Wider market context of landscape firm collapse

More competitive market may have taken its toll on Land Engineering Scotland.

Skypark: Glasgow base of Land Engineering Scotland - image: Matthew Colvin de Valle/Flickr
Skypark: Glasgow base of Land Engineering Scotland - image: Matthew Colvin de Valle/Flickr

After 37 years of trading, £40m-turnover landscaping and civil engineering company Land Engineering Scotland has called in administrators, blaming a struggle to make profits in a competitive market. The move has allowed joint administrators Colin Dempster and Andrew Davison of EY to sell parts of the business to idverde, saving 249 jobs. Another 135 were lost. But what is the wider market context around this collapse?

Land Engineering Scotland delivered civil engineering, hard and soft landscaping, design and maintenance to the commercial sector, with current high-profile projects including City Campus Glasgow and the first £48m phase of the Scottish Government-funded Royal Edinburgh Hospital regeneration, when it appointed EY on 30 May. The administrators have refused to be drawn on the details of the collapse but Horticulture Week understands that it was the company's civil engineering operations rather than its landscaping that was most in trouble.

Davison says: "The market has become increasingly competitive for the company and has impacted on its profitability, particularly in relation to the company's construction business." He explains that the directors explored various options but with no success, eventually taking the decision to appoint administrators to help safeguard elements of the business.

Very competitive market

Stuart Simpson, director of Ashlea Landscapes, which is also based in Glasgow, says: "They were doing a lot of public work and some private construction. It's a very competitive market. Land Engineering was a huge animal with a lot of overheads and whether it's the size or the overheads that ultimately sunk them, I don't know."

He adds: "They moved into offices at Glasgow Skypark, which to me was bizarre. It's adding another overhead to your business in a city centre location. I don't know what the reasons for that were based on. We're in Glasgow but we're in an industrial estate, not big plush offices like a law firm. It was a multistorey office complex, it couldn't come cheap."

In its last filed accounts at Companies House on 26 May 2016, for the year to 31 August 2015, Land Engineering recorded a pre-tax loss of £192,000 on a turnover of £39.9m, citing the economic downturn, an exceptionally mild winter and delays and reductions or cancellations to the contract awards of key customers.

In the 2013-14 financial year it made a pre-tax profit of £97,000 on a turnover of £42.9m. In 2012-13 sales increased by 5.2% and pre-tax profits were £1.2m. The previous year sales decreased by 4.6% compared with 2010-11 but profits remained steady around the £2m mark due to savings in administrative costs.

"They may have been too competitive with the pricing they've done," Simpson suggests. "In Scotland the grounds maintenance side is totally cut-throat. Some years ago I tendered for a contract and Land Engineering was half my price. Some contractors pick up a lot of work and I don't know how they can do it for the rates they offer.

"I stopped pricing a lot of the stuff. I thought, I'm wasting my time. What's the point in charging someone £10 when it costs you £12? There's a lot of that in the market. It's sad to see a company that's been going for 37 years and had a £40m turnover, and that's the end of it. It's not a good thing for the industry."

EY sold Land Engineering's services, responsive and winter divisions as well as the company's interest in contracts at Grangemouth, Craighouse and Quartermile to idverde, safeguarding some 249 jobs. Services on these contracts will be delivered by idverde with no disruption to clients, says EY. For idverde, the acquisition represents an expansion of the £350m-turnover French company's Scottish footprint and a 10% overall headcount boost, after acquiring English companies The Landscape Group in March 2015 and Quadron in February 2016. Previously it had a small presence in Aberdeen, trading under the name idverde Scotland.

The UK business recorded a turnover of £44.9m in its latest filed accounts, for the nine months to December 2015, before the acquisition of Quadron. Idverde says its proforma turnover in the UK for 2016 was £89m, when it had 2,300 staff.

"Scotland is a key part of our UK and European strategies," says idverde chief executive Nick Temple-Heald. "The news creates an even stronger platform for us in Scotland to develop our UK-wide offering for clients with multi-site facilities that require outdoor landscape construction and maintenance."

Simpson says idverde will probably try and build the business further in Scotland. "Hopefully they will bring the prices up. Land Engineering had a history of low prices. At Gardening Scotland last weekend people were saying that it's not very good for the industry. A lot of people expected it to happen, which is not a good thing. Hopefully it will open up the market. We'll have to wait and see."

Frosts Landscape Construction commercial director Aidan Lane says medium-sized companies are squeezed by both smaller operators with low overheads and larger companies with bigger reserves to ride out any blips in the market.

"It's always been a competitive market," he adds. "We are very, very busy. Going back 15 years we were 80% soft and 20% hard landscaping. We had to make a decision to move out of that. Now it's the other way around. If you want your company to be a certain size you can't just focus on soft landscaping. It's very sad a company that's been on the market so long has closed."

Competition in civil engineering

Concentrating on civil engineering projects puts landscapers in competition with the big civil engineering firms. "A lot of these civils are much larger and they operate on a much tighter margin," says Lane. "We've found that on some of the larger projects we go for. They might have an £80m-£100m turnover. They can do work at a lower mark-up because of the size. These guys own their own plant and smaller companies have to hire plant in."

The long delay between pricing and getting on site - sometimes as much as four years - and project slippage are other major pitfalls facing landscape firms. "That's been incredibly challenging for us and other landscape companies," says Lane. "Projects slip by six months or 12 months. It's still a healthy market in terms of picking up work. It's trying to find the right project to fit the company."

But Crown Group managing director Gareth Emberton confesses to being baffled after looking at Land Engineering's accounts. "They've got a £7m balance sheet and a £40m turnover, and the directors don't look like they're pulling that much out of it, so how that could've happened to a company of that size, I don't know."

He adds: "It sounds like whatever's gone wrong has pulled the whole thing down. What they're saying is slippages on contracts, the competitive market - all those things can happen to all of us. How you mitigate against that is key. We don't know the full facts here and you can only speculate. Something major must have happened. It's a shame."

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