Cantillon: Construction giant laid low
Siac textbook strategy undermined by Polish project
Siac Construction, who developed the Aviva Stadium, stuck to its strengths, shunning the temptation to leverage its earnings against the property bubble “easy money” of development. Photograph: Alan Betson
The sight of Siac, one of the giants of the Irish construction sector, limping into court, seeking the protection of examinership – most likely today – is cruelly ironic.
For Siac, like all the big Irish builders, had adopted a textbook strategy through the collapse of the Irish property crash and the ensuing recession. It had stuck to its strengths, shunning the temptation to leverage its earnings against the property bubble “easy money” of development.
And when the business dried up in the home market, it moved resources overseas, chasing projects that could sustain it. When the Irish market imploded, it accounted for 60 per cent of the group’s business. Three years later, the figure was just 16 per cent.
Diversification into continental Europe and North America appeared to be paying dividends for a business that can trace its roots back to the era of the Great Lockout.
Unfortunately for Siac, one of the markets in which it sought business was Poland. Like others alongside it – notably Sisk and Roadbridge – a project that looked like laying the foundations for profitability over a number of years turned instead into a nightmare.
In 2010, Siac and its local joint-venture partner PBG signed a €427 million motorway-construction deal with the Polish infrastructure ministry, with chief executive Finn Lyden looking forward to “lots of motorway business” there.
Within two years, PBG had gone bust and Siac had pulled the plug on the contracts, sought over €20 million compensation from the Polish authorities and reported the whole sorry mess to the European Commission, which was extensively funding the whole thing.
Quite what is happening in Poland has not yet been determined. But that three Irish businesses – well used to the cut and thrust of construction contracts – have come unstuck indicates that something appears seriously amiss in certain sectors
All that will be of little use to Siac now. On the plus side, as it enters examinership just as the people are starting to believe that the worst of our economic crisis may be behind us, it appears to have its lenders solidly behind it. That would indicate that a restructuring proposal is likely to be reachable, if at the expense of members of the Feighery family, owners of much of the closely held shares in the business.