Legal And General withdraws Umbrella from its Modular Business whose non existent Sales presence led to low expectation of a Sales Approach "Making it Rain"[videopress OZUH74hP]
In more optimistic times this was the general Narrative of Legal and General Modular Homes as told by its CEO.https://www.youtube.com/watch?v=7pGKN7XSdMk
Housing Today interviews Rosie Toogood, CEO 07 April 2021
Legal & General Modular, a subsidiary of insurance firm Legal & General, has set its sights on revolutionizing the housing industry through the use of modular homes. Led by former Rolls-Royce executive Rosie Toogood, the company aims to provide affordable and sustainable housing solutions to housing associations, councils, and build-to-rent developers. Toogood has set the target of building 3,000 homes a year by 2024, with the company already on track to achieve this goal. Legal & General Modular's current pipeline includes a 750-home project over the next 18 months, with an additional 2,000 homes in discussion for 2022. The company's modular homes are in high demand due to their quality, sustainability, and fast delivery times. Legal & General Modular is poised to make significant revenues in 2021 and beyond as it continues to grow its presence in the market.
The Announcement last week that The operation was to close is explained by an analysis of the 2021 full year accounts and 3 Subscription payments for Shares amounting to £49,500,000 presumably to cover the deficit in funding as funded in each of the previous accounting years reported.
31/3/2023 Cash for additional 3 £1 shares £49,500,000
Losses accumulated at 31 Dec 2021 £181,863,551
Total Cash for Shares/covering Losses. £231,363,551
£12m of sales in 2021
Bank Loans £9,000,000
Lease Liabilities £25,000,000
Staff Liabilities. 390 at end of 2021 £20,000,000 pa
Contrasted with the April article on the Companies website there would seem to be a contradiction between the Narrative and the Actualite
While Legal & General Modular is not a speculative housebuilder selling directly to individuals, it is part of a larger group of housebuilding businesses within the insurance firm. Toogood expected ( Some might say took for granted) that "internal" customers should be a significant part of their delivery pipeline. The company's current projects include an 185-home development for Bristol council, with 50% of the homes being affordable. Toogood aims to build 3,000 homes a year by 2024 and has already taken on an additional 50 employees this year, with plans to hire 300 more by the end of 2021. The company's pipeline for the next 18 months includes over 750 homes, with further projects in discussiontotaling another 2,000 homes. Toogood attributes the strong demand for modular homes to their quality standard, sustainability credentials, and ease of delivery.
The Employee appraisal site Glassdoor gives a less spun appraisal of what had been going wrong. Legal and General Modular Homes has been facing some challenges, which are reflected in the reviews of its employees. One of the main issues seems to have been the lack of a clear future strategy, which has resulted in a dearth of sales pipeline and necessitated production breaks. This led to periodic layoffs and low morale among employees. Additionally, the CEO's micro-management style has not been well-received by the executive team, with multiple resignations over the past few years.
On the positive side,L & G Modular Homes offered a good pension scheme and training opportunities for its employees. However, there are reported concerns about the low base pay and lack of bonus or overtime schemes. Furthermore, the management has been criticized for not valuing its employees and not giving them enough opportunities to progress within the company.
To address these issues, L & G Modular Homes should have focused more on demand planning and building a solid sales pipeline to secure jobs and grow the business. It could also have listened more to the expertise of and widened the fields of expertise in its leadership team and given them more autonomy. Additionally, the company needed to prioritize its customer led projects and make decisions faster. By taking these steps, L&G Modular Homes could have become a great place to work and got closer to achieving its goals.
The most similar Failure lately was the collapse of Kattera The US based Modular Behemoth, in June 2021.https://www.youtube.com/watch?v=UYHPesaX398
Katerra, a construction technology company that started in 2015, collapsed due to a series of business failures compounded by the macroeconomic effects of the COVID-19 pandemic. The company's financial position deteriorated rapidly, and it was unable to secure additional capital and business. One of the reasons for Katerra's downfall was its connection to Greensill Capital, a supply chain finance giant that filed for insolvency in March 2021. Both Katerra and Greensill were heavily backed by SoftBank. This cashburning unicorn failure is not unique; other companies like Enron and WeWork have also experienced similar fates. However, even with other examples to learn from there is still an appetite in " Roving Caveliers of Finacialisation Land" to solve problems that no longer exist, such as Range Anxiety for Electric Cars, as seen with the failed pilot program Better Place. The lesson here is clear: businesses must have a sustainable financial model and be mindful of their connections to other companies.
The housing market has been plagued by two fundamental misdiagnoses of the problem. Firstly, the collapse in home ownership is mainly due to the withdrawal of mortgage finance from first-time buyers (FTBs). Secondly, there is a crisis of affordability and credit allocation, with people borrowing eight times their income to get on the housing ladder while hundreds of thousands of pensioners' homes have at least three spare bedrooms. The availability of credit is a key factor in the gyrations we call the property cycle. In January of 2020, SoftBank first bailed out Katerra, then still a fully integrated manufacturing system with an order book of $2 billion. However, the sheer breadth and ambition of the company's approach was always hugely ambitious, and ultimately it was brought down by the Hubris of another Softbank Unicorn, Greensill Capital.
The writer noted at the time "A winning solution could be an order book-led approach by occupier demand coupled with assembly off the supply chain that already incorporates a lot of automation".
In the world of House Building, the customer as occupier is king. The key to success in the housing market lies in dis-inter-mediation - cutting out the middlemen and advisors who have institutionalized and complicated the process.This is no more apparent than in the "Affordable Homes Crisis " Talking Shop.
