Brexit Round Up
The diagnosis of the Brexit hangover continues and will do for a long time yet. There continues to be more questions than answers.
Quotes in the Business Post include:
David McWilliams: “This is our golden opportunity”
Michael Smurfit: “this is a disaster for Ireland and Britain”; “Share prices will recover a lot quicker than the currency. Sterling will take a lot longer to settle down.”; “Ireland will not be allowed do a special deal with Britain.”
Michael McDowell: “Brexit can still be averted”
John Bruton: “In the wake of the British vote to leave the EU, Ireland must look out for opportunities but prepare for the worst.”; “the EU, as a whole, can learn from the British vote, and promote the reform to apply these lessons.”
Dan O’Brien in the Sunday Indo comments on “Learning to Live With Brexit” in his piece today. He comments on the meltdown of existing UK leadership, possibility of other in/out referenda and the slowdown of business investment. He quotes Mark Carney, the governor of the Bank of England, “the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer”.
Gavin Daly covers for Brian Carey this week in the Sunday Times. Dr Savvas Savouri, chief economist at Toscafund Asset Management in London and Brexiteer campaigner, is very optimistic on UK economic prospects post Brexit; he thinks increased competitiveness will drive trade with India, China and the emerging markets and will more than compensate for lost trade in Europe. He also predicts Ireland will leave the EU as well.
The impact of every 5% sterling depreciation on Irish GDP has been estimated as a 1% reduction over two years, according Cormac Lucey in the Sunday Times.
Positives
Some funds have begun the process of domiciling themselves in Ireland. The IDA are bullish on getting a good few firms to move. Britain received €35bn, 1/3rd of all FDI into Europe, last year.
The ISEQ index of Irish shares only posted a loss of 2.18% for the week, closing at 5,749.96. Bank of Ireland, Dalata and Kingspan were the biggest losers for the week, losing 34.2%, 26.1% and 23.9% respectively.
FTSE 100 is just above where it was before the vote in sterling terms. (Although some big losers within – RBS are down 55% from last year’s peak).
Negatives
Sterling’s continued weakness @84p/€1.19 (lowest since 1980s) is hurting exports.
The Euro stocks are down 6%. (Dalata and Kingspan are down 25%, BOI hard hit also)
Expansion plans for international companies have been halted.
Farmers grants under threat (Britain were a €1.27bn net contributor to the CAP programme).
Probability of IPOs such as AIB greatly reduced.
Any influx of FDI into funds will bring along with it increases to contingent liabilities on the country’s balance sheet. (If Depfa went down in different circumstances it could have cost us much more than Anglo’s failure)
Britain has been downgraded from AAA to AA (S&P and Fitch)
Question Marks
When will Article 50 be invoked?
How long will it take to disentangle?
Will Britain be excluded or get a Norway-style deal from EU?
Checkpoints along northern border a “probability” according to Martin McGuinness.
What about the €2.4bn due on structural supports for the North to support the Peace Process?
Will we be victims of Europe making an example of the UK?
Sunday Business Post
John Malone’s Liberty Global is said to be looking at buying UTV Ireland from ITV and merging with TV3.
Carlyle Cardinal Ireland (CCI) partnered with Carlyle Global Financial Services Partners (CGFSP) to acquire the AA Ireland from the AA plc (AA:LSE) for €156.6 million, including consideration for substantial cash left on balance sheet. John Dolan of Cardinal and Peter Garvey of Carlyle completed the deal and will manage the investment. This is CCI’s seventh investment from its current fund dedicated to large Irish businesses. CCI has committed to investing substantially in the business over the coming year, including a technology upgrade of its roadside assistance services and expansion of its motor insurance business. AA Ireland is also planning a big push to expand its motor insurance business and grow its current base of 185k policy holders.
Nick Corcoran, founder of Cardinal, writes in the Business Post and is very bullish on Ireland’s prospects.
John Halligan, Junior Jobs Minister (Minister of State for training and skills) and part of the Independent Alliance, has called for the minimum wage to be increased by 25% from €9.15 to €11.50 over a two year period. The Government has committed on its programme to increase to €10.50 over five years. The Low Pay Commission is due to make a recommendation on the minimum wage later this month. He has been rowing in a different direction to the Government on water charges and abortion and he is definitely not in harmony with the rest of the Government, which is likely to cause a problem down the line.
The state has collected nearly €1/4 billion more taxes than in the equivalent five months last year from tobacco companies as they stock up in advance of the introduction of plain packaging.
