Losses deepen at L&G’s modular division

Legal & General’s modular firm has recorded an increased pre-tax loss as it reported revenue for the first time.

The housing modular specialist posted a pre-tax loss of £36.9m in the year to 31 December 2021, in comparison with the £30.2m loss it recorded the year prior – a 22 per cent increase.

Recognising revenue for the first time was a “significant milestone” for the business, according to the firm’s accounts, as it turned over £12.2m for the year.

“The company also continued to make significant progress adding further projects to an already strong sales pipeline, making further enhancements to our production lines, developing partnerships with key suppliers and driving further product development of our EPC-A rated dwellings,” the report added.

Increasing timber and steel prices caused by the COVID-19 pandemic put “significant pressure” on the cost of producing homes, it said. But “product cost reduction initiatives” and growth in property sales helped to mitigate the impact of the price increases.

The modular firm has not turned a profit yet, reporting six successive years of losses since its launch in 2016, including a pre-tax loss of £30.2m in 2020. For the comparable period a year before it made a loss of £30.6m.

The company has previously argued that its modular arm will need several years of upfront investment before it will become profitable.

Interest in the business from both existing and potential customers “remains strong”, while directors indicated the company is “well placed” to adapt to changing market conditions.

The firm signed two contracts last year covering the development of more than 180 homes, while it has since signed a further contract to deliver housing in Littlestone, Kent.

The modular division received a £34.8m boost from the insurance giant over the course of the year, in exchange for four £1 shares.

L&G also invested an extra £7.1m into the firm in March 2022. A spokesperson said this was part of its strategy to bring “rapid and disruptive change to the construction industry”.

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