Sale lays down blueprint for new Century

Century Homes founder Gerry McCaughey believes the takeover of the firm by Kingspan offers the timber-frame builder the chance to become a world leader, writes Una McCaffrey.

Question: how would you celebrate finally closing a deal that has made you a millionaire 24 times over?

Answer (if you're Gerry McCaughey of Century Homes): you would fall asleep at 9pm, thankful for getting to bed at a reasonable hour for the first time in four months.

The lack of champagne corks last Monday night is not hard to understand when you hear how hard McCaughey worked in the run-up to a deal that will see Kingspan paying €98 million for his timber-frame company.

He was accompanied by his laptop at all times, even in the days approaching his wedding last December and (worse still) during his subsequent honeymoon. Only true love would stand that one.

Now that the mystery has fallen away and Century's acquisition by Kingspan has become public knowledge, McCaughey's exhaustion has changed into a massive enthusiasm at the prospects that lie ahead. (And presumably his wife has forgiven him.)

Put simply, he has suddenly arrived at a point where he should be able to realise all of his business ambitions.

"I can't express how much I'm looking forward to this. I'm more excited now than I have been for 10 years."

It's a big statement, since McCaughey's record over the past decade suggests that life has hardly been slow.

For one thing, the Kingspan proposition was not the first to come Century's way over recent times. Offers have previously come from both home and abroad but have been rebuffed.

With Kingspan, it was all a bit of a dance at the beginning as McCaughey and his colleagues tried to establish how serious the proposal was. When it became apparent that this was a "merger of minds", the real fun began.

The thing was that Kingspan was different to the other suitors. Not only is the building materials company located no more than 30 miles away from Monaghan (Kingscourt is "almost in Monaghan" the way McCaughey sees it) but the company has always been Century's role model.

"I always had the ambition to be Kingspan," says McCaughey. "I always had the height of respect for them as a company."

In many ways, the neighbourly deal was inevitable if McCaughey's long-standing Kingspan-style expansion plans were ever to come to fruition.

He is honest in his analysis - either Century could have raised funds by going public ("not the space I wanted to be in") or it could be bought over by a firm that already had access to such funds. The only other option was to grow painfully slowly - a strategy that would not have sat well with McCaughey's fast-moving nature.

And with Kingspan, Century got not only backers but also synergies and a meeting of minds. Century - the largest timber-frame operator in Europe - is already a heavy user of Kingspan's products, principally its insulation panels, which are built into Century's timber frames.

McCaughey wants to make wants to make "offsite construction" the biggest part of Kingspan over the next few years. Based on Century's current turnover of €67 million and the €165 million in sales posted by Kingspan's insulated panels operation, this does not seem like an outlandish goal.

The Monaghan man is coy on details, however, aside from acknowledging that plans for capital investment in Britain have already been agreed.

Century took its first foothold in Britain three years ago and now has facilities in Ayrshire, Cardiff and London. McCaughey says the potential here is enormous. And as is his habit, he has the statistics to prove his point.

About nine-tenths of new homes in the US and in Scandinavia are built from wooden frames , whereas the comparable figure is just 60 per cent in the UK and about 25 per cent in the Republic.

Growing concern for the environment points towards almost endless growth potential here, with Century boasting a list of environmental standards as long as your arm. To start with, the company only buys timber from sustainable forests. In the end, it recycles 76 per cent of its waste. In the middle, you get energy-efficient buildings.

Taking that UK market specifically, imagine the potential of growing that share at a time when the Government is rushing to construct tens of thousands of new homes (370,000 in the Milton Keynes area alone) over the next decade and a half.

"With Kingspan's power, we can be the largest timber-frame company in the world. If we became largest in Europe within the first 15 years, what can we do in the next 15 years?"

A true appreciation of this statement requires a rewind back to 1990, when Century got its show on the road from a standing start. It had come into existence because McCaughey's father, Brian, had proposed a test. It was a test that involved taking a risk with Brian's money and Gerry's belief in the potential of timber-frame buildings in Ireland and beyond. A matter of putting Brian's money (£150,000 to be precise) where Gerry's mouth was.

McCaughey the younger had become obsessed with the potential of timber-frame construction while studying for a BComm in UCD. The obsession was put on the back burner for five years after college as he spent time as a painter/decorator in sunny California, but it re-emerged at the end of the 1980s.

And so it came about in 1990 that Gerry (aged 27) would join with his brother Gary and his father Brian (then 55) to take on the fierce headwinds created by the world of concrete construction.

"I believed in the thing so much that there was no doubt in his mind," says McCaughey in retrospect. Bursting with respect for his father, he says the initial investment was not made with massive financial returns in mind. Instead, it was about realising ambition and proving a point.

