Firms in the lawn care and landscaping business have seen more green lately, according to new data from Sageworks, a financial information company.
Sales growth for landscaping services firms in 2013 kept up a strong pace, and profitability improved by more than 50 percent, Sageworks' financial statement analysis of private companies found.
Companies in the landscaping services industry (NAICS code 561730), on average, saw sales growth of about 12 percent in 2013, accelerating from nearly 10 percent growth in 2012 and continuing a rebound from 2009, when sales fell nearly 7 percent.
"Sageworks data show the construction sector and many related industries are among the fastest growing private-company industries," said Sageworks analyst Libby Bierman. "In the last year or so, the housing market really started to pick back up, which means more people employed real estate agents and construction firms for new or existing homes and buildings. The data Sageworks released on landscaping firms suggest consumers similarly started to refresh the exteriors of residences and commercial real estate, using the services of professional landscapers."
Bierman noted the average landscaping firm's revenue growth put the industry ahead of the curve in sales growth. At the same time, she said, the industry has done well over the last few years to increase profitability, which mostly stemmed from a decline in cost of goods sold relative to sales.
"This might mean landscaping firms were able to raise prices to consumers without seeing an increase in per-unit supply costs, or the firms negotiated lower prices from their vendors, potentially though bulk purchases," Bierman said. "Either way, thanks to the higher profitability, landscapers have had more money in the last two years to invest back in the business or take home."
Landscaping firms, on average, had net profit margins of about 7 percent in 2013, compared with margins that averaged less than 5 percent each year since 2008. Overhead, or selling, general and administrative expenses, were higher in 2013 than in 2012, but in addition to improved cost of goods sold relative to sales, landscaping firms benefited from a drop in other operating expenses relative to sales.
Through its cooperative data model, Sageworks collects financial statements for private companies from accounting firms, banks and credit unions, and aggregates the data at an approximate rate of 1,000 statements a day. Net profit margin has been adjusted to exclude taxes and include owner compensation in excess of their market-rate salaries. These adjustments are commonly made to private company financials in order to provide a more accurate picture of the companies' operational performance.
Most landscaping firms are privately held businesses with less than $5 million in annual revenues, according to Atlanta advisory firm CCG Advisors. "While there has been significant acquisition activity over much of the past two decades, the industry remains highly fragmented," the firm said in a report last year outlining industry trends and opportunities. "The top three companies account for less than 5% of the overall market revenue and the top 150 account for less than 20%."
Sageworks, a financial information company, collects and analyzes data on the performance of privately held companies and provides accounting and audit solutions.
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