Gavin O’Reilly has stepped down as head of marketing for social media company StarClub to focus on his executive directorship of Bayard Capital, headed by his brother Cameron.
Tony O’Reilly Jnr is interviewed in the Business Post. He has got another life with Providence Resources and the money raised is effectively a bet on finding oil in one of two prospects in the Porcupine Basin off the west coast of Ireland. He acknowledges that it was lucky to complete its funding pre-Brexit. O’Reilly will also up his stake in the company according to the Sunday Indo.
There is a page dedicated to the Paul Kelly Console charity and the abuse and greed of some leaders of charities.
“Namaleaks”, a secure information-leaking website being set up by TD Mick Wallace and some key Edward Snowden allies, is to launch within two weeks, a source familiar with its plans said.”
“Internal Central Bank emails reveal that Anglo Irish Bank said the Financial Regulator knew about the €7bn fraudulent transaction.”
Róisín Burke talks to entrepreneurs on the ground in Galway, Mayo, Sligo and Donegal.
Newstalk is profiled in the Business Post.
BWG have consolidated its Dundalk and Carrickmacross Value Centres wholesalers into one unit in Dundalk at a cost of €5m.
Very interestingly, Mazars are running a Mittelstand Business School for its business advisors. The Mittelstand is the lifeblood of the German economy and is essentially made up of the vibrant SME sector.
There is an agribusiness special in the Business Post. It is also calling for entrants for its Agribusiness Awards.
According to Róisín Burke, the Weston family have tasked PWC with preparing a planning strategy for Brown Thomas and Arnotts.
Sunday Independent
Today’s front page has the results of the Millward Brown opinion poll. The support for the parties is as follows:
– Fine Gael: 30% (+4%)
– Fianna Fail: 26% (+2%)
– Sinn Fein: 20% (+6%)
– Labour: 7% (unchanged)
– Independents/others: 14% (-13%)
The poll also found that 25% think that Enda Kenny should remain as Taoiseach, while 56% believe he should resign.
ABP’s pet-food division, C&D Foods, has bought French pet-food manufacturer Continentale Nutrition out of bankruptcy for an undisclosed sum. Continentale has revenues of €100m and employs 358 people. By comparison, C&D has staff of 1,100 and annual sales of €350m. This was C&D’s second attempt to buy Continentale Nutrition. C&D’s current managing director, Philip Reynolds, states his displeasure that it did not go through the first time.
An association of credit unions has called for an overhaul of the Central Bank’s mortgage lending rules to reflect whether or not borrowers have equity in a home. According to the Sunday Business Post, the IMF has called for a tweak to the Central Bank’s mortgage limits from a loan-to-income limit to a total debt-to-income limit. This makes sense and will need the central debt register to be live which is in play. The Central Bank will publish a review in November, but no material changes are expected.
A court has ruled in favour of developer Greg Kavanagh in his row with Johnny Ronan over leases at a property in Dublin’s docklands. Kavanagh is seeking to acquire Ronan’s freehold interests in the strips in order to drive forward a commercial and residential development at the site. The Sunday Business Post reports that New Gen is expecting another fight with residents of Mount Merrion where it has applied to build 63 houses and apartments at the former Oatlands Monastery site.
EY, Grant Thornton and New York management consulting group Oliver Wyman have been shortlisted to carry out part of the Central Bank’s investigation of the tracker mortgages saga. It follows from revelations at Permanent TSB that thousands of its customers who were entitled to trackers had not been offered them, pushing up their cost of borrowing.
Mick Wallace, Independent TD, has said the bidding process for NAMA’s sale of its €5.6bn Northern Ireland loan book to US private-equity giant Cerberus was “horrifically uncompetitive”. Cerberus secured the loan portfolio, paying £1.241bn, just £1m above the reserve price.
Two sites in Castleblayney, Co Monaghan, for which Zurich bank extended a loan of €32m in 2007, have been sold for a fraction of that. The sites were due to be auctioned at the RDS at a reserve price of between c. €390k and €510k.
The Department of Jobs has lobbied Michael Noonan to introduce a tax-advantaged share option scheme for SMEs. The new scheme would include no income tax on grant or exercise of share options and the application of a favourable capital gains tax rate on the disposal of shares.
BNRG, an Irish solar energy group, has committed to developing $200m worth of solar assets in the US. The company has acquired rights from local developers in Oregon and New England. Construction is set to begin next year.
