Hard lessons learned from the depths of the last recession are standing Vision Contracting in good stead, says Managing Director, Niall O’Meara.
Ahead of celebrating 10 years in business in August, Vision Contracting is in a pretty good place – despite the various challenges of the last year. The company, which has around 100 direct employees, had a €61.5m turnover in 2020, up from €55m in 2019 and €36.2m the year before.
“We’re now forecasting a similar turnover level for this year as in 2020, but we’ve had a four-month shutdown,” Managing Director, Niall O’Meara says. “Under normal trading circumstances we would have expected sales revenues in excess of €70m this year.”
Despite this substantial growth in recent years, O’Meara says the company is not turnover focused. “The plan has always been to build a sustainable business based on repeat work with a strong and diverse customer base, including blue chip multinationals.”
It’s an understandable vision given that Niall O’Meara and his three fellow founding directors – Mick Allen, Construction Director, Aidan Drummond, Pharma and Industrial Director, and Colm Fehily, Commercial Director – worked for one of the country’s largest building and civil engineering contractors before it went into receivership in the summer of 2011. The four set up Vision Contracting shortly afterwards.
O’Meara says the four senior managers have seen first-hand the risks of chasing scale. “We have the hard lessons of knowing what it takes to create a sustainable construction business. We’re very much focused on project risks and getting paid fairly for what we do. Some might even accuse us of lacking ambition because we’re probably overly cautious.”
The company, which now has offices in Cork, Dublin and Limerick, started with literally nothing, he says. “We have no debt or borrowings because at that time we couldn’t secure any bank finance. We backed ourselves and started by doing small work in Ireland and we supplemented it with a couple of projects in London through existing relationships. As we got a foothold in Ireland, we decided to concentrate our efforts on the Dublin market rather than London because we could see things recovering here. Starting from a low base we saw enough opportunity in the Irish market to keep us busy and to allow us to grow the business year on year.”
Keen to spread the risk, the company works across a wide range of areas: about 30% of projects are public sector works; 30% to 35% of the work is for pharma clients; 10% is residential development; and the rest is general building – everything from office and hotel fit-outs to shopping centres and golf clubhouse facilities.
Recently completed jobs include the delivery of 40 apartments in Blackhall Place in Dublin 7 and the new TK Maxx extension in Liffey Valley. Other recent projects include a residential development at The Paddock located at Bushy Park Road, Dublin 6, and a newbuild warehouse and clean room facility and WWTP plant expansion project at MSD Brinny, County Cork and the countrywide term maintenance and refurbishment framework for the Department of Education & Skills.
The company is on site on Gloucester Street in Dublin 2 where it is the design build contractor on a 113-bedroom, 10-storey hotel for Premier Inn. It has also started work on several projects with Pfizer in Ringaskiddy, County Cork. In Tralee, meanwhile, it was recently awarded a €15m contract for the new 75,000 sq.ft. Gaelcholáiste Chiarraí, which will cater for up to 600 students and 50 teachers. The company is also on site with its own town centre housing development at Kilcoolaght in Killarney.
“To get any scale in the Irish construction market you have to be a generalist,” O’Meara says. “We’re trying to spread ourselves wide in case there is a slowdown in one sector. We’re also spreading ourselves geographically and we have capability and reach pretty much countrywide.”
There is also a move to add specialisations, like fire remediation, fit out works and framework contracting to the offering. “Typically, the framework projects are service based, and they’re tend to be smaller value niche opportunities but they’re a good counterfoil to general contracting. We are focused on securing further framework opportunities, because there’s a certain security knowing there is a pipeline of work coming without having to restart the tendering process each time.
“It’s attractive from our point of view because it’s repeat work with regular income, and it adds value to the underlying business. We are also looking at energy refitting opportunities on a framework basis. The National Energy Efficiency Action Plan has set out targets for our public bodies and there is significant public money being earmarked to upgrade public building stock. We’ll certainly be targeting these opportunities and looking to build further capability in this sector to add to our niche contracting areas.”
There are continuing challenges, including tendering risk and tight margins. “The nature of the traditional tendering system tends to encourage you to race to the bottom. It is slowly changing: customers are starting to realise that appointing contractors on the basis of lowest price may not be the best solution and that in the longer term it may be better not to put the primary focus on cost.”
Niall O’Meara says the company has always taken the approach of trying to work fairly with its customers. “Our primary focus is to create enduring working relationships with our customers. Strategically we may decide to win the initial project keenly, but we back ourselves to deliver it well and by working collaboratively with the customer we work on securing the follow-on project. More often than not the customer will work with us rather than take the risk of going out to the market and starting the procurement process all over again. That’s the way we’ve built our business.”
The current situation with material price inflation and scarcity of supply is another obvious area of concern. “Traditional stock materials are all becoming scarce and that’s going to cause significant delay issues and ultimately put pressure on margins. There’s a lot of concern in the industry on the back of recent price hikes and supply chain delays. Price inflation has been creeping into the supply chain for the last year or so but has really ramped up in the last couple of months. Supply has not caught up with demand resulting in acute shortages of the most basic of building materials, such as timber products, plastics, insulations, reinforcement, and structural steel.
“The costs will have to be passed on if they’re sustained so inevitably it’s going to increase the cost of building in the short term. Inflationary impacts have been already seen in house building with knock on effects on new house sales prices, by way of example.”
Recruitment is also a continuing challenge for the business. “Getting experienced and proven people at every level is an issue,” says O’Meara. “And it’s a limiting factor in terms of business development. We could certainly target more contracting opportunities if we could add to our site teams and leadership teams. We are not prepared to take a chance on just simply hiring cold and assembling unproven site teams. We saw the consequences of doing this some 10 to 15 years ago and it did not work then and in my view it does not work now.”
The skills shortage is felt at every level of the industry. “Succession is an area of concern – where we do move on to in five or 10 years’ time, where are the future leaders coming from?
“There is a shortage of all resources and trades, but some trades are in more demand than others, particularly the wet trades.” Some of the issues comes down to a lack of apprenticeships, he says. “I’m not sure if it’s the nature of the industry and the lifestyle expectations of the younger generation. Moving from project to project can be a barrier for people thinking about construction as a career. You can work on a project for a year and finish and move on but you’ve no guarantee that the next job will be within 30 minutes of your home. In fact, there’s every chance that it won’t be. That is impacting on the ability to attract new people into the industry.”
Niall O’Meara and his fellow directors believe, however, that the future is bright for Vision Contracting. “We’re immensely proud of what we’ve achieved and the customer base we’ve built up in the face of very difficult challenges. We’ll be continuing to work collaboratively with our customers and delivering the best possibly quality and we’ll continue growing – slowly and steadily.”