Thursday 27 October 2016

Precious metal: How ceilings for landmark buildings made a Cavan man a fortune

Eddie McElhinney's SAS International turns over more than €100m a year, but his daughter has just taken over the reins

John Reynolds

Published 25/09/2016 | 02:30

Eddie McElhinney
Eddie McElhinney

Cavan builder turned metal ceiling multi-millionaire Eddie McElhinney's 48-year-old business, SAS International, has carved out a profitable and highly-specialised niche.

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The firm is often the go-to designer when some of the world's leading architects, such as Richard Rogers and Foster and Partners, want the inside of the airports, train stations and landmark office buildings they design to look amazing.

On a walkabout of his factory in Bridgend, near Cardiff in south Wales, one of several his company has in Britain, the normally low-profile 73 year-old native of Redhills, Co Cavan, describes the increasingly artistic nature of his ceilings business.

Huge shiny rolls of steel are piled high in one corner of the factory and heavy duty machines stretch and flatten it out along a production line, before noisily but efficiently cutting it, then perforating, 1,000 holes at high speed in a square ceiling tile.

The crates and trolleys we pass are full of tiles that all have the names of their destination labelled on them: Victoria Station in London, which is being redeveloped, and others in Paris and Manchester. Roughly half of what they make here is for the UK market, while the other half is exported.

A staff of 350 people work on the factory floor - the biggest of its kind in Europe making ceiling tiles - with 50 in the office, and another 400 in several offices and factories around Britain.

The perforating machines cost almost €2m each and it took a year for them to be made, but the investment means SAS should be able to take more market share.

Here in Ireland, they're in Dublin Airport's Terminal 2, Kerry Group's new headquarters in Kildare, the new Central Bank HQ, NUI Galway's new human biology building and the former Bank of Ireland headquarters on Dublin's Baggot Street.

The largest contracts are worth tens of millions. One is for the world's biggest train station, Kowloon in Hong Kong, featuring four levels underground, each with four platforms.

Closer to home, a new office in London, for a well-known US-owned business that is set to open in late 2017, features a ceiling tile that incorporates an LED light and an integrated cooling system using copper piping.

Working by convection - similar to home underfloor heating, it keeps large buildings within a two or three degrees celsius temperature range, is more energy efficient than air conditioning, and fits better with their modern design.

"This has never been done before. The panel is shaped like a flower petal and looks amazing, and we have to make and rivet millions of these, using folded metal with slots in it. It'll take a year to complete, and our workforce is involved at every stage of the process, from the concept, planning and design right up to the end product. On some projects, we might be involved over a four or five year timeframe," McElhinney explains.

"It's a multi-million pound job; one that none of our European competitors would be able to do. Nothing like it will probably ever be done again."

Architects, given to outdoing each other for more and more visually striking designs, may increasingly turn to a niche player like SAS, given its track record.

"We've developed a brand and gained respect and a reputation over time," he says.

"My first breaks came working for consulting designers and engineers Arup - some of whose top people remain my good friends today - and then working on Richard Rogers' famous Lloyd's building in London in the early 1980s also helped put me on the map. The architects for Bangaroo South are also Richard Rogers' firm, so it shows that they haven't forgotten about us.

"In modern airports and train stations, countries and cities want to make a statement about identity. The most spectacular ones we've done are Hong Kong airport and now the Kowloon train station. Another airport we're working on, Muscat, in Oman, will be even more striking."

Since starting out on the tools in the building trade, McElhinney himself has become more like a designer or an artist in how he sees the world.

"Everything about buildings is about form and shape, but I don't claim to have any artistic skills. I might go to a motor show [something of a petrolhead, he used to race TVRs and Porsches, and owns two Porsche 911 RSs, a Bentley, and a limited edition Land Rover Defender] and look at a car and then say to myself 'I could shape metal like that, but in a totally different way.' You don't necessarily have to be an originator of form and shape. You could look at the curve or design of a car and be inspired.

"The Sistine Chapel's ornate ceiling is beautiful, but I always looked at the colour and shape of things, thinking how we might put our own twist on them to create something with its own identity. If you did that once a year, you'd be very successful.

"Usually four companies in the world tender for the largest projects. We go for them all. We win some, we lose some. We each prototype a design for it, then you have to hope that yours is their favourite one.

"Cathal McGuinness runs our business in Dublin, and every architect in Ireland would know him. They really appreciate products like ours. Pro-rata, Ireland is the best market for our work."

