Liverpool-based MMC specialist will continue to trade
following new investment
Ideal Modular has undergone a pre-pack administration after
a major customer of the firm withheld payments.
The pre-pack, which legally transacted on November 27, saw
the Liverpool-based prefab housebuilder bought out by a firm set up in recent
weeks by its chief financial officer and a previous shareholder in the
business.
The deal comes a matter of months after the £3m turnover
firm signed up to what it claims was the UK’s “biggest ever” modular housing
contract, for £300m with Greenwich council.
In a statement the firm, set up in 2017, said the deal
secured new investment in the business and ensured it would continue to operate
as normal, protecting 76 jobs at the business.
A pre-pack administration is one where a firm goes into
administration after having already determined a buyer for it in advance. They
are often used in order to ensure a struggling firm can keep trading, but are
controversial as they can leave creditors out of pocket while the firm
continues under new ownership.
The deal will see Luke Barnes, the firm’s co-founder, leave
the business “to pursue new ventures”, while previous shareholder and former
investment banker Tom White has been installed as chief executive.
According to papers filed at Companies House, Ideal
Modular’s legal entity, Ideal Modules Limited, was bought by a business set up
on November 10 called IDMH Limited for £338,000.
IDMH lists as its directors Tom White, and the existing
Ideal Modular chief financial officer Andre Muller, who had been appointed by
the firm in June.
Companies House documents say Ideal Modules, which turned a
pre-tax profit of £374,000 on turnover of £3.1m in the year to June 2020,
started to run into difficulty after being forced to shut operation during the
spring lockdown, forcing it to take out a government-backed covid-19 business
interruption loan.
However, the situation worsened in September when a customer
owing £2.3m issued a “pay less notice”, a mechanism allowing clients to notify
contractors that they are going to reduce or stop payments, and setting out the
reasons.
A notice of proposals filed by administrator Quantuma with
Companies House states that this left Ideal with “no visibility of income” and
meant it was “unable to trade without the injection of further cash”,
ultimately leading it to announce the intention to appoint an administrator on
November 20.
The offer to buy the business received from IDMH was the
only one which envisaged keeping it as a going concern.
In a statement, the firm said there was now “no risk” to the
continuation of the company. It added: “Ideal Modular Homes, North-west based
manufacturer, has secured new investment and has been restructured through a
pre-pack administration process.
“The process […] facilitates a quick and smooth transfer of
the business, allowing trading to continue uninterrupted.”
The firm said the new chief executive had been an investor
in Ideal since its inception, and had worked at JP Morgan for 11 years advising
large companies on M&A, debt and equity issuance and corporate strategy. It
said: “Tom has significant experience scaling early stage companies across a
number of industries and will draw on this experience to help accelerate
Ideal’s growth.”
The difficulties at Ideal Modular come despite significant
growth in the modern methods of construction (MMC) sector, with Homes England
announcing in September it was requiring delivery partners to build 25% of
homes using MMC in its forthcoming £7.5bn investment programme.
In August Ideal Modular, alongside architect Shed KM, was
one of two firms signed up by Greenwich Council for a five-year deal to build
750 homes, worth an up to £300m.
Ideal has also supplied homes for the 154-home Uptown Irwell scheme. It is not known which customer issued the pay-less notice.
Original Source: Housing Today
