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Face to Face: David Lawther and Alan McCready, ISG

by Michael Fahy on Dec 16, 2012

ISG regional director Alan McCready (left) and chief executive David Lawther
ISG regional director Alan McCready (left) and chief executive David Lawther

The UK-based fit-out contractor ISG achieved sales of $2bn in the year ending 30 June, and has set itself some ambitious targets for the growth of its Middle East business. As the market in its home country continues to stutter, the London-based company has made international growth a key plank of its strategy, and its three year-old operation in the Middle East is expected to play its part.

The company initially set up in Dubai in a JV with Habtoor Leighton. However, within six months the firm decided to launch its own operation, which has subsequently grown to a level where it has 75 staff split between offices in Dubai and Abu Dhabi, plus a fledgling operation in Qatar. Group chief executive David Lawther said that it took the decision to pursue its own path due to the changing marketplace.

“As part of that, we decided to focus on servicing our international client base to really establish the business. For that, we did not need a partner – we had all of the skill sets, and we were working with a client base that we know across the globe,” said Lawther.

For instance, last year its work included several fit-outs at Sowwah Square in Abu Dhabi, including a 929m2 office fit-out for law firm Norton Rose and 603.8m2 fit-outs for Akin Gump and Baker Botts. It has also carried out major office fit-out projects for regular clients such as Credit Agricole and SinoGulf.

Economic conditions in the region mean the company’s growth may not have been as quick as initially anticipated. Indeed, in its new annual report, the company said that, during its last financial year, the Middle East division had been impacted by “lower volumes and margins”, and delays to a number of key projects. This meant that the unit declared an operating loss of $802,000 as revenues edged up by 6% to $33.7m.

Despite this, the company is confident it now has the building blocks in place to achieve much more rapid growth. Regional director Alan McCready said: “What we have been doing for the last two and-a-half years is servicing those multinational corporates – that has been the main market for us. So it has been corporate office [fit-outs] etc.

“While the market has been slow, those are the companies that have kept us busy and allowed us to build a platform here. Adding on to that now, we are active in the hospitality sector. We see that as being increasingly important over the next two-to-three years, both in new-build hotels and in refurbishment of existing stock,” said McCready.

Within the hospitality sector, the company is currently working on the Ritz Carlton resort & Spa in Abu Dhabi, and on improvements to the Intercontinental Hotel at Festival City in Dubai. It has also previously carried out a project to fit-out the entire Mövenpick Hotel at Jumeirah Beach Residence, as well as its public areas.

McCready added that the company was pursuing other opportunities, including “some of the new-build hotels on the Palm for fit-out, and we are looking at a number of refurbishment opportunities planned some of the existing hotel stock”.

McCready noted: "We have got a very good track record of hotels, both in the UK and other markets. It is certainly a specialist skill, and it is one where we would fully intend to transfer some key personnel from our UK operation to Dubai here to head up some of those projects, supplemented by the 75-person team we have on the ground.”

Lawther said this strategy is a replication of the model the firm has adopted elsewhere. “If you look at the evolution of ISG across other geographies, we have primarily started in the corporate office market, moved into the hospitality sector and then into the engineering sector at the high-technology end such as data centres, for example. I do not see any reason why we will not follow that process here.”

The company recently extended the Commtech operation it acquired in Asia some years ago into the Middle East with a view to strengthening its MEP commissioning skills. Lawther believed that, as building management systems become more complex, there will be a greater demand for such services.

McCready also pointed to a number of significant infrastructure announcements made by Dubai’s ruler in recent weeks, such as the huge Mohammad Bin Rashid City project, as evidence that the market is returning to a position of strength.

“We are excited, as I suppose a lot of construction companies are, about the infrastructure projects that have been announced over the last month or two. It is certainly creating a bit of noise in the sector here. We see it as underpinning Dubai and the UAE as a location of choice for many companies to have their base in the Middle East region.

“We certainly still feel it was the right choice for us to set up here when we did, and in this location, as opposed to any other part of the region. There is an openness and a transparency about doing business here that is not always the same in other locations, and that is important to us,” said McCready.

