Back in Controlled

Controlled Demolition was one of the biggest and most successful names in the industry – but when it suddenly slumped into administration last September, after majority shareholder 3i walked away from the business, the fallout was bitter and acrimonious.

Angry subbies besieged Controlled’s Wakefield head office, some of whom issued a winding up notice, and rival contractors tried to muscle in on its existing contracts. Meanwhile, reports emerged claiming that the firm’s total liabilities were over £15m.

Controlled finally emerged from administration when former Interlink owner Richard Burt bought the company for £1.93m. But managing director Darren Palin, who along with other directors lost a 40% stake when the old business collapsed, remains unhappy about the treatment dished out to his firm. And he wants to put the record straight.

“It was reported that we owed creditors £15m – but that was only if you took into account what 3i had written off (around £3.5m), what had been owed to the banks (£5m), a further million owed to the Inland Revenue, and what Richard [Burt] had guaranteed.

“The figure we actually owed to our suppliers was around £4m – though we weren’t technically obliged to give them anything as they were unsecured creditors. But we’ve since paid them £1.9m – and we’ve got commitments to pay out a further £300,000.”

Some of Controlled’s creditors will not be getting a penny though, a result of their behaviour in the dark days following 3i’s pull-out.

“A few companies got together and attacked the company very aggressively when it was at its weakest position, and issued a winding up notice,” Palin explains. “We explained to them that this would mean the downfall of the company, and most creditors would end up with virtually nothing – but they said ‘we don’t care’.

“So they’re not getting a bean – and collectively they were owed £350,000.”

Settlements

The suppliers Controlled has settled with have received a variety of settlements, depending on the size and nature of the business.

“Some were small family businesses that just needed a payment of some sort up front to keep afloat, so we’d give them £50,000, writing off £20,000,” he says. “Some we have given 100% of what was owed, others 75%, some 25%.”

But there is potential for those suppliers that stayed loyal to get further payments, Palin adds. “We’ve had someone working full-time to recover sums owed from old contracts, around £300,000, and we’ve already got a fair bit back. That’s why we’ll be able to pay back more than the £2m we originally promised.”

There’s also another £1m Controlled claims it’s owed by Irish client Ballymun Regeneration, from a £4m demolition contract for Dublin’s McDonagh tower. The claim centres around a delay in the construction of the scaffolding on the contract, and Controlled is waiting to see if scaffolding contractor Access & Support will support its claim. “The key man at their end has been ill for the past few months,” explains Palin, “hence the delay. His information is crucial to our cause.

“But we have given written confirmation to the client that we’ll give any money we recover to the Irish contractors on the job. And we have already made some payments to creditors over there.”

Once the dust had settled on Richard Burt’s £1.93m acquisition of the company, Controlled was left with most of the old forward order book – even though rival demolition contractors had moved in “like vultures” once word got out Controlled was heading for administration.

“As soon as they could smell blood, they were on the phone to our clients,” says Palin. “But it ended up working to our advantage, because they were told in no uncertain terms by our clients that ‘we don’t work like that’.”

Novations

In the event, 11 out of 13 contracts were novated to the new com-pany, totalling £6.5m in value. And since administration, it has added a further £5m to its forward order book, a combination of old clients, such as BNG and Bovis, and new. This, along with getting past the first six months in business, has been a big boost to the new company’s credibility.

Now, Palin is looking forward to the future. The new Controlled, he says, will be a leaner outfit, concentrating on more specialist, value-added jobs, and probably turning over around £15m – “but it’s not prescriptive, it will hover around that figure,” says Palin.

The kind of work he intends to target now is “difficult city centre jobs that are technically demanding, with logistical challenges. We’ve recently demolished a couple of Gorbals tower blocks, where we had to decant 600 dwellings, handling all the logistics. Those kind of turnkey explosives jobs will remain a speciality for Controlled.”

Another market Controlled is keen on is nuclear decommissioning. “It already has a good record on nuclear sites, going back 12 years,” says chairman Burt, “and the clients tick all the boxes we’re looking for – technically challenging, strong safety culture, plus they don’t select on price.”

As it rebuilds its reputation with clients, Controlled will also seek to reingratiate itself with the industry. Palin plans to reapply for ARCA membership in April, but will have to wait until the new company has been trading for two years before it can be considered for readmission to the NFDC.

He also has to renew Controlled’s ‘Acquire & Store’ explosives licence. “This was something separate from the administration,” Palin says, “and is related to when we last moved office. Unfortunately, since then the licence rules have changed, and you must have a store 90m from dwellings, not 25m as before. But the police have told us it shouldn’t be a problem issuing the licence once we find a new site.

“In the meantime, we’ve got an arrangement with another licensed shot firer.”

New plan

The business plan of the new Controlled Demolition seems a long way removed from the grand ambitions under 3i; to hit a £30m turnover and treble profitability. Is that an acknowledgement that the previous plan was not achievable?

“I think it was achievable, and we would probably have hit £26.5m for last year before the administrators came in, but would it have been sustainable for long?” asks Palin. “I’m not sure.”

“I had grave doubts about it,” says Burt. “It would have meant a highly disproportionate market share – the top end of the demolition market is probably only worth about £200m – and would have destabilised the whole market.”

“I think we learnt one very valuable lesson, and that is not to chase turnover over all else,” says Palin. “From now on we’re looking for negotiated contracts, repeat business with clients that have a strong safety culture.” n