The father and two sons were joined by Brian's colleague, technical expert, Jim McBride, and three employees to make a total team of seven. Premises that leaked in the rain were secured just outside Monaghan and the Century Homes story began.

At that time in early 1990, the Irish economy was still a long way off from double-digit growth rates. Slightly fewer than 20,000 were being built in the Republic each year, compared to the 80,000 or so that were constructed in 2004.

This meant that Century's initial concerns were all about survival rather than profits. Still though, even as the rain poured through the ceiling, McCaughey remained utterly convinced.

Helping to maintain his resolve was his experience of timber-frame houses in the US, where houses with floor space as big as 2,787sq m (30,000sq ft) were regularly constructed from timber in earthquake zones.

"Ignorance is a terrible thing," is McCaughey's analysis of Irish fears of building houses out of wood. He blames Century's predecessors, the early timber-frame companies, for not arguing their points properly.

McCaughey has had no such problems, probably because of his almost-unnerving enthusiasm. He was also helped by a phenomenon that was growing across Ireland at the time of Century's launch - the return of a diaspora who had worked in US construction.

As McCaughey and his colleagues began touring the country to sell their wares in 1990, they found that their most receptive audience was drawn from this returning diaspora that had seen for themselves how timber-frame housing could work.

Century's first client was a builder in Armagh, with most of the company's early commissions coming from one-off houses rather than estates as they do now.

Standing in the firm's despatch yard outside Monaghan it's possible to see just how much of Irish housebuilding has now been convinced by Century's offering. All loads - be they floors, roof trusses, walls or doors - are marked with the name of the builder and the name of the site in question.

Look a little more closely and you'll see that each component is marked to show where it needs to go within a given house. Doors for "Bedroom 3" in a nameless housing estate comprise one load.

Trucks are ready to leave for all parts of the country, just as they are at Century's other Irish plants in Longford and Dungarvan, Co Waterford. A fourth facility is currently under construction in Tullamore, Co Offaly.

The Monaghan factory, with its multi-million euro computer design and machinery infrastructure, despatches an average of 10 whole houses per day, or two per truck. They can be assembled as soon as they arrive on site, and will be watertight within a few days. Thus, builders save money by saving time.

Getting Century to this stage of designing by computer for estates rather than simply one-off houses took a little bit of a luck and lot of effort from the McCaugheys.

The big advantage throughout this period was that the company was never overly beholden to the banks, principally because the original seed capital was not borrowed.

"We always had cash on the balance sheet and we made investments carefully. There was no madness in what we were doing."

Figures released this week on the Kingspan acquisition show how this tradition has been maintained, with Century bringing with it cash balances of €7 million.

Cash aside, McCaughey is visibly excited back at the ranch as he demonstrates how timber sourced from Finland can, within a matter of minutes, be transformed into a wall or a roof truss. He displays a fatherly pride towards Century's machines, which, he explains, position nails or make cuts within an accuracy of one millimetre.

Walking around the Monaghan facility, he definitely does not have the air of a man eyeing his three-year earn-out from Kingspan and subsequent escape.

He is as secretive and as giggly as a child when it comes to the firm's research and development activities which, if this reporter's uneducated visual analysis is correct, seem to revolve around upping the ante on off-site construction.

In other words, rather than delivering walls and doors to a site, Century (or Kingspan) could deliver whole houses, already put together.

Other projects could see Century leveraging off Kingspan to develop steel-framed as well as timber-framed buildings - the company is already experienced in timber-framed hotels, schools and the like.

McCaughey's eyes again widen at the potential that lies before him. In public at least, he displays considerably less passion for the €31 million he stands to receive from the sale than at the opportunity Kingspan offers for Century.

All he will say about the cash is that he is happy to know that it will make his family secure. His brother Gary is also in line for an initial payment of €23.7 million. The company's marketing director, Paul McDonald, stands to make nearly € 3 million. More millions will come when an earnout has been completed.

All things considered, it is perhaps the best end for what is ultimately a family business, even though McCaughey says it was never run as such.

"I didn't grow up expecting to be tolerated. I don't believe in family businesses being used as recruitment agencies for families," he says.

His father - the chairman - was not an easy master, requiring his entrepreneur sons to walk him through Century's accounts, line by line, every quarter.

The success of the company, in Gerry's eyes, came in the combination of skills at the top.

His brother Gary was the fixer, Jim McBride was the technical expert and Brian McCaughey was the sensible head who oversaw it all and reined in any problems.

Gerry, he says himself, was the marketing man - "the mouthpiece of the company, not the success of it". It seems fair to believe that he is alone in his modest assessment.