A subsidiary of failed firm Longcross Group has followed its parent company into administration, after its directors lost their battle to keep the company alive.
LX Engineering (South) was forced to call in administrators having failed to secure new work after clients lost confidence in the business and employees exited the company.
Joint administrators Michael Kiely and Peter Kubik of Hacker Young have been appointed. Longcross Group and its contracting division Longcross Construction went into administration in June last year.
The Kent-based subcontractor had been trading profitably following the demise of its parent company but was hit with cashflow problems after it had its funds frozen by Lloyds Bank.
The bank’s decision was taken because Longcross Group and Longcross Construction, which shared a credit facility with LXES, owed £6.2m when they entered administration.
Despite this, LXES was able to avoid major disruption by agreeing with its bank to have certain funds released in order for it to continue trading.
According to the administrators’ report published on Friday, it ran into further trouble when Longcross Group and Longcross Construction were unable to pay LXES £1.48m owed for work it had carried out on projects, including the Delta Point office-to-residential conversion in Croydon.
During this time, directors came under pressure to pay their subcontractors and suppliers who were “demanding unrealistic payment terms”, according to the administrators, which the company was unable to meet.
Existing clients were also reallocating projects to competitors due to the company’s cashflow problems, with many employees leaving “of their own accord due to the perceived instability of the business”.
LXES went into administration owing £2.4m, more than £500,000 of which was owed to HMRC. A further £197,504 was owed to Warwick-based subcontractor Wolseley UK, which made it the company’s second largest creditor.
LXES worked in multiple sectors including retail, commercial, education and leisure, largely taking on contracts worth between £1m and £5m.
It had around 60 employees.
Major jobs included:
- Tottenham Hotspur FC – new training facility - £4.5m
- Shepherds Bush Road – refurbishment- £5.5m
- Marble Arch House – new build commercial offices - £5.2m
- Sainsbury’s supermarkets – around £3m a year
- Four academies in Kent – average of £2m each
Longcross Group and Longcross Construction fell into administration in June, with over-exposure to the retail sector cited as a major factor.
Deloitte administrator Lee Manning said at the time of the first administration: “[Longcross Construction] had been quite focused on the grocery business, where cutbacks have been made on store expansions and refits.
“The directors concluded that the company was unable to continue to trade on this basis and resolved to place the company into administration.”
LX Engineering and LX Engineering (North) are still trading.