Cork timber frame manufacturer Cygnum is in the right place at the right time for a revolution in home building. EY Entrepreneur of the Year 2023 finalists John Desmond and John O’Callaghan on how success really is a matter of chipping away at it.
This year 24 Irish finalists have been named for the EY Entrepreneur of the Year Awards which take place later this month. Currently in its 26th year in Ireland, the programme works to recognise, promote, and build a supportive community around Ireland’s high-growth entrepreneurs and is considered one of the strongest programmes globally.
Since its inception, the EY Entrepreneur Of The Year Ireland community has grown to a tight-knit network of more than 600 alumni who harness each other’s wealth of experience, with three quarters (75%) conducting business with one another. Together, the EOY alumni community generates revenues of €25bn, and employs more than 250,000 people across the island of Ireland.
“Every five hours we produce a house from the factory. From our customers’ point of view they can increase their housing output by 40% by going with timber frame”
Among the finalists this year are John Desmond, managing director, and John O’Callaghan, financial director, of Macroom, Co Cork, manufacturer of timber frames for houses Cygnum.
Last year the business revealed how an investment of more than €7m over five years at its Cork plant has increased its overall output by more than 60%, resulting in the creation of 50 new jobs.
The market share of timber frame construction has grown exponentially in recent years, from 37% of developments in 2019, to 48% in 2021. According to Forest Industries Ireland (FII), rapid-build timber homes have the dual benefits of only needing three to five months to construct, whilst also saving 12 tonnes of carbon dioxide emissions versus conventional builds.
From a humble workshop to the automated factory of the future
Founded by Desmond in 1997, Cygnum aims to produce 1,350 homes a year I the next two years via what is understood to be the most automated timber frame plant in Ireland and the UK. Currently the plant produces five houses a day.
Desmond graduated from forestry studies at UCD in the mid-1980s and worked for a family-owned sawing business. “They were, and still are, a pretty progressive bunch. But I wanted to do something myself where I had some skin in the game. We looked at a couple of different options and timber surfaced as one that would be of interest.
“After doing quite a reasonable amount of research – and timber frame was very much in its infancy at that stage – we started from humble beginnings. I made the first house myself it the corner of a shed with a colleague. It so happened that I ran into Duncan Stewart who was going to do a programme on the construction of a local house and he encouraged them to go timber frame with ourselves. This gave the business a great kickstart because we struggled to get people to think of timber frame as a better product.”
While timber frame housing has become the dominant form of home building in regions like Scandinavia and parts of Europe, it is finally beginning to pick up pace in Ireland for its sustainable and energy efficient qualities.
“Our biggest competitor was, and still is, the concrete block. The feedback from the industry in the early days was that we didn’t stand a chance. From the start we focused on the upper end of the market, at people who had come back from places like the US who were familiar with timber frame. In those early days it was a good business but a small business with a small turnover and it was more akin to a workshop type setup because one week you’d be making a dormer bungalow and the next a two-storey house.”
Desmond said the challenge was going from bespoke manufacturing to mass manufacturing. In the late 1990s and early 2000s a number of builders had started work on developments that gave home buyers a choice between timber frame and concrete block. “One builder used his own house as the showpiece and up to 72 houses in that development went timber frame and that’s really where we started manufacturing at scale.”
While timber frame housing was still at a nascent stage in 2005 demand was sufficient for Cygnum to build a factory and Desmond points out that technological innovation and automation were top of mind.
John O’Callaghan joined the business in 2002 where he witnessed the business grow 600% between 2002 and 2006. “The level of growth we had was substantially outgrowing the market growth itself.”
The gathering storm
However, storm clouds were gathering. “We could see the early signs of the collapse of the property market in 2006, two years before it really hit the bottom. We did three things at that point in time,” O’Callaghan recalls. “We set up a sales office in the UK, we made a policy of preserving cash and retaining reserves in the company and we tightened up credit controls.”