The UK MMC market is riddled withingroup biases and silo-based thinking, which leads to a lack of customer engagement. Home@ix seeks to change this by incorporating the customer's voice into the origination and briefing stage of the place-making design and site acquisition/viability process. The offsite manufacturing industry needs to think like a brand, creating a story and personality that consumers recognize. Manufacturers can create a product and brand that developers can market successfully, ultimately determining the overall success of a project. It's time for the industry to pull together and push together to take a larger market share. Home@ix offers a direct-to-customer approach, giving customers the choice of design and finance options. It's time to put the customer first and disrupt the broken industry.https://www.youtube.com/watch?v=sc5ZlXV-1fw
There was always something of putting the Cart before the Horse with the L&G approach. In addition to the obvious market and industry challenges, the Management approach could IMO have been better.
Is Legal and General Modular Homes, Just another part of the Affordable Housing Crisis Lip Service Talking Shop?
The Logic of dividend policy and maximum export of financial surpluses might though give a better understanding of what is going on with housing in the UK in the context of the Global Financialisation and its own peculiar yet dominant logic system. As Saskia Sassen put it , there is " A Savage Sorting of Winners and Losers: & Contemporary Versions of Primitive Accumulation," seem to be at work with the "accumulators" being "Off Shore" in nature. The Narrative "account therefore offers a partial picture at best, as it neglects the impact of capital flows into, and outflows from, the sector. Far more dramatic changes were taking place here than this ‘institutional recovery’ paradigm suggests",Tom Archer & Ian Cole examine these themes in this paper from The financialisation of housing production: exploring capital flows and value extraction among major housebuilders in the UK
The paper explores the financialization of housing production in the UK, focusing on the capital flows and value extraction practices of major housebuilders. The authors argue that financialization has led to a shift in the priorities of housebuilders, from building more homes and growing income and profit through expanding volumes, to maximizing profits for shareholders, often at the expense of production volume. They analyze the financial statements of major housebuilders and find that they engage in practices such as share buybacks, dividend payments, and land speculation to extract value from the housing market often for offshore shareholder interests. The authors conclude that these practices contribute to the unaffordability of housing in the UK and call for policy interventions to address the negative effects of financialization on housing production.
Rental housing financialization has implications for housing shortages, prices, and volatility. In the short term, the impact on the market for sold homes is likely to be minimal as most rental financialization is oriented towards larger housing blocks. However, over longer time horizons, it is reasonable to expect that housing shortages may fuel more demand for rental property. Conversely, rapid growth in the availability of quality rented homes may have a depressing effect on prices for purchased homes.
Rental housing financialization should have a major impact on the distribution of rental housing availability, especially in dynamic local economies targeted by REITs and REOCs. These funds prefer to provide for asset-poor but education-rich urban professionals, especially in their younger years. Asset-rich elites also benefit from the integration of a new class of assets into mainstream financial markets while limiting any downside that might come with increasing the supply of single-family properties.
For renters who lack both human and physical capital, there is far less cause for optimism. They are too precarious as workers to be appealing as tenants to REITs and REOCs. Worse, the expansion of higher-quality urban housing often results in the removal of existing property serving these poorer communities. Without major efforts to orient listed real estate towards social ends, there is more than a little cause to assess these financial structures as further exacerbating the divide between insiders and outsiders to the knowledge- and asset-driven globalized urban economy.Berkley homes floated last year could be underwritten by the new federated land banks of England, Scotland, Wales, and Ulster. a sort of rentenmark solution. Bonds and who benefits from the coupon are two key questions which are rarely asked and which this article seeks to address. The Distinction between Free Markets and Free Trade are crucial to understanding the point. https://notthegrubstreetjournal.com/2023/04/09/free-trade-vs-free-market-careys-american-system-vs-ricardo-malthusian-system-monopoly-vs-free-market-competition/ https://theecologist.org/2008/aug/02/radical-carbon-tax-reform https://drive.google.com/file/d/1wZiBNnJ81t9D-LwFJwjyb4QU5R9BUDRd/view?usp=sharing https://www.gov.uk/government/collections/housing-white-paper https://publications.parliament.uk/pa/cm201011/cmselect/cmtreasy/memo/taxpolicy/m32.htm The Home@ix approach is for one segment of the Market the reluctant 10%, Rungs 1-25 and rungs 35-50 of the housing market could quite seamlessly and for great benefit to society be worked into the brief of a regional English landpound, Scottish Land Pound, Welsh Landpound and Ulster Landpound. Etc, so forth and so on. https://www.youtube.com/watch?v=VaEQX-rN_0Y https://twitter.com/richard_donnell/status/1655129170756661248 https://twitter.com/richard_donnell/status/1655137148079677440 https://twitter.com/George_Nixon97/status/1655109483994001412 https://twitter.com/George_Nixon97/status/1655149045222977545 https://twitter.com/RealEstateLand3/status/1655176398758195201 https://twitter.com/RealEstateLand3/status/1655177446520500225 https://twitter.com/DurhamWASP/status/1653892326413008897 https://twitter.com/CunneenKeith/status/1651728338317082624 https://notthegrubstreetjournal.com/2023/01/02/from-homes-for-heroes-to-exponential-zeroes-neglected-actors-in-the-housing-crisis-narrativeabsorptionrate-lasttimebuyerscash-buyers-fiscalpolicy-miras-and-stampduty-an/ https://notthegrubstreetjournal.com/2022/10/01/homeatix-moduloft-the-affordable-housing-manufacturers-defining-the-terms-of-and-boundary-conditions-of-our-domain/ https://notthegrubstreetjournal.com/2022/06/09/benefits-to-bricks-a-homeix-response-to-pm-and-michael-gove-proposing-the-english-scottish-welsh-ulster-land-pound/ https://notthegrubstreetjournal.com/2016/01/06/the-iron-law-of-oligarchy/