced from 1:3 to 1:1.5.

Derby-based TopHat opened a 125,000 sq ft factory in Dove Valley Park, Foston in 2018 with capacity to produce 800 homes a year.

As announced in June, it has leased 650,000 sq ft premises for a factory in Corby that will increase total capacity to more than 4,500 prefab units per year.

“The group is not yet profitable or cash generative, due to this investment in future growth and innovation,” said founder and chief executive Jordan Rosenhaus. “The delivery of the second factory, in particular, will enable TopHat to deliver strong profitability and cash flow within the next three years.”

Clients include Urban & Civic and BoKlok, the joint venture between Skanska and Ikea. As a result of these two new customers, TopHat saw its turnover increase from £6.3m in financial year 2020 to £12.4m in the year to 31^st October 2021.

Pre-tax losses in the same period reduced from £21.3m to £18.0m.

Thus losses have shrunk from three times turnover to one and a half times turnover. By 2025, the tenth year of operations, Rosenhaus is expecting to be in profit.

Jordan Rosenhaus said that “the administrative cost base of the company is sized for future growth and not for existing operations”. He added: “The directors feel that this investment in overhead is a key strategic initiative to deliver the future business plan.”

All this seems par for the course. Latest accounts for rival volumetric builder Ilke Homes showed that it lost £34m before tax in the year to 31^st March 2021 on turnover of £12.7m. Over its first three years of operation Ilke Homes has generated less than £24m in turnover and lost, in aggregate, £88.7m before tax.

Deep pockets are required to go the distance. House by Urban Splash collapsed in May, despite benefiting from government financial support, and the previous month saw Caledonian Modular fall into administration.

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