Mihály Varga, founder of KÉSZ Group: "it's ok if we cry in training if we laugh then in the match"

Mihály Varga, founder of KÉSZ Group: "it's ok if we cry in training if we laugh then in the match"

They have been competing for forty years, governments came and went, KÉSZ Group remained. In the opinion of Mihály Varga founder, creditability and knowledge are the most important things - the founder of the company empire intends it as an inheritance - in addition to the property and it was set in stone in the Varga Family's Constitution. In the next episode of our series titled "From system changers to generation changers" we will present how the founder strives to keep together his company built up during four decades.

The year of 2020 hit by epidemic did not go well for anyone, just as for KÉSZ Group, however, it could nevertheless grown on the whole: its consolidated sales revenue exceeded 125 billion forints and one quarter of it came from export or activities performed abroad. The plan to have a greater progress in this year and its bond program will soon become timely. KÉSZ Group works persistently with a 2.4 per cent profit rate that is - according to experts - in the normal range. The company's assets have grown from the 2002 year's 2.5 billion forints to 22.5 billion by 2019. Mihály Varga, the founder has been registered in the strong midfield of the top 100 list of the wealthiest entrepreneurs for twenty years but his business card indicates only Chief Visionary Officer: nowadays he plans and discusses "only" the future, the strategy and the directions rather than buildings.

"To cry in trainings and to laugh in matches, it's good if it turns out that way" - says Mihály Varga who has embarked upon the undertaking from which KÉSZ grew up for almost forty years ago. We attempt to summarize how did he maneuvered in the environment of millions carried in nylon bags in the beginning of the 90s, how he could make profit of cancellation of the 1996 world exhibition, how he and the bishop and also he and the opposition mayor in Szeged respect each other and what does a businessman successful in the construction industry have to do with Bence Máté, the world-famous nature photographer and how can a several ten billion worth company be kept together for at least 300 years by a family constitution.

The million worth works were paid for by one cubic meter of fifty-forint bank notes rolled with canning gums

Mihály Varga was employed by Bácsépszer, a state company in Kecskemét when their economic working committee was established in 1982. At that time EWCs multiplied like mushrooms and their members worked after working hours and distributed the revenues to the last fillér among themselves. He made designs by night and worked as an employee by day and at weekends he performed extra work, he participated in construction works even himself as after graduation he learned and acquired master's examinations in carpentry, metalwork and masonry. Later the Varga group transformed into a small cooperative and when their income was already taxed jointly, the cooperative became his full-time job and then, after the change of regime, Könnyűszerkezet-építő és Szolgáltató Kft. (Light Structure Builder and Service Provider Co. Ltd.), i.e. KÉSZ was established in 1991.

At that time the company had already an accountant whose son still fills an important function in the Group and is an honored colleague of Mr. Varga as a supervisory board member. "Let's tax a lot and then we will earn more" - suggested the chief accountant to Mihály Varga and, in the businessman's opinion, they made a good decision. Of course, acquaintance had to be kept with everyone but Mihály Varga ranked the partners according to an own "scale of ten": he greeted everyone, there were ones with whom he shaked hands and he concluded business with the people in category eight but he never piped down.

The scenes of those times, which seem nowadays surrealistic, could not be avoided. In one case, the roof of a filling station was ordered from the company. It was transported by the Varga group by an IFA truck and then the customer paid 8.5 million forints in fifty forint bank notes rolled with canning gums brought from the loft. "It came to ca. one cubic meter, we took the money to the bank in the luggage rack of my Zastava car" - tells the engineer.

It was the dumping of construction of filling stations, department stores and border crossing points but the environment changed fast. "The contracts consisting of 3-4 pages were replaced by those of 30-60 pages. The customers from Western Europe introduced a new way of thinking and new working culture, so one could develop beside them" - says Mr. Varga while he tells that he could stay straight even during the inflation after the change of regime owing to foreign orders. "The customer came and asked to realize the project from a certain amount of money in marks but the math didn't work out. So I asked for an advance and the customer would have asked for a bank guarantee" - he remembers. Finally they solved the problem so that the advance was deposited in the bank and committed at a high interest, so by the end of the project the surplus money was generated.

