Ilke brands new £30m Homes England loan ‘sign of confidence’ + MHCLG hits back over net zero failure claims
News, views and more from the modular construction space
Ilke Homes is one of the offsite sector’s poster children.
Backed by private equity and plenty of PR the Yorkshire-based firm is arguably the industry’s bellwether. Legal & General is its only challenger to the throne.
But like L&G, Ilke has so far failed to hit the back of the net financially, which is no surprise given MMC’s on-going attempts to kick and scream itself into the mainstream.
Start-up losses can be badged as investment costs. Just look at other industries: Ocado took 15 years to make its first profit; Amazon seven.
But manufacturing housing is a trickier business than flogging stuff online.
Ilke, which launched in 2017, is fortunate in that it is supported financially by not only deep-pocketed private equity backers, for now, but also partly by Homes England.
The fact that Ilke is borrowing another £30m of public funds from Homes England could raise a few eyebrows.
But Ilke points to a current order book of £200m and the sunny uplands where post-pandemic production gets revved-up.
There is no doubting the potential with all the prevailing winds for MMC pointing in the right direction. But, with the threat of on-going general economic uncertainty, Ilke could still have a tricky course towards profitability.
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*NEWS*
Ilke borrows extra £30m from Homes England to drive growth plans
Ilke Homes has taken a new £30m loan from government agency Homes England and reported another significant annual loss.
In delayed accounts, published this week, the Yorkshire-based firm posted a loss of £34.6m on turnover of £12.7m in the year to the end of March 2020. It comes on top of a £22.3m loss the previous financial year.
Ilke said the loss was anticipated as it remains in “development phase”.
The accounts revealed that Ilke, which is backed by private equity firm TDR Capital, took a £30m loan from government agency Homes England last month. Ilke has drawn down £10m of the facility, which has been matched by £10m from TDR. It is understood the Homes England loan is incumbent on TDR matching the agency’s funding.
An Ilke spokesperson told Modular Monitor: “This is a sign of confidence from Homes England given that the business is clearly a going concern, with great opportunities in front of it”.
The £30m from Homes England comes on top of a loan for the same amount it took from the agency in 2019. Both loans are from Homes England’s Home Building Fund.
A Homes England spokesperson said:
“We are pleased to support Ilke’s MMC offer and order book and will continue to support new entrants working to diversify the market.”
Ilke’s accounts also revealed that giant housing association Places for People made a “financing contribution” of £10m. Asked what this related to, the Ilke spokesperson said that Places for People is a “minority shareholder” without giving further detail. Places for People signed a £100m contract with Ilke in 2019.
An undisclosed investor has also taken a 0.5 per cent star in the business for £1m, the accounts showed.
As of March last year, Ilke had net liabilities of £4.3m and said it would incur more over the 12 months to March 2021.
But it added: “The directors have received confirmation that the controlling party TDR Capital LLP… intend to provide or arrange for the prevision of financial support to the company and group should it be so required in order to meet its reasonably incurred obligations.”
Ilke was forced to close down its operations last year for three months, leading to a fall in deliveries and installations. In the 12 months prior, up to the end of March 2020, it installed 146 homes, compared to 64 the previous year.
However, it said since then orders have picked up as the construction market has recovered from the pandemic and currently has a pipeline of around £200m.
Asked by Modular Monitor when it expects to turn a profit, the Ilke spokesperson said: “The strong order book is moving the business rapidly towards an economic scale and profitability on a forward-looking basis is within our forecast horizon.
“Of course, financial accounts – which are the historic scorecard – will take a little longer to show profitability as they will record the investment that the business has made in people and technology to get to this stage, before we report the revenues and profits from our strong order book.”
Earlier this month, Ilke appointed its third chief financial officer since its inception four years ago. Former Crest Nicholson chief executive Patrick Bergin has taken the job, joining his old Crest colleague, Stephen Stone, who has been Ilke’s chair since March.
Bergin is a replacement at Ilke for Michael Murray who left in April, according to his LinkedIn profile.
In January this year, Ilke’s executive director of growth and partnership, and another former Crest Nicholson employee, Matt Bench told Modular Monitor he would be “very surprised” if Ilke did not open a second factory in 2022.
*NEWS*
MHCLG dismisses claims over net zero failure around planning shake-up
A government department has hit back at claims that its planning shake-up is a missed opportunity to tackle climate change.
In a damning progress report the Climate Change Committee, which advises the government, said the proposed planning changes “missed the powerful opportunity to ensure that developments and infrastructure are compliant with net zero and appropriately resilient to climate change”.
Offsite housing firms have talked up how they can play a role in tackling the climate emergency with low carbon homes.
The report also claimed that the Ministry of Housing, Communities & Local Government (MHCLG) is not fully supporting local government to play its part in the transition to net zero. “Progress has fallen short to date on ensuring that building standards are fit for purpose and properly enforced,” the report said.
Among its recommendations, the committee said MHCLG should “implement a strong set of standards – with robust enforcement – that ensure both new and existing buildings are designed for a changing climate and deliver high levels of energy efficiency and low-carbon heat.”
In an emailed response to Modular Monitor, a government spokesperson said:
“These claims fundamentally misunderstand our much-needed planning reforms.
“All developments should take into account the impacts of climate change and responsibilities to the environment, as well as prioritise building on brownfield and urban land, so that we put green spaces, communities and environmental protection at the heart of the planning process.
“We are also ensuring new homes are producing less emissions and that new housing developments are leaving nature and biodiversity in an overall better state than before development.”
*OFFCUTS*
COMPANIES: Legal & General will use MMC to speed up delivery of homes as part of a proposed £1bn build-to-rent (BTR) and affordable housing scheme in Sussex. The proposed scheme is part of an overall 2,750-home master plan L&G has for the North Horsham site. An initial 200 homes will be built using MMC. It will bring together L&G’s BTR, affordable housing and modular businesses for the first time, the firm said. L&G is aiming for it to be one of the UK’s first EPC A-rated suburban build-to-rent and affordable developments.
CONTRACTS: Plans for a new £1.1bn framework aimed at delivering offsite and MMC “housing, apartments, care homes and multi-occupancy dwellings” across the south west of England have been unveiled. The London Housing Consortium, acting as the central purchasing body for the South West Procurement Alliance (SWPA), are consulting on setting up a dynamic purchasing system (DPS) agreement.
POLICY: Housing minister Christopher Pincher has confirmed that a new National Brownfield Institute, being built as part of the University of Wolverhampton, will advise on MMC. The scheme is reportedly getting £14.9m of government funding from its Get Building Fund for the West Midlands.
*NUMBER CRUNCH: $3bn*
The amount of investor money that was reportedly wiped out by US offsite start-up Katerra’s demise, according to the Wall Street Journal.
“You guys had the golden goose, you had all that money from SoftBank and at the end of the day it was all pissed away,” Chris Severon a former construction cost estimator at Katerra is quoted as saying.
Quite.
(Read our previous coverage on Katerra here)
*INSIGHT*
Hot on the heals of McCarthy Stone talking up MMC, Countryside has followed suit. Its chief executive Phillip Lyons has come out to bang the drum, branding it a “watershed moment for the industry” in an op-ed for Property Week. Countryside already has two MMC factories and plans to open a third this summer.
*AND FINALLY…*
Watch here how Laing O’Rourke used MMC to deliver a new hospital in Wales
I’m James Wilmore, a freelance journalist and editor. I cover the built environment and occasionally cycling. This is me here and here
For all enquiries, story ideas and tips, please email: james@modularmonitor.co.uk