For the construction sector, the past decade has been one of soaring highs – and searching lows. Although Galway-based JJ Rhatigan found itself in the midst of the storm, it has weathered it successfully and has now come out the other side. Its cranes are in evidence once more in skies across the State and it is targeting turnover growth of 20 per cent for 2016.
But there were some rocky steps along the way, and the downturn hit. Hard.
Revenues plummeted, wages fell and staff numbers dropped by 25-30 per cent. The depth and length of the recession also came as a surprise.
"For the first part of 2008, we were preparing ourselves for what had been referred to as the 'soft landing', says managing director Padraic Rhatigan, who has been leading the company since 1982. "The 'key inflection point' was probably September 2008, during the time of the bank guarantee. At that stage, it wasn't even clear if we could rely on bank commitments, bank guarantees, etc".
Projects dried up as customers ran out of money.
“When the recession commenced, many of our clients could not get funding which had previously been promised to them and a large number of commercial transactions fell foul of the absence of funding,” says Rhatigan. “Fortunately, we had a reasonable level of reserves built up within the company and this, together with very close monitoring of our costs, assisted us in weathering the storm.”
A family company, Rhatigan concedes there were moments when he feared for the viability of the company, which was founded by his father John more than 60 years ago.
The firm faced a further challenge in that while JJ Rhatigan is solely focused on construction, it also had a number of development companies, separated from the construction end. And as the recession deepened, values in these companies dropped.
“They took the big hit with the drop in value of property,” says Rhatigan.
Losing some assets
The company was subsequently faced with losing some assets, including Dublin’s Radisson Blu Hotel on Golden Lane, after Goldman Sachs’ Beltany Property Finance acquired the loans from Ulster Bank.
However, the issue was resolved and, as Rhatigan notes, the assets are “back in recovery mode as values come back, and there is a good income stream within those companies”.
Now the company is focused on cautious growth.
“We would be very confident in the Irish market going forward obviously, but it will be different to the pre-crash times, it will be a different sort of recovery. But we’re well-positioned to maintain good solid growth,” Rhatigan says.
Last year, turnover stood at €110 million, up from € 57.5 million back in 2011, and the company’s headcount rose to 208, up from 135 four years previously.
Today, growth is back on the agenda, and the company says it is in a better position to capitalise on it.
“Throughout the recession, it would be fair to say that we have repositioned the business to be a leaner, meaner and more efficient organisation. We anticipate that this will help our efficiencies going forward and hope that it will lead to a sustainable participation into the long term within the construction industry,” Rhatigan says.
Today, JJ Rhatigan is “building everything, in all sectors, public sector and private sector”, says Rhatigan.
UK market
The company has also diversified into the UK market, in particular the greater London area, where it has “gained a reasonable foothold” and it has “substantially increased” its volume of business in the Dublin and eastern region.
Indeed, across the Dublin skyline, JJ Rhatigan cranes are in evidence, in places such as the Grange development in Stillorgan, south Dublin, where the construction company has built 122 apartments for Nama, and at St Edmund’s near Liffey Valley, where it is also building for Nama.
At Wyckham Point in Dundrum, the company has also worked with Hibernia Reit on the completion of its development there.
The residential market is an area of growth for JJ Rhatigan.
“We would see ourselves getting a steady opportunity to develop as residential recovers,” Rhatigan says, but notes that a number of factors are slowing down that recovery.
“The first one is that the market is still suffering from a lack of confidence, and the absence of mortgage debt for owner-occupiers appears to be a big challenge. It’s the absence of it and the difficulty of drawing it down”.
On the commercial side, construction is also growing strongly. “A year and a half ago there was very little happening, but then there was huge demand, and now the demand is being satisfied gradually”.
Now JJ Rhatigan is building more for institutional clients, such as the aforementioned Hibernia Reit, which Rhatigan sees as a favourable outcome of the downturn.
“It’s probably more structured now,” says Rhatigan, adding, “it will only help to bring a level of consistency”.
For 2016, the company expects to achieve revenue growth of about 20 per cent, pushing turnover figures up to the €130 million mark.
“Due to the nature of construction contracts, you can’t say [for certain] because you either get a job or you don’t. But having said that, I would see us attaining about 20 per cent growth,” says Rhatigan.
“It’s not about growth for the sake of growth, but if opportunities are right we will try and capitalise and if they’re not we don’t have any concern about not building turnover for the sake of it”.
