Plenty more bumper years ahead for Sisk

Government plans to spend €6.3 billion on infrastructure this year is goodnews for Sisk's managing director Tom Costelloe, writes Barry O'Halloran.

Watching the traffic inching past the offices of civil engineering group Sisk, close to the notorious Red Cow roundabout in west Dublin, you can see that the State either needs less traffic or more roads.

Given that most of the mid-week traffic at places like the Red Cow is commercial anyway, the former is clearly not an option, for the moment at least. In any case, the State has been clearly committed to the latter since the National Development Plan (NDP) was launched in 1999.

That, and the fact that the Government plans to spend €6.3 billion on infrastructure this year, is good news for the likes of Sisk and the other big players in its sector. Companies like Sisk have enjoyed close to a decade of sustained growth.

For a portion of that, they've enjoyed levels of expansion that they would never have thought possible 15 years ago.

Sisk's ultimate parent is holding company, C-Con, owned by the Sisk family. It also has businesses in Britain and Africa.According to Mr Tom Costelloe, managing director of John Sisk & Son, the group's biggest division and the one responsible for its Irish business, it will generate revenues of around €750 million in the Republic this year, a 25 per cent increase on 2003.

That is barring a bout of extremely bad weather or some other act of God that could slow down building activity. Mr Costelloe is cautious enough to know that you can't rule these things out in his business, but there seems little reason to fear that activity will slow down in the final month of the year.

This will be another profitable year for the company. In 2003, the group had total revenues of €714 million. Mr Costelloe says that the Irish business accounted for €600 million of that and was the major contributor to the €28 million profit before tax that Sisk recorded for the year.

Those revenues and profits came from all the key sectors in the building game, including infrastructure, residential, commercial and industrial (where it has a strong record in pharmaceutical and biotech developments).

In light of the fact that the group is one of the most established players in an industry that's booming, none of its figures are that surprising. So can businesses like Sisk expect to maintain growth?

The sustained mushrooming of the business in the late Nineties led to high levels of construction inflation, as much as 20 per cent in 2000 alone.

Mr Costelloe agrees that last year was one of the best he has ever seen in the two-and-a-half decades that he has been working in the business. But he does not see the sector coming down to earth with a bump any time soon.

"Between 1994 and 2000, there was phenomenal growth and being honest, the industry couldn't cope with it just when it reached its peak in the year 2000," he says.

"The economy reacted before we did, and, while the volume of work has only gone down marginally, there's a huge capacity built in now and all the companies have got used to their new size. It has reached a plateau in the last four years and there's been very little growth in volume.

"In fact, tender levels went down in 2002 and 2003 by 3 or 4 per cent, and they've gone up marginally this year. But, given that the market is very buoyant, we have to hope that the level it's at is sustainable. The long-term challenge for the economy generally and the challenge for our industry is to make sure that we can keep giving value for money," he argues.

One particular aspect of the boom, residential housing, has presented new opportunities for Sisk. Historically it was a civil engineering group that worked on big projects, and up to two decades ago it owned 50 per cent of Ascon. But, recently it has joined forces with residential specialist Park Developments to work on a number of projects. One is a social housing scheme in Cherry Orchard, near its base in west Dublin, the other is the capital's docklands.

In the last five years, it has also focused on what he calls "civils", that is the infrastructure projects. Recently it completed an upgrade of a stretch of the Dublin-Wexford (N11) with a local contractor, SM Morris. Mr Costelloe says the work was completed ahead of schedule.

Similarly, he says, the company brought in the Monasterevin bypass under budget. The latter was a joint-venture with Limerick-based Roadbridge.

The National Roads Authority (NRA) and South Tipperary County Council recently hired the Roadbridge-Sisk partnership to complete the Cashel-to-Mitchelstown stretch of the Dublin-Cork route.

The €240 million project will be the first in the State to be managed using an early contractor involvement (ECI) system. This involves the contractor coming on board at an early stage and managing the design and planning elements of the route in conjunction with the local authority.

That will include public consultation. It is likely to take over a year before work can begin.

This approach is far removed from the old method, which simply involved local authorities controlling everything and tendering for a builder. The more usual approach used now is "design and build", which involves the contractor designing and building. ECI is the next step up.

Sisk is also working on a number of other high-profile projects. It is currently working on what will be the State's biggest shopping centre in Dundrum in south Dublin. And it is involved in another project that qualifies as the "biggest" of its kind, the Wyeth biopharma facility in Abbotstown, Co Dublin.

With a pipeline of projects like that, Sisk seems well placed to look forward to a few more bumper years.

Factfile:

Name: Tom Costelloe

Position: Managing director, John Sisk & Co

Background: From Mayo, he qualified as a civil engineer in 1979 from University College Galway. He spent 20 years working in the west with Sisk before a short period in Nigeria, and took over his current job five years ago.

Family: Married with four children.

Hobbies and interests: Spends time with his family, plays a bit of golf and supports the Republic of Ireland soccer team and the Mayo footballers (he has a nephew playing at under 21 level).

Why is he in the news? John Sisk & Son, the Irish division of the Sisk civil engineering group, is on track to generate €750 million in revenues this year, more than the €714 million turnover and pre-tax profits of €28 million of the whole group last year, according to recently released figures. It has been involved in a number of high-profile projects.