Modular specialist’s profit falls 40% amid project overruns

Premier Modular saw its pre-tax profit drop by 40 per cent last year amid static turnover and difficulties in its permanent buildings division.

The East Yorkshire-based company, which specialises in manufacturing temporary or permanent modular structures, saw its turnover fall by 0.8 per cent from £102m to £101.1m.

Pre-tax profit dropped more sharply from £13.2m to £7.7m, due partly to higher depreciation of tangible assets, the firm said in its accounts for the year to 30 June 2024.

Increased demand for temporary rented modular buildings was offset by lower sales for permanent buildings.

The firm’s directors attributed the fall in permanent modular building sales to market conditions in a sector “that has seen financial stress for a number of competitors”.

They cited high interest rates, “generational levels of inflation and the 2024 general election” as factors.

Directors added: “The two largest projects undertaken across the year have had issues through delays and cost overruns.

“This has led to cash constraints in the business while the issues are worked through. It is believed these issues should be resolved within the calendar year 2025 and resolution will release funds into the business.”

Premier Modular’s fleet sales division saw its revenue drop by 7 per cent from £22.2m to £14.6m. Its rental business increased turnover by 9 per cent from £30.5m to £39.2m, but permanent sales dropped by 2 per cent from £49.3m to £47.3m.

Even so, the accounts said Premier Modular’s order pipeline for permanent and rented buildings “is at unprecedented levels”.

And its Dutch subsidiary Premier Modular (Netherlands) “continued to grow its pipeline in 2024 and in FY25 the first units have gone on hire”, directors added.

They said they expected the Dutch business to become profitable by June 2026.

Cash at bank and in hand rose from £3m in 2023 to £4.9m the following year.

No dividends were paid out and the firm held no bank loans or overdrafts.

It employed a monthly average of 326 staff – up from 293 the year before – and the annual wage bill rose from £15.8m to £18.7m.

Directors warned that the increase in the national living wage and employers’ National Insurance contributions from April this year “are expected to be inflationary and deter investment in staff”.

This was in keeping with a broadly pessimistic outlook.

A release of pent-up demand for construction of schools, hospitals and other infrastructure was “long overdue”, directors said.

But with governments “not delivering on spending promises, and diversions such as the reinforced autoclaved aerated concrete issues delaying new-build programmes, it cannot be certain that the construction industry will see the clarity of future funding needed to kickstart a more optimistic 2025 and 2026”.

However, in the past month alone the firm has been appointed to a framework in Scotland, the four-year Modular Buildings 3 framework from NHS Shared Business Services, and a £265m framework from the LHC Procurement Group.

Despite its static turnover, Premier Modular has at least avoided the fate of several other modern methods of construction specialists.

Elements Europe fell into administration last month, for instance, while Northern Ireland-based Jans Offsite Solutions went under in May.

Derby-based modular builder TopHat plunged more than £50m into the red in the year to 31 October 2023 and ceased trading before the end of 2024, citing “challenging” market conditions.

ModPods International called in administrators last summer after spiralling relocation costs hit its bottom line.

Investor L&G wound down its offsite business in 2023 after years of heavy losses and modular specialist Urban Splash House entered administration in May 2022.