The big leap could be in the beginning the world exhibition planned for 1996 jointly with Vienna, for which construction of the pavilions was awarded to the company (Kft.). Although the expo fell into the hole, the company could come out without a loss: they purchased their first manufacturing base in Kecskemét from the amount awarded in the indemnification action. As regards development projects, they continue to apply the principle applied at that time, i.e. that for a purchase above 300 million forints they consider to solve the relevant project in own production but for operation of the machines they established an own rental and leasing company.

In 2006 they transformed into a company limited by shares but the development was put to a stop by the 2008 crisis. The crisis shattered KÉSZ Group as well: They were compelled to depreciate their outstanding debts of 13 billion forints over the years: "Winning of the works at Ferihegy Airport and of the Mercedes factory project got up with a Marshall Aid" - recalls Mr. Varga.

Although in an interview given to HVG in 2018 the businessman emphasized that they fulfilled mostly the orders of private companies. The company won total 4.5 billion forints only the year before in its narrower homeland, Szeged, mostly for the health investments of the University of Szeged in public procurement procedures and participated as a subcontractor in the construction of sport facilities. Besides, they took a firm stand some years ago in Kolozsvár, Moscow, Kiev, Belgrade and Germany, plan to perform marketing activities in Scandinavian countries and try their wings in catering trade as well. The Group is operating in three places of business. In the beginning their headquarters were in Szeged, then they established an industrial and innovation park in Kecskemét and in the meanwhile they constructed their headquarters in the capital. In addition, they operate hotels in Kecskemét, Hódmezővásárhely and Szeged where the founder is living now with his family.

The warmth of home, Szeged

The Varga family purchased a complex of buildings under monument production not far from their home where they are hosts and operate a hotel. We know that they consult with the town what reconstruction works are authorized by the municipality in the heart of the city, in public areas, but Mr. Varga already plans to reconstruct the whole street for the people living in Szeged.

Another project specifically related to Szeged, which became famous not only in the town near Tisza riverside, is lifting out of the hard-luck steamship called "Szőke Tisza". For the time being, the businessman did not disclose details about his plans with the corroding industrial memory. It is sure that the projects will be accompanied also by Máté Bence, the world-famous nature photographer but it is not out of question either that they plan a long-term cooperation based on reciprocity.

KÉSZ Group is just preparing for its sustainability program and, to start it, it organized a joint interactive exhibition with Bence Máté to call the attention to this theme in an understandable, slightly self-critical way. We wish to excite people's interest by our sustainability program but we would like to encourage also our own industry to stay with us on the way towards a sustainable future" - declared Mr. Varga who allied with Bence Máté to generate innovative ideas and solutions.

Serious inheritance

Another undertaking of the founder is to hold together the property gathered over decades, which has already overgrown the some cubic meters of fifty-forint bank notes rolled. After studying international examples, the billionaire entrusted the empire to an asset management company owned by a foundation that will hinder segmentation of the property.

The Varga Family Constitution was made to care about the family, however, in a sustainable way. The beneficiaries receive an ordinary allowance and the first apartment is given to the family members in a practical, liveable form, without luxurious things. The support is more generous if it is for education, training and it is exceptional if it aims at self-realization or undertaking.

The company empire is open even for family members if they walk up the donkey ladder. It doesn't strictly mean that the aspirant should start from beside the lathe but strict conditions must be met.

Notwithstanding that the Varga Family Constitution ensures a civil standard of living to family members, it stipulates both on theoretic and practical levels that fragmentation of the company's property should be prevented, should be increased and the aim is not only to achieve material goods but also to leave an economic footprint. Besides, business self-realization is also guaranteed in the document. The values to be followed recorded in the Constitution are forgiveness, cooperation and social sensitivity. The property is managed strictly by the asset management company and they are formally not the owners but the beneficiaries of it. The beneficiary status may be terminated in an extreme case.

As an inheritance, in addition to the property, the followers received the advice from the founder that they should always play over the table and greet everyone on the way up the ladder because when they come down, they will meet everyone. 2

Pictures: hvg.hu