Dublin Port Company, the state-owned company that operates Dublin Port, is looking to acquire 40 hectares of motorway-connected land to support future growth. DPC has paid c.€90m in dividends to the State since 2007 and is set to pay a €10.9m dividend this year. DPC is targeting an average annual growth of 3.3% over the 30 years between 2010 and 2040.
Tetrarch Capital has applied for planning permission to build a 159-unit aparthotel off Pearse Street in Dublin. Tetrarch plans to invest €25m in the development and has earmarked completion for 2018. Michael McElligott, the company’s chief executive, said the Dublin aparthotel market is “very undersupplied”.
Janet McCollum, CEO of Moy Park, is interviewed in today’s paper.
Sarah McCabe writes on how Brexit could reverse the tide of young people leaving Ireland.
Dan White covers the implications of Brexit for the sale of AIB and the European banking crisis. He believes the collapse in bank share prices means that a sale of the state’s shareholding is off the agenda for the foreseeable future.
Anya Cummins, a partner in Corporate Finance at Deloitte, has a great piece on the outlook of M&A activity in the wake of Brexit. She writes on uncertainty driving lower activity overall, but opportunities should emerge for both buyers and sellers in the Irish market.
Ana Boata, European economist at Euler Hermes, comments on the “painful economic dislocation” of Ireland and the UK.
Richard Curran covers EU negotiations with the UK and the ongoing rental crisis.
Sunday Times
DCC, Grafton Group, UDG Healthcare and Greencore are expected to return to the ISEQ as a result of Brexit and obtain a secondary listing to protect access to their European investors.
Seamus Mulligan, the low profile former Elan executive who went on to found Azur Pharma, has emerged as a 4.25% shareholder in Mainstay Medical, a Dublin-listed developer of medical implants to treat back pain. Mulligan made his money merging Azur with NASDAQ-listed Jazz Pharmaceuticals in 2011. He has cashed in about €180m of Jazz shares and still has more than 1.1m worth of shares trading at $141 today.
Merrion Pharmaceuticals, a once promising drug development company which developed a system for delivering injectable drugs in tablet form, sold off its intellectual property to Novo Nordisk for $13m and its Citywest property for €2.7m. Declan Ryan, son of the late founder of Ryanair, was a key investor.
Fitbit, a US fitness tracker, is setting up a European base in Dublin and plans to hire c.50 people. Fitbit shares have fallen more than 60% since its flotation in June 2015 as it faces more stiff competition from Apple Watch. Looks like another good win by the IDA.
Dunnes Stores threatened to sue an architect who was appointed as an independent expert to resolve a dispute over the delayed Point Village development in Dublin. Under a development agreement, Dunnes was to pay €31m towards the scheme, including €3m when the Point Village square was completed. Scott Walker Tallon signed off on the scheme in 2013, but Dunnes were not satisfied the terms of the agreement had been met. Dunnes are taking legal action against the Receivers of the development, Grant Thornton. The Receivers are also in legal action with Dunnes, seeking €15m that they claim is due for the fit-out of the Point Village centre.
Netwatch, a high tech CCTV security company, has raised €19.5m in equity and debt to finance US expansion. The Carlow-based company has raised c.€9m from the BDO Development Capital Fund, while Bank of Ireland is providing the c.€10m debt finance. Netwatch was founded in 2003 by David Walsh and Niall Kelly, and employs about 400 people in Ireland, the UK and US. Revenues were €10m in 2014 and the company aims to double in size in three years.
Finance Ireland, a non-bank lender headed by Billy Kane, former head of Irish Permanent, has hired Goodbody Corporate Finance to raise €25m. Finance Ireland is also exploring a possible disposal of Everyday Finance, its loan recovery and management business which has c.€500m of loans under management. The business is switching its focus from management of loan books to becoming the largest non-bank lender to the SME and agri sectors.
TV3 has commissioned another series of Red Rock, the Garda soap, which will cost €7m. The soap has sold well internationally, doing deals with Amazon Prime and the BBC.
Public service union expectations for faster restoration of pay and pension cuts may be pushed out by the UK’s Brexit vote, according to the Department of Public Expenditure. Minister Pascal Donohoe pushed through a renewal of the emergency austerity financial regulations. The move was a direct response to a letter received from ICTU calling for an end to the emergency legislation.
The Chartered Accountants Regulatory Board has been fined €15k and formally censured for failing to investigate fully concerns raised about PWC’s involvement in a health check of the Irish banks during the financial crisis.