In his first interview in 15 years, McElhinney describes the business as "quite profitable". Its most recent accounts put sales at €100m in 2014. The true profitability is hard to fathom, as the company has divisions in Australia, the Middle East and Hong Kong, as well as in Dublin, but the operating profits were about 30pc. "It's a bit of a complex picture, but I'd prefer not to give out our sales and profit figures," he says.

This year's Sunday Independent Rich List placed him at number 177 out of Ireland's wealthiest people, with an estimated worth of €83m. But he declines to comment.

The global ceiling market for all materials is worth about €20bn by value, according to industry analysts. And modern architectural trends seem to be leaning more and more to metal ceilings, putting the company in an enviable position.

A large chunk of that market is in redevelopment and refurbishment work, he points out. "When people think of construction, they perceive it to be about new buildings. But the reality is that more money is spent refurbishing existing ones than building new ones. It's about a 70pc/30pc split across the industry as a whole, and for SAS, about 65pc of our work is on refurbishments and 35pc on new builds."

Who are the firm's biggest rivals? "Our biggest competitor is a German business, Lindner, with which I'd say we have a good, even friendly relationship. There isn't anyone else in Europe, however. There's a Korean company, and a few Chinese manufacturers, as well - as you'd expect in a market of this size, but they're also big volume producers.

"Many architects would say we're number one in our niche. We're the largest niche building product manufacturer up to a value of £100m in Britain. But we're the world's second biggest metal ceiling and related component manufacturer."

Another factor that adds to the opacity of the company's profit figure is that it reinvested a lot of money into the business.

"Our staff spend a lot of time exploring the physical properties of metals and other materials. In our latest tiles, you saw the copper piping for its integrated cooling properties, and aluminium has a role to play too. Some tiles are designed to convect heat, while others have a role in cooling. It's about creating a way of giving you a comfortable feeling. We're always trying to look at the efficiency of all the processes involved in doing this and how they can be improved."

3D printing has also been a boon to R&D. Previously, making a new part or component could take up to several months. With 3D printing, it can be made in several days. It's particularly helpful in prototyping new tile designs.

We look at one which is for a new project in Qatar for which the firm is tendering. It takes inspiration from both a ship's sail and a leaf.

The firm also has several machines for making its own tools, and this also helps to keep skills in-house. About 10pc of the employees have been with the company for more than 25 years. It has a flat management structure and its biggest challenge is hanging on to talented designers.

As one of five sons of a dressmaker and a garda, "who also wasn't a very good carpenter", McElhinney left Cavan for London shortly after doing his Leaving Cert. He later bought a company he worked for, and built it up from the age of 25, and over the years he sold off various divisions of it. Its roots evolved from buying machinery of a Swiss company that supplied them but went bankrupt.

He and his wife initially ran it from their home, and he learned everything he could about manufacturing and its machinery and processes. Part of it then evolved into ceiling contracting firm SAS Contracting, which had a turnover of £50m and was given to some of its management in 1995 in exchange for shares. Others who came through his firms over the years set up their own businesses and made their own fortunes. "They're among our best customers," he smiles.

More recently, a distribution division that bought and sold building materials, CCF was sold to builders' merchants Travis Perkins in 2002 for about £50m. In March, a smaller specialist distribution division was sold off. "We decided to concentrate on what we like doing most"

A bigger change in the company has been that after 48 years in the business and living in Berkshire in the London commuter belt, he has taken a back seat in the business, retaining just 5pc and a non-executive director role. He still takes a keen interest, however.

He's a keen follower of ups and downs in the wider world of business too, including the many companies that are customers of SAS, and has invested modest amounts in the stock market, in companies that interest him.

He gave the rest of his shares to his three daughters and son. His youngest daughter, Siobhan (42), left a corporate law career in the City to oversee the business, bringing in a new chief executive to work alongside her and lead the management team. She remains involved as the company chairman, representing the family's stake.

Though protected by its strong exports, the business may not be without its challenges. Brexit looms large in these islands, as we all know. "I don't think the UK will leave in the way it thought it might. Siobhan and I got to know Theresa May a little over the years because she's our local MP, and she's always been very capable. But it's still all a relative unknown, as are the consequences for Ireland."

Sales grew by 12pc last year, profit more substantially, with further increases in both figures so far this year, Siobhan adds.

"Part of what I still do is encourage the company's export focus that underpins its survival. Europe is a big market, but so is the rest of the world," her father says.

Eddie will also have more time to spend with his wife and grandchildren, as well as in his native Cavan, where he's renovating a house with some land. And he's treated himself to a John Deere tractor. "I'm more interested in that now than any of my cars," he laughs.

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