The improvement can also be seen in the company's pipeline of projects, which stood at $22.5m at 30 June, compared to $12.8m a year earlier. The track record it has established in the region during the past three years should enable to push on to achieve fairly rapid growth, said McCready.

“It is only now, really, that we are thinking that we can step up to larger projects and move into some other sectors as well. We have a $50m business in the UAE here at the moment and, because of the vibrancy that we are feeling over the last six months, and the pipeline that has been identified, there is no reason why that will not be $150m in the next three years. That would be the plan and the programme that we are working to at the moment. And we think that is achievable.”

Qatar is one area which could contribute towards growth in the longer-term, but Lawther is not expecting this to happen overnight. For our product, we are slightly later in the chain. Clearly what you have at the moment is a lot of creation of infrastructure … planning of infrastructure. Obviously, a number of project management firms are getting heavily involved in that process, and we have good, strong relationships with those.

“In terms of physically building the office, though, that will be further down the line. To get it to the size of a Dubai, you are looking three to four years out.” One skill it has at its disposal as Qatar develops is experience of working on major sports projects through its involvement with the 2012 London Olympic and Paralympic Games (see box-out). McCready argued that it is the relationships the company has built in the UK that will influence growth in Qatar.

“The same consultants we deal with in the UK business – designers, project managers, cost consultants, MEP consultants – it is the same firms that we deal with on a day-to-day basis here as well. Particularly in the commercial office sector; right down to the same personalities.

“That means they are familiar with ISG; they know what to expect, and my job as regional director is to make sure that what we do here is absolutely identical to our approach in the UK and the rest of the world,” said McCready.

Lawther said that fostering the same corporate culture in the region is the reason why it has chosen to grow organically rather than acquire an indigenous firm and then attempt to adapt it. Elsewhere in the region, the company has an office in Cairo, which McCready said is “not fully operational”, but which is being sustained to service client demand where required. It has also serviced projects in Bahrain and in Saudi Arabia from the UAE, but Lawther said there are no current plans for Saudi.

“For us at the moment, our immediate short-term growth is concentrating primarily on Dubai, Abu Dhabi and Qatar. We will go and service clients in Saudi, but at the moment where we are with other geographies will take priority.” McCready added: “Saudi is not off the radar, but it is not this year or next.

“And I think that timing is fine. At the moment, buildings will come out of the ground, but the opportunity for us is the end users who will occupy those buildings, and they are two to three years away.” He also said that there are “a group of specialist Saudi Arabian contractors who know-how things are done and how construction works there. They will get the majority of the business. It is not an easy market entry into Saudi, but working for the end user, the occupier, is a different scenario.”

On-track delivery

ISG was not only responsible for building the Velodrome, described by Lawther as “one of the most iconic” buildings created for the London Olympics 2012, it was also responsible for ‘overlay’ contracts during the Games themselves. This involved preparatory work on all of the major stadia, as well as the delivery of more than 4,000 temporary buildings and the world’s largest temporary restaurant, capable of dispensing 50,000 meals a day.

Moreover, as soon as the distinctive opening ceremony, directed by renowned filmmaker Danny Boyle was complete, ISG had a 60-hour time slot to clear the stage and props ahead and embark on an intensive restoration programme that involved the relaying of the turf, re-installation of seats situated below the ceremony’s 'tor', erect hammer throw cages and nets and remove some of the cameras and follow spot platforms.

The cauldron also had to be relocated from its central position to the south side of the stadium and was relit by Austin Playfoot, a torchbearer from 1948 and 2012.

“A lot of that knowledge and know-how … we want to transfer a lot of that to the region and with key events coming here in the future,” said McCready. Lawther said that, from a construction point of view, there were no fatalities during the construction, which he described as “unique” for events staged of that magnitude.

“That culture of health and safety was driven through all of the stadia. So the industry as a whole moved up a notch.” Similarly, he argued that sustainability was a key focus throughout, and he pointed to the rope structure used on the velodrome’s roof, as opposed to a traditional steel truss structure. This meant that the building used 10,000t less of steel.

“The other element of sustainability is the legacy,” said Lawther. “People were very conscious in terms of the investment being made that there needed to be appropriate legacy use.”