The Brexit vote is not good news for the Dalata hotel group. A slowdown is the UK will impact on its six UK-based hotels, while a reduction in UK travellers to Ireland on the back of a weakening sterling will hit the Irish trade. Shares in Dalata, which has 31 hotels in the Republic, are down 27% since the referendum result. Stockbroker Davy reduced its earnings forecasts for Dalata by 5.1% for 2017 and 5.6% for 2018, based on its UK exposure.
DCNS, the French majority shareholder in Irish tidal energy company OpenHydro, expects to generate €1bn in revenues from its marine tidal energy business by 2025. The majority of the projected sales are to come from OpenHydro.
Ikon Talent, a Dublin sports management agency which is part-owned by former Rugby player Brian O’Driscoll and footballer Damien Duff, has been valued at €1m following a shareholder restructure.
Patrick Kennedy, the deputy chairman of Bank Of Ireland, has bought 2m BOI shares at just under 19c following the Brexit slump, when BOI shares fell 40%. Richie Boucher, chief executive, and Archie Kane, chairman, also bought shares.
Media Group News Corp has agreed to buy APN News & Media’s Australian regional newspaper business for €24.6m.
Details of Irish recipients of certain tax reliefs will be published on an EU website from 1st July. The schemes include capital gains entrepreneurs’ relief for amounts over €500k and a number of tax reliefs for farmers.
Accuris Networks, a Dublin telecoms software developer, has landed €2.25m in follow-on funding from a number of existing investors. The round follows on from a €10.25m funding round in 2014, led by China Ireland Technology Growth Capital Fund and Ulster Bank Diageo Venture Fund.
Nick Webb’s Inside Track has a good spread this week:
– London banks’ concerns over their EU “passport” and ability to service the EU single market could mean the likes of Morgan Stanley, JP Morgan and Goldman Sachs will be looking for new bases and Dublin is a serious option.
– The great and the good were at the Ireland Funds event in Trinity last week. Attendees included Wall Street legend Gene McQuade, former AXA chief executive Kip Condron, Brandes investment president Oilver Murray, aviation entrepreneur Donal Boylan, property magnate Stanley Quek and CHQ owner Neville Isdell.
– Eoin Reddan, who has recently retired from Rugby, is joining Domhnall Slattery’s aviation leasing group Avalon in September.
– Cerberus has appointed a Receiver to Netterville Castle in Knowth, Co Meath, birthplace of Fenian poet John Boyle O’Reilly.
Hugh McGinley of McGinely Construction has been injuncted by the High Court to stop interfering with the work of a Receiver to one of his apartment schemes, amid claims that tenants and the Receivers staff were threatened.
Niall Brady piece covers the potential flight of London bankers to Dublin.
The Sunday Times chief executive interview is with Bill Doherty of Cool Medical, a US medical device manufacturer based in Limerick.
Sandra O’Connell’s “How I made it” piece is with Bernie Butler whose business Good4U has aimed to take sprouted seeds out of the heath store and into the supermarket. Good4U has annual turnover of €4.3m and 50 staff.
Other news
In other news during the week, Irish IT consulting and managed services firm Arkphire has acquired networking solutions provider Bootstrap for an undisclosed sum.
$2.08 trillion – Amount wiped off global equity markets on Friday after Britain voted to leave the EU. @IrishTimesBiz
€35.7bn – The value of exports to the UK last year. @examinerbiz
40% – Percentage of indigenous Irish company exports destined for the UK. @IndoBusiness.
12% – Sterling’s fall against the dollar since UK polls closed last Thursday. @IrishTimesBiz
40% – Percentage of FDI projects in Northern Ireland that have been funded by the EU, in the past five years. @IrishTimesBiz
6.5% – Loss of competitiveness in Irish exports since Thursday’s Brexit vote. @examinerbiz
€10bn – Amount wiped off the value of Irish shares yesterday. @examinerbiz
8.1% – The year-on-year rise in retail sales in May, according to the CSO. @examinerbiz
0.5% – The expected hit to Irish economic growth in wake of Brexit vote, according to Finance Minister Michael Noonan. @IrishTimesBiz
€5.6bn – Amount that Ireland has raised from selling bonds so far this year. @IrishTimesBiz
6.9% – The rise in residential property prices in the year to May, according to the Central Statistics Office. @IrishTimesBiz
3.8% – The latest forecast for Irish GDP growth, according to Cantor Fitzgerald, down from 4.4% originally. @Indobusiness
AA – S&Ps new rating for the EU, down from AA+. @IndoBusiness