Interview with Mr. László Szalados, deputy general manager of the KÉSZ Group for technical issues
Earlier, between 2009 and 2018, You have been the general manager of KÉSZ Építő Inc., currently You are the deputy general manager for technical issues. For which areas are responsible now in this position?
I am leading and supervising the KÉSZ Group’s Hungarian division of Engineering activity and Technologies. This area includes the strategic sectors of the Group, such as the general contracting, manufacturing, mounting, general contracting of the electrical department, design, and industrial technologies. Furthermore, the KESZ Group’s Romanian building industrial activities are also under my direction.
In the past few years there was a quite serious construction recession in Hungary too. I looked at the company's numbers, and they does not look like that. Between 2012 and 2016, during this 5 years the yearly revenues grew steadily, from 22 to 48 billion HUF. The turnover before tax did also raise from 650 million HUF to aproximately a double, and the number of staff did increase from 120 to more than 200. How was it possible to bring these succesfull results?
For KESZ, in this critical situation, the Budapest Airport’s develompents were the biggest support.
I am assuming, that it was the construction of the SkyCourt!
Yes. Just a few months after the outburst of the crisis, we did sign with the Budapest Airport that contract, which did concerne the development, known as the SkyCourt. This did provide a stabil work task for 3 years onward for the KÉSZ Építő Inc. At that time, the most important thig for all construction companies was, to have a job. By the way, this project was a very nice profession challenge for us too!
So this contract was essentially the main support?
Yes. And the Budapest Airport is eversince a returning, satisfied customerof ours (among others), as we are still working currently on several tasks.
There is the new passenger pier at Terminal B. What is the other two tasks?
Yes, we do build the pier, and in addition we are also involved in repairs of the rolling paths and the runway. These are not so spectacular for the traveling public. And we have a further task on this terminal: the replacement of interior coverings, and at the terminal T2A, the Budapest Airport will renew the 30-40 year old coverings.
I looked at which construction companies belong to KÉSZ Holding, and I saw that they cover the entire value-chain, from the design, through the manufacturing all the way to the actual execution, moreover the building service and operation is also among the activities. At the university, they do teach vertical integration. Was the strategic director this good?
Actually, the founding owner was the main strategist, and his expectations many times have been justified, that we shall move towards our own resources, and diversified inside own resources, not just for one - two areas. Of course, there are differences between the companies, such as the size of them, their market weight, but this development did not stop! Every year we looking for the possibilities, which are those new market segments, that we can make our own services more stable.
Let's talk a little bit about the construction industry's situation! Just a few days ago, the KSH (Central Statistics Bureau) Officethe) report came out about the last year. According to this, the performance of the construction industry increased by 30% in 2017, and the orders amout was higher by 120 % then last year around this time. So it looks like that everything is all right until 2019. Would You agree with this?
I do agree: there are really many tasks in the market, but we really have to stay calm in that respect, meaning of which job shall we undertake, under what conditions, especially the deadline.
What is pulling then the industry? The EU money, through public investments?
There is an EU source and also government investment activity, since many public buildings has been implemented nowdays, which has been waiting for the favorable economic environment in recent years. In addition, industrial investors did also recovere from the drenched condition during the crisis.
We know, that there are big cyclical movements in this industry. Extraordinary capacities can be built, but then, in a difficult position these are difficult to handle. Are You preparing onto what will You do, let’s say in 4 or 5 years from now, if the market develops in to direction, that the great boom stops, or even turns into a recession?
Of course, we're thinking about that, and to avoid it, one of the most obvious solution is, that we ourselves start to develop projects, with which we can give work to our organizations. But the thing I really want to point out is, that the present 30% increase, in fact came pretty sudden, but it is also based on a quite large price increase. Both wages and raw material prices did rise, this makes up most of the growth. Furthermore, it appeared a very large number of real estate investment in the market. In the ability there is not included, that the construction industry can grow 30%, as well as I think, that non of the car factory can build 100 cars one day, and 130 on the next day. Here we see data from the price index side, in which these factors are also included.
You have mentioned earlier the real estate market. There is an extremely large number of building new apartments, and prices are still going upward. In Europe, the second or third largest price increase is present in Hungary. Don’t You feel, that this is a bubble, that will sooner or later burst?
As I see this, the housing prices perhaps are starting to move towards the European context. Is this good or not, are the homes expensive or not, it is another question. If we compare it with the capitals of the region, then we see, that we have now reach the price level, which should be otherwise justified, with consideration of the implementation costs.
Let's go over now to another topic. Partly due to the shortage of labor, the market forces out new working methods, introduction of new technologies. Where are You stading regarding this area?
Let me give you an example! Our designers are currently participating in the implementation of the BIM design method. We are also learning, there are no standards, and even on the domestic level, there is now a process of discovery, what can it give to the participants of the project. What can it offer to the designers, to the investors, to the technical inspectors and the contractor! BIM can be in any case interpreted, as a new technology. Its usability is even among the parties and the participants are doubtful, and of course, to us too, as well as for the other companies, but we already have customers which require this. But switching it into "coins" is still to come.
In few days now, an important professional event begins: the "IDEA Conference 2018", which has as one of the key messages, the innovation. Why was it important for KÉSZ, to stand behind the conference, and be one of the main supporter of it?
We consider the compatition to be very important thing in order to create innovative solutions. We thought that such an international conference, giving an outlook into the current construction world beyond the borders, can only strengthen our vision of future. We first of all look at ourselves, that not only in Hungary, but also in Europe, in the countries where we are present, with our abilities, with our abilities in the competitive environment, we can achieve good results. There are many things to learn from these companies and from these lecturers!
What are the most important requirements now for construction machinery?
About the construction machinery, from our point of view, one of the most important requirements is a constant availability. On the other hand, we expect from these companies, to make these machines visible with a smart-online register all the time: where they are, which one can be rented, which one can not be rented, how can we access to them, for how long, possibly switching them back and forth, between our construction sites. Within that, it would be our goal – in the improvement the efficiency of machines - that we can keep a track of their continuous work, even through a computer platform, whether they are standing on the construction sites, or they are actually working. We think that we have to make a big step forward, that the efficiency of these machines, and that is, that the just spent time and full work time proportion improves.
We also report about these innovative solutions in this issue, in connection with "Intermat 2018". But let's continue with a few short questions. What is the biggest challenge now for KÉSZ Építő?
The biggest challenge is to create an appropriately inspirational working environment for our employees.
What is the biggest project now for the company?
The varnishing plant of the Merces in Kecskemét, and it’s second varnishing plant execution. This is the biggest project at the moment.
What was the biggest success for the company in the past 3 years?
I think, what our company looks to, as the most proudly work of its history, the restoration and revitalization of Kossuth Square and its surroundings. It was such a beautiful job, which is not only professionally, but emotionally everyone has lived through well, and what I'm most proud of!
Let's go back to industry issues, but now from viewpoint of the future! How do you feel, where is the most significant growth potential now in the industry?
As I see, besides the office building, the industrial sector is the dominant one. It will continue to be determinative, partly based on our own performance they can show some independence from the cyclical nature of public or municipal investment, but obviously they can not even separate themselves from the economic environment they are in. Because many investors are just attracted with the economic environment, or any type of job creation support brings to Hungary, which comes from the state or from the municipal side. Therefore I see growth in the industrial sector. And not just the so-called classic automotive industry, or related sectors to the automotive industry, but also eve in agriculture, the development of which is I think, the country's elementary interest. There are already a number of plants called sample farms, and if Hungary would look like it everywhere, then we could be at the forefront of the world.
You, as a leader, know the group well, and in the industry You are well aware of market trends. What would you develop from current competencies? Or where would you create new competencies?
The focus from the general implementation will be transferred to the specialized- and mechanic industrial manufacturing, and also in direction of product manufacturing. The basis of all such activities is the planning. Besides of our current large design offices, we have a serious further development plans of them this year, with specialist designers and detail planners, who are specialised in steel or reinforced concrete design, and furthermore professional designers for other specific fields. Our other development direction is building electricity, along with further development of building automation systems department. Because buildings are getting more clever, the expectations have already appeared in that direction. And that is the knowledge, that we need to strengthened. But we are not alone with this.
How do You see, is there a need on the market for these smart buildings?
Yes, we see that there is a need. With the currently available solutions, and because of the nature of the buildings, the question is how can those be utilized. I feel that today an industrial building is built for 15 to 20 years, the public buildings are even more, even up to 50 years. The speed of development of the information technology, is 100 times bigger, than the lifetime of a building. So it can easily happen, that the planned solution does not seem to be the most up-to-date solution even at the moment of handover the building. And there is the responsibility, both for the customer, and our designers, so that we can determine such an optimum, which corresponds to the life cycle of the building.
Does the customer exactly knows, what is really wants?
In fact, I really can only say good things about our customers, naturally they always know it very well ...
Where will be the KÉSZ in 3 years, on which new market segments, and will there be new divisions?
In two areas, we are surely will strengthen. We already have an existing business line in building electricity, here we want to focus on weak current, it is about ability development. The other is the design, we would like to get to foreign markets too, primarily to the European markets. In three years' time, we definitely would like to have a foreign design footprint, furthermore we would like to have a very strong building automation and industrial automation skills.
I think, that in all areas the strategic direction is a foreign expansion!
KÉSZ is almost the only one in this sector, that has a very serious foreign presence. We are present in five countries so far. We see that there are companies, which have also tried to expand abroad, have started projects, with more or less success. We have been doing a very stable business in Romania for 17 years by now. I personally deal with it, I am proud of this, but also proud to my colleagues, who work day-to-day for our common successes. When we can serve a client at the same level in Eastern Romania as well as in Western Hungary, we can offer them a same service, then we feel that our goals are being fulfilled, which we set out 5-6 years ago.
Thank You for the interview!