黑洞社区

Modular housebuilder Ilke Homes is in a race to pull in further funding in the next month or see its auditors draw attention to financial risks in the business when it publishes its latest accounts.

The 拢28m turnover firm, which is more than two months late in filing its accounts, has been told by auditors that the current economic environment means it needs more funding than previously expected to get a financial clean bill of health, despite closing a 拢100m fundraising in December.

Ilke, which builds modular homes from a 250,000 sq ft factory in Knaresborough, North Yorkshire, told 黑洞社区鈥檚 sister title Housing Today that Companies House had given it a time extension to file its accounts until at least the end of the month, in which time it was aiming to secure additional funding. Ilke鈥檚 accounts for the year to 31 March 31 2022 were due to be filed on at the end of March this year but still have not been published.

The issues emerged after Companies House began action last Wednesday to strike the firm off the register of companies, given its late filing of accounts, before then saying on Friday that this action had been 鈥渄iscontinued鈥�.

Ilke chief financial officer Patrick Bergin said Companies House had apologised to Ilke for issuing the 鈥渘otice for compulsory strike-off鈥�, which he said had occurred in error despite Ilke having agreed a time extension 鈥渢o the end of June鈥� with the official business registration body.

Bergin said Ilke had always been aiming to close a further funding deal on top of its successful 拢100m fundraise which closed late last year, but that the proposed partner had pulled out for its own internal reasons shortly before the deal was due to be completed in March this year.

He said the accounts of the start-up modular builder, which reported a loss of 拢41m in the prior year to March 2021 on turnover of 拢28m, were ready to be published but that the auditor wanted to include a 鈥渃aution鈥� in the wording of the report, given the economic climate, if Ilke was unable to secure additional funding.

Bergin said: 鈥淲e can file, the accounts are ready, [but] the final conversation with the auditor is around whether they include a caution in the audit report that references the severe but plausible downside scenario. I鈥檓 shooting for the cleanest outcome.鈥�

He said he was 鈥渆ngaged in the process鈥� of securing more funding within the next month, but declined to put a figure on the amount necessary, beyond saying it was less than the 拢100m already secured.

He said there was no question the auditors would 鈥渜ualify鈥� their audit opinion, but said that if no further funding was secured, they would likely include an 鈥渆mphasis of matter鈥� comment that there was a material uncertainty about the business continuing to be a going concern in certain downside scenarios.

Bergin said: 鈥淢y simple anxiety with that expression is it鈥檚 not particularly helpful. This is part of the start-up battle. It鈥檚 very unhelpful for a start-up business to have anyone hinting at uncertainty.鈥�

The delay to Ilke鈥檚 accounts comes at a time of significant uncertainty in the modular housebuilding sector following the closure of L&G Modular earlier this year, and the collapse of Urban Splash鈥檚 venture with Sekisui last year.

>> See also L&G Modular鈥檚 closure shows there鈥檚 a limit to the patience of slow capital

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Bergin said this requirement for more funding came because of auditors requiring more stringent stress testing of the business in the wake of the market turmoil seen in recent months. He said: 鈥淣ow they鈥檙e asking as a plausible downside scenario, 鈥榃hat if inflation is 15%? What would be the buffer capital you need?鈥欌��

Bergin described Companies House鈥檚 issuing of the strike-off notice as 鈥渉ugely frustrating鈥�, given Ilke had agreed a time extension to file its accounts. 鈥淭hey鈥檝e issued an apology but it鈥檚 hard to get the genie back in the bottle,鈥� he said.

He said all of this was occurring despite strong operational performance of the business, which he said delivered around 700 homes in the financial year to March 2023 and had built a pipeline of 4,000 homes worth more than 拢1bn in turnover.

He said the accounts, when published, would show that Ilke鈥檚 revenue topped 拢100m in the year to March 2022 鈥� well over triple the previous year鈥檚 turnover 鈥� but that the business was still loss-making. He said: 鈥淵ou need an operation that can do scale, and you need an operation that can generate pipeline, and we have managed to do those two things. Thereafter its largely about execution.

鈥淲e鈥檙e clearly carrying a significant growth overhead in this business. We do need to be at greater scale to break even.

鈥淏ut this business has hyper growth dynamics about it and has to. We know we need get to scale and we need to get to scale quickly. We don鈥檛 run vanity projects, we concentrate and really stick to the knitting, and produce a house that any housebuilder is pleased to take.鈥�

A Companies House spokesperson said: 鈥淲e accept on this occasion the strike off notice in respect of this company was issued in error and we鈥檝e taken steps to rectify this.

鈥淢ore generally however we encourage companies to avoid instances such as this by filing their accounts on time.鈥