Sunday Business Post
Brexit
In light of Michael Noonan’s downward revision of GDP growth from 4.3% to 3.4%, Ian Guider reflects on the Irish economy and whether or not Brexit can put a halt to our current economic bull run.
The positives he mentions are: we currently have the fastest growing GDP rate in Europe, unemployment has halved, booming retail sector, record low-cost borrowing rates and more money than ever flowing in from corporate taxes (up 9.2% for first six months compared to last year).
The negatives are: exports (including tourism) will be under pressure with currency. A UK tax rate of 15% will put us under pressure. The banking sector is still not fully functional. Confidence may take a hit on back of Brexit. The NTMA estimate that for every 1 % appreciation in the euro, it shaves 0.5% of exports. Sterling touched 70p last year and is at 85.3p now, having touched 86p during the week. Spare a thought for the Irish companies whose main trade is from the UK.
The immediate worry for us is undoubtedly the fall in sterling and then our next biggest worry is the trade deal we do and are allowed to do with our neighbours.
David McWilliams talks of the gulf between rich and poor and how capitalism has left the former workers in industrial heartlands disenfranchised and these are the people who voted for the UK to leave the EU, also noting that there are similar groups in other countries who are going to hit the polls with angry faces and the Brexit vote could be the start of a global theme.
Stephen Kinsella has an excellent article based on Dicken’s quote from A Tale of Two Cities and he captures the confusion that prevails in the UK. The jist of his article goes as follows:
“It was the best of times” – FTSE 100 is up. Exporters in UK flying.
“It was the worst of times” – FTSE 250 down. Importers and property stocks in trouble. 800k job cuts.
“It was the age of wisdom” – Mark Carney seems to be a rock in the absence of political leadership
“It was the age of foolishness” – Johnson, Gove, Cameron and Farage have all left the stage.
It goes on and is worth reading.
Main paper
The Business Post break news about trauma care being axed from nine A&E services around the country which will be politically controversial.
There is lots written across the board on Enda Kenny’s horrendous week and speculation about when he will step down. Pat Rabitte writes that, “This government can fold up its tent now if independents keep sticking to their opposition causes”.
The disgraced charity boss Paul Kelly is still in the news and is likely to be for the foreseeable future.
Liberty Global are said to be anxious to try and get a deal closed to acquire UTV Ireland from ITV. In any case, it will only move as fast as it can get approval required given it is a media merger. UTV Ireland is reported as losing €20m p.a. in the Sunday Times.
A Dutch hedge fund manager Bram Cornelisse has increased his stake in Independent News and Media to 4.4%. The shares are down 20% this year.
Steorn, the physics-defying free-energy company which raised €23m from investors, is out of cash and will have to raise significant cash and dilute existing shareholders if it is to survive. The company admitted in a letter to shareholders that it “has again failed to meet the expectations that we have set with investors and we have, again, failed, to effectively communicate with our investors.”
“Darktrace, a provider of cyber threat defence software backed by Irish technology entrepreneur Mike Lynch of Invoke Capital, has raised $65 million in its latest funding round. The company is now valued at more than $400m, Lynch told The Sunday Business Post.”
There is an article on how trophy homes in South Dublin are rising in price.
Applegreen has encountered significant planning problems with its proposed giant service station beside the Perpetual Motion Ball on the Naas exit of the M7.
“FoodCloud, an Irish social enterprise that puts businesses that have surplus food in contact with charities, is set to expand its operations in Britain.”
Jon Moulton has emerged as a backer for the Simon Phelan (a former Better Capital Ireland executive) led HomeTree which is a one-stop shop for homeowners to purchase energy efficient products to help reduce their utility bill.
Arkphire, the IT consulting and managed services firm who recently acquired Bootstrap, said the deal will boost their revenues by €4m. Arkphire reported revenues of €50m for the year ending June.
Belfast Company Novosco recently acquired a British IT security solutions and managed services firm with just under €5m in revenues.
Roisin Burke’s Word on the Street goes as follows: “Is Today FM for sale? Sources say it could be, in an off-market offering.”
Burke also established from VideoDoc’s founder Mary O’Brien that they are close to landing investment from big hitters that will help the business go global.
Sunday Independent
Today’s cover piece is on a potential leadership vote in Fine Gael. A handful of TDs have held talks over whether they will table motions on Enda Kenny’s leadership and possibly force him into an early departure.
“Property developer Deirdre Foley has claimed that inspectors appointed by the Workplace Relations Commission to investigate the redundancy of 460 workers at Clerys department store, forwarded material from her laptop “while trying to erase the evidence of doing so”.” D2 Private co-founder Foley “has also claimed that the WRC’s inspectors accessed legally privileged (confidential) communications relating to the controversial purchase of the iconic Dublin store”.
HMV is set to launch its own online video-streaming service in a move to compete directly with Netflix. £5.5m is to be invested in this new offering. Paul McGowan, chief executive of HMV’s owner Hilco Capital, said the launch is earmarked for the fourth quarter of this year or possibly January next year.
David Atkins, CEO of Hammerson, predicts Dublin will be a “net winner” from the UK’s decision to vote in favour of Brexit.
Stormont’s finance watchdog will be briefed by a team from the UK’s National Crime Agency about the ongoing investigation into the sale of Nama’s Project Eagle loan book. The loan book was sold to Cerberus, a US investment fund, and two businessmen have already been arrested in connection with the sale.
Jon Florsheim, the consumer division managing director at Eir, has stated the company’s commitment to bundling broadband, TV and phone services, hoping that consumers will spend more. Former RTE managing director of television, Glen Killane, was announced during the week as taking over Eir’s newly created position of managing director of Eir TV and Sport.
Seamus Clancy, chief executive of recycling programme Repak, has said pubs and hotels rank among the worst when it comes to recycling. Repak estimates between 2,000 and 3,000 companies are not complying with packaging rules. It collected €25.53m from its members last year.
Aminex, an Irish oil and gas explorer, plans to make acquisitions after a deal with the wealthy Omani Al-Zubair family. Al-Zubairs’ vehicle Eclipse Investments will put £12.8m into the company, while a separate share placing will raise £4.1m. Existing shareholders will have the opportunity to take part in an open offer to raise up to £2.6m. The shares will be issued via Shore Capital and Davy Stockbrokers.
Ireland could receive intellectual property-related work worth millions following Brexit, according to Dr Christina Gates of IP law firm Tomkins.
Nama’s disposal of Project Tolka, a loan portfolio linked to property developers and investors Paddy Kelly, John Flynn and the Dublin-based McCormack family with a value of €1.5bn, is believed to be at an advanced stage. The disposal has been complicated by Nama’s wish to hold on to the residential assets in the portfolio to help reach its target of 20,000 new homes by 2020.
An Post is in talks with postal services from the UK, Australia, Canada and Portugal about licensing a software platform it has developed, according to Liam Sheehan An Post’s sales and marketing director. The platform, called Admailer 2.0, helps companies target potential customers with direct mailshots that have been created in the cloud. The company made €8.6m profit last year on turnover of €826.1m, but had losses in its mail division of €32m.
Sisk Healthcare, the healthcare arm of Sisk Group, is seeking to renegotiate its banking facilities to avail of the current low-interest rate environment as it seeks out new acquisitions. Sisk Healthcare has an annual turnover of c.€100m. Sisk Group’s building business reported a 25% rise in pre-tax profits for 2015, bringing the figure to €13.7m. Stephen Bowcott, the group’s managing director, said the company is on track to achieve turnover of c.€650m in 2016.
Shareholders at Providence Resources have been critical of the current CEO, Tony O’Reilly Jr., and his ability to drive the company forward. Shareholders are to vote on a plan to raise €62m via a share placing and up to €4.84m via an open offer this Thursday.
Debenhams Retail Holdings Limited is facing strong opposition from several of its landlords to the repudiation of its leases. Landlords claim the UK parent, Debenhams PLC, “contrived” to place it into examinership.
Dan O’Brien covers globalisation in today’s piece. He comments on how it is being blamed in the current shift away from “establishment” parties and policies, with Brexit being the latest example. He points out that globalisation has been hugely beneficial for Ireland and has been one of the biggest contributors in improving the standard of living here. O’Brien includes a couple of interesting statistics: Ireland only has 1% of Europe’s population, but received 20% of Europe’s FDI inflows in 2015, according to a recent United Nations Conference on Trade and Development report (albeit these figures are somewhat inflated due to “inversion” deals); meanwhile, employment in multinationals which are IDA clients increased by more than 7% last year.
Nama has refused to comment on claims it hiked interest rates on loans given to Nama-supported developers after a complaint had been made against it to the EU commission. The complaint was made by developers Michael O’Flynn, Paddy McKillen, David Daly, New Generation Homes CEO Patrick Crean and MKN group director Brian McKeown. Nama-supported developers received an interest rate of c.6% versus the 14%-15% “non-Nama-supported developers” could expect.
The ISEQ lost almost 3% this week. Malin, Smurfit Kappa and Ryanair are down 9%, 6.3% and 5.2%, respectively, while Dalata and Kingspan recovered 3.9% and 2.7%.
This week’s interview is with Mark Little, former RTE correspondent and the new managing director of Twitter’s Irish operations.
Porsche is investing about €1bn at its headquarters in Zuffenhausen and creating more than 1,000 jobs. First-quarter profits at Porsche are up 17% to €896m with operating margins of 16.7%.
Qiu Dongrong, the fund manager at HSBC Jintrust Fund Management, has put half of his cash stockpile into equities, Qiu’s fund is down 6.2% this year.
This week’s focus is on various Irish charities and the compensation paid to their chief executives.
There is a great piece on how the devaluation of Sterling will impact the various sectors of the Irish economy.
Dearbhail McDonald writes on the scandal at suicide prevention charity Console.
Sunday Times
The energy minister Denis Naughten will warn the EU that Ireland’s all-island electricity market risks being thrown into chaos by the Brexit vote. Ireland is in effect currently part of the UK energy market and is subject to fluctuations in the UK. An ESRI report has stated the Brexit vote has strengthened the case for Ireland bypassing the UK energy market by building an interconnector with France.
Brian Carey is back this week and reminds us of what happened the last time the UK had a major European exit: when they left the ERM in 1992, interest rates rose 3% to 11.5%, the punt at the time came under attack from speculators and was devalued by 10% the following January. It is unlikely there will be interest rate rises this time and there will definitely be no devaluation to assist exporters.
Joe O’Reilly, the Castlethorn Homes, Dundrum Town Centre and Chartered Land developer, has made major progress on all of his loans. Dundrum is sold to Hammerson; Chartered Land will become development manager for Dublin Centre, a five-acre site near O’Connell Street; Castlethorn is building out sites for Lonestar who bought Ulster Bank’s Castlethorn loans and is also working with Chartered Land on the site of the former Berkeley Court in Ballsbridge. Joe O’Reilly’s deal with Hammerson who bought O’Reilly’s loans from NAMA includes an option for him to buy 50% of the five-acre site across from the Gresham which O’Reilly spent 20 years assembling.
A €90m expansion of Ashford Studios in Co. Wicklow has been stalled after Wicklow County Council deemed the planning application to be inadequate and lacked essential information.
The government’s proposed increase in the inheritance tax threshold from €280k-€500k for children inheriting from their parents will only benefit c.2k people per annum, mostly in Dublin, and will cost the exchequer €75m per year.
Cormac Lucey concludes that allowing the pound to drop sharply against other currencies is a low cost way for Britain to adjust to weaker economic output.
Atlas Investments, the company charged with selling the legacy assets of the former NTR, has disposed of a 50% stake in Celtic Anglian Water for €18.5m.
The founders of Octagon films, one of the biggest names in the Irish film and TV sector, are seeking to liquidate the company, citing irreconcilable differences with a German investor that owns 49% of the business.
Cairn Homes is facing a High Court action from Bartholomew O’Neill, a Co. Kerry developer, who is attempting to block the listed builder’s application to appoint receivers on some of his assets.
KBC Bank has appointed Stephen Tenant and Nicholas O’Dwyer of Grant Thornton over Westpoint shopping and apartment development in Westport, which was developed by former Galway hurler Padraic Connolly.
WLR Cardinal, a real estate fund backed by US Investor Wilbur Ross, Cardinal Capital and the state, has agreed to refinance property assets connected to Ronan O’Caoimh, the chief executive of Trinity Biotech. The fund is backing Darnick, a firm controlled by O’Caoimh’s children, in buying property loans from Deutsche Bank. The assets include Shanowen Square Student Residence in Santry.
Niall Phelan, chief executive of Rye River Brewing Company, who are behind the highly successful and innovative McGargles beer brand, has just agreed a new financing deal with Pat Walsh’s Bluebay Ireland. The deal will refinance existing Ulster Bank loans, as well as provide development capital for the fast-growing business.
Aurivo, the West of Ireland dairy co-op, has sold its 67% stake in one of the country’s biggest timber mills, EC, based in Corr na Mona, Co. Galway, for c.€4m. The deal is reported as an MBO backed by Bank of Ireland.
Novaerus, a clean air technology company backed by the Irish entrepreneur Bill McCabe, has acquired a US rival in a share deal worth $1.75m.
Eir Sports, the rebranded Setanta Sports, is paying €7m-€8m for the rights to the 2019 Rugby World Cup and is lining up a bid for GAA broadcast rights for the 2017-20 period which are currently being sold. The GAA rights, which could cost about €15m, are held by RTE and Sky for 2014-17. Eir took over Setanta earlier this year in a deal believed to be worth €20m, Mickey O’Rourke, co-founder of Setanta, has committed to Eir for two years.