When the storm hit it was devastating. “Our turnover fell off a cliff. We went from turning over more than €25m in 2006 to €750,000 by 2011.”
Desmond recalls: “It was an extremely difficult time defined by job losses, pay cuts and everyone who stayed on did so on a three-day basis, even though they were probably putting in seven days. One of the objectives was to retain the core skills and the DNA of the organisation, so we would have a platform that we could regrow again. And I suppose up until 2017 we were in survival mode. We carved out niche markets in the UK, which wasn’t easy as the UK had its own housing crash and Sterling was dramatically weakened.”
To Cygnum’s credit, it retained a focus on innovation and this paid off handsomely when the business won the Sterling Award in 2019, a top architecture award in the UK run by the Institute of British Architects for a social housing project called Goldsmith Street. “It was the only social housing project ever to have won this architecture award and it is still used as an exemplar around the world in terms of how to do social housing in an energy-efficient and sustainable, circular economy way.”
Desmond said that despite the tough years between 2008 and 2017 the company maintained a focus on innovation. “It was a real test of resilience and digging deep as a business. But we are now left with the confidence that whatever comes around the corner, we know that we’ve been through worse.
“We focused heavily on R&D during that period and that is now bearing fruit. I think more than anything, the people who were with us through that period have become a hard core team. Many were paid for three days but in some cases put in seven during those grim times and that kind of thin stands to the business. When you’re running the business through those times and you are in the trenches, it can be a pretty lonely place alright.”
The light of day
The re-emergence of the Irish housing business from 2017 saw Cygnum in the right place at the right time.
“We saw the market re-emerging and we knew that automation was the way forward so we started investing around €7m over three to five years to double the size of the factory here. We brought in a lot of automation, a lot of digitalisation and we have one of the most automated plants of its kind in Europe.
“Every five hours we produce a house from the factory. From our customers’ point of view they can increase their housing output by 40% by going with timber frame.
“From a sustainability perspective, timber is a sustainable resource and you’re looking at 60% less carbon impact compared with standard masonry. That makes an enormous difference considering Ireland is struggling to meet 50% carbon reductions – here is a ready-made, proven solution that can deliver 60% savings.”
While Ireland faces an acute housing crisis and houses can’t get built fast enough, the reality is there is a serious labour shortage on sites. Cygnum has responded by making housing kits that are fully insulated with airtight membranes, helping to speed up the construction process.
Looking to the future, Desmond says Cygnum is razor focused on supporting Ireland’s housing needs and is sticking to its objective of producing 1,350 homes a year.
“Our ongoing R&D programmes are very much centred on the sustainability path that Ireland is on and we’re involving everyone from sales to manufacturing to hone our processes to add value. In five to 10 years’ time I’d see us producing a very different product to what we’re producing today. Sustainability is presenting a bigger challenge, particularly on the masonry side and we are spending a lot of time, energy and money on being prepared for that and being ahead of that curve.”
O’Callaghan adds: “There are a lot of tailwinds behind us at the moment in terms of our business. And that makes us very optimistic and ambitious for the future. Sustainability is finally featuring in everyone’s discussions and that is only going to get bigger and bigger. Timber frame is a sustainable, ready-made and proven solution to this whole challenge. 48% of new housing schemes in Ireland are timber frame. But if you look at Scotland and Scandinavia they are at up to 90% penetration with timber frame. And that’s the kind of trajectory we will see in Ireland over the next three to five years.”
Desmond concludes that being a finalist for the EY Entrepreneur of the Year Awards has been a great validation for the company. Being part of the alumni is a game-changer. “I think the amount of energy we derive from the group is fantastic. It has really given us another turbocharge. When you see the amount of activity between acquisitions, investments and expansions by this group it really is phenomenal. There’s hardly a day that goes by where you don’t see somebody in the paper who you’ve met through this network. It has exceeded our expectations.”
Main image at top: John O’Callaghan, financial director, and John Desmond, managing director, Cygnum