Mivan: the Antrim company that sailed too close to the wind
Barely four weeks ago the firm was a byword for world-class workmanship. Now 242 staff are on the dole queue and its factory lies closed. What went wrong, wonders Paul Gosling
Published 29/01/2014 | 08:30
The collapse of Antrim's upmarket construction company Mivan underlines the contrast between Northern Ireland's economy with that of the rest of the UK. While the overall UK economy is growing at its fastest rate since 2007, the jobs news here remains grim.
Nearly 300 jobs are going at Mivan, if the latest 144 redundancies are added to those previously announced.
Yet Mivan had been a 'jewel in the crown' of the Northern Ireland economy, to borrow a phrase from the company's own public statements. That was how Mivan had described the Royal Suite of the new King Adbullah Sport City in Jeddah in Saudi Arabia, for which it won a £7m fitting-out contract only last August.
In all, Mivan won more than £70m of new projects last year, including prime residential and commercial builds in the booming London property market. It also secured £8m of business for fitting-out cruise ships.
But while the contracts were still coming in, this was not enough.
The Mivan group had restructured in 2012 and the accounts prior to the restructuring show why the business was in trouble. The main trading business reported a loss of £20m in 2011 and, at the time of the business restructuring, it was carrying debts of £20m.
Attempts to turn the business around were insufficient and the administrator, Deloitte's Peter Allen, has now pulled the plug. "We received a number of indicative offers, but unfortunately no purchaser was able to complete," he said. "Although the business will now close, we are hopeful there will be meaningful interest in a packaged sale of the assets."
It was losses on contracts in Romania that led to the restructuring in 2012, but the restructuring, it seems, did not correct the company's underlying problems. Nor was there sufficient value left in Mivan for it to be worth acquiring. Lagan Group Holdings, it is understood, held talks with the administrator, but terms could not be agreed.
Mivan was a privately owned company, founded in 1975 by Ivan McCabrey (below) and had offices around the world – in Romania, Russia, North Africa and the US. It had, the company said of itself, "a reputation for excellence and innovation".
During the construction boom years, Mivan also boomed. It built one of Saddam Hussein's palaces, using gold taps and was backed, in those far-off days, not only by government good wishes, but also by its financial guarantees. The company also fitted out Disneyland Paris, the Millennium Dome, the Scottish Parliament and London's most expensive apartment block, One Hyde Park. It won a Queen's Award for its restoration of Jerusalem's Dome of the Rock.
But, like Icarus, it flew too high and burned out when the atmosphere got too hot. As with many other businesses hit by the construction bust, it ventured into adventurous and high-risk new markets to keep turnover high.
Romania looked attractive, as its young membership of the European Union led to vast spending on new infrastructure. A joint venture was formed to build public housing – which went bust four years ago. Another joint venture to build shopping centres reportedly lost Mivan about £50m.
This is not, tragically for Ireland as a whole, a unique story. In the Republic, another of Ireland's construction companies, SIAC, hit crisis – in its case because a major road building programme in Poland went wrong.
New member states in eastern Europe may look attractive, but assumptions that EU membership brings with it the same business culture as at home can be misleading.
Philip Gilliland, managing partner at Caldwell & Robinson solicitors in Londonderry, conducts business in Romania.
"It is a bureaucratic, challenging place in which to do business," he says of Romania. "Decisions can be opaque and rather arbitrary and difficult for outsiders to understand."
Gilliland adds that, while companies can be attracted into the country by the prospect of lucrative contracts, the reality is that the country's financial system is weak, with little money around.
"Because of the financial crisis, banks have not been lending to developers to build property," he adds. "Investing in the industrial economy in Romania has proven to be more successful for foreign companies than investing in property. Typically, however, British and Irish investors have been investing only in the property sector."
It seems to have been exposure to new and troublesome markets that caused Mivan problems, as it attempted to escape the construction industry crisis at home. Richard Ramsey, chief economist at Ulster Bank, explains: "Construction companies were looking for new markets. And this is one of the downsides."
Ramsey warns there will be more pain to come. "House building in GB will benefit the Northern Ireland economy," he agrees.
"The closest market to home is now firing on all cylinders. But we are now seeing the legacy of what has happened up to now.
"The play now is consolidation in the construction sector. For many construction firms, the recovery is going to be too late.
"Don't be surprised if we see more fallout among construction firms, even though the recovery is supposed to be well under way."