Less than 10% of mortgage customers affected by a €40m overcharging scandal at PTSB have appealed offers received under a redress scheme ordered by the Central Bank. Redress began last summer after the Central Bank launched an investigation against PTSB when it emerged that 1,372 customers had been wrongly denied low-cost tracker mortgages after fixing their loan rates temporarily.
Urban Picnic, a Dublin food business that supplies the catering at Facebook’s European headquarters in the capital, made almost €1.3m profit last year.
Low earners pay less tax in Ireland than any other country in Europe, according to PublicPolicy .ie. It found that as an example, somebody working and living in Denmark would pay almost €4,700 more in tax and social insurance contributions.
USIT, a student travel group, reported operating profits of €732k to October 2014, a fall of almost 38% on the previous year. USIT is owned by Neil O’Leary, Michael Tunney and David Andrews.
Nick Webb’s Inside track covers an ensemble of stories:
– Alan Foy’s cloud communications company Blueface has put the brakes on a planned IPO on the London Stock Exchange following the Brexit result.
– Tullow Oil chief executive Aidan Heavey has emerged as one of Michael Gove’s (the Brexit leave campaigner) biggest donors. It’s ironic the Brexit fallout has knocked 25% off the share price.
– Hibernia REIT chairman Danny Kitchen also took a hit on Brexit. He bought 61k shares in LXB Retail Properties group days before the vote, which are now down 20%.
– Investec is believed to have run the rule over Goodbody, which is 51% owned by Fexco and 49% by Roy Barrett, staff and management. Fexco bought Goodbody from AIB for €24m in 2010.
Niall Brady’s business focus covers George Osborne’s plan to secure multinational investment post-Brexit with a sub-15% corporation tax rate.
The business interview this week is with Declan O’Neill, chief executive of telecoms infrastructure business Obelisk. The company was founded in 1996, with its owners seeing potential to work on 30 mobile towers; 20 years on, the company has delivered about 2k of the country’s 5k towers. O’Neill has a good quote, describing the growth as being down to “selling shovels in a gold rush”.
Olivah Sha has an excellent piece on the investment funds and London and UK real estate market.
Small firms’ representatives and chief executives voice their Brexit concerns, including Padraig McEnaeaney founder of Celtic Pure, who conducts 10% of his business in NI and had planned €6m plant expansion to partially support UK expansion. Rory O’Connor, founder of Wexford-based Scurri, a supplier of software to e-commerce agents, is also taking stock as 95% of his business in the UK. Mark Fielding of ISME reminds everybody the UK market hasn’t closed, but got more uncertain and companies should now explore other markets.
Sandra O’Connell’s ‘How I Made it’ piece is with Mary Walsh, founder of Ire-Wel Pallets. She left AIB bank in 1990 after 14 years to set up a pallet business as a complimentary business. There were 80 pallet makers in Ireland at the time; now there are just 4 and Ire-Wel have about 50% market share.
15% – The British corporate tax rate proposed by British Chancellor George Osborne. @IndoBusiness
10.2% – The year-on-year rise in house prices, outside of Dublin, in the year to June. @IrishTimesBiz
12% – The amount insolvencies across Ireland have fallen, when compared with the first half of 2015. @IrishTimesBiz
3.4% – Amount by which Irish tax receipts are ahead by for the year-to-date, according to the latest exchequer returns. @IrishTimesBiz
4.5% – The amount by which the IMF warns the UK economy could be smaller by 2019 as a result of Brexit vote. @IndoBusiness
2.5% – The year-on-year growth in Irish grocery sales in the 12 weeks to June 19th. Source: @examinerbiz
45% – The percentage by which Irish credit union loan books have shrunk in the last 8 years. @IrishTimesBiz
€4.9bn – Amount collected by the Irish state in environmental taxes last year, up 5.8% on 2014. @IndoBusiness
7.8% – The unemployment rate for June, Its lowest level in nearly eight years. @examinerbiz
41% – Percentage of Irish food and drink exports that go to the UK, representing a value of €4.4bn. @IndoBusiness @Bordbia
9,100 – Number of jobs created in the first half of 2016 by the IDA. @examinerbiz
7th – Ireland ranked 7th out of 74 in the latest BDO International Business Compass report, ranked by capacity for innovation. @BDOIreland
7.9% – The percentage of less jobs today when compared with before the financial crisis, according to the OECD. @IrishTimesBiz
0.2% – The percentage of GDP Spain and Portugal could be fined by the EU for breaching new budget rules. @IndoBusiness
0.1% – 0.3% -The percentage of GDP by which public healthcare spending has exceeded the budget in the past few years. @examinerbiz