Brendan Drumm, the former HSE executive, reminds us that we are considered one of the highest spending countries in the OECD on health and that throwing more money at the system, as is the current suggestion, will not solve our escalating health care problems. Only three countries in Europe spend more on health than Ireland per head of population.
The government Help-to-Buy scheme, whereby buyers get up to €20k of a tax rebate, is now expected to be wound down in an orderly fashion. Consequently, there has been a surge in applicants recently from 4,400 in March to 7,275 now. The reason it is being wound down is that it is said to be having an inflationary effect on house prices. Interestingly, of those availing of the scheme, nearly 2/3rds bought their houses for less than €375k. In my opinion, this continues to highlight that affordability above the €400k level is a challenge and that government focus should be on solving the supply problem and trying to find ways to bring site prices down via increased supply of sites to the market and not increasing further demand for houses that are not yet built. This lack of affordability thesis is supported by another article later in the paper which shows that in 1991 59% of people aged 25-34 were homeowners; that percentage is now reduced to 25% based on the 2016 Census. The average house price has now risen from 1.9x gross income in 1987 to 4.2x now.
The Central Bank is probing the part that Davy had to play in the value chain of an Anglo Irish Bank bond which was originally bought by the Belfast property developer Paddy Kearney, which had a face value of €27m and was supported by an €18.4m loan from Anglo. The loan secured on the bond was sold to the US investment fund CarVal, which is reported to have paid c.€1m for the loans which went on to be worth c.€6m, at which time Kearney was funded to buy back the loan from CarVal for €2.36m. The bond ultimately recovered to be worth near par as the funds recovered from IBRC were higher than originally expected.
Nama is expected to put the Gibson Hotel on the market in the coming weeks for c.€80m along with the Grange apartment complex in South Dublin, comprising of 54 apartments, for c.€110m. Nama is also looking for a partner to compete the XO building in the Dublin docklands near the toll bridge, which would be Dublin’s tallest office building. London-based SW3 Capital, run by Dubliner Tom O’Mahony, is said to be among the suitors.
It is reported that property developer Jerry O’Reilly has been financed to buy out his loans from Deutsche Bank which are secured against Limerick’s Absolute Hotel.
Dermot Desmond has taken a significant equity position in recruitment marketplace Jobbio as part of an €8M funding round. Jobbio was founded by Stephen and John Quinn. Previous reported investors include Michael Chadwick, Nicole Junkermann and Barry Maloney.
Detailed reading of the AIB’s IPO prospects reveals a few interesting things namely:
- Staff cannot get debt write-offs as it would trigger a benefit-in-kind which is liable to Irish tax.
- It has been under pressure not to sell non-performing residential loan books to investment funds who acquire loan books.
- It also intends to keep its voluntary redundancy scheme open until 2019 on the same terms which are currently offered.
- While share options for staff may not be forthcoming, a long-term incentive plan for senior staff looks very possible in order to reward and retain top talent.
Larry Bass’ TV production company Shinawill is in talks with INM about a rich strategic partnership.
Gerry Barry, who made a fortune from selling his company Fintrax, which he founded in the 1980’s, is more excited by his new venture Priviti than he was by Fintrax. Fintrax went on to be worth €585m. He has also had some significant success backing early stage companies. Successes include Embo Medical and Netvet. Capsos Medical and Adama Innovations are showing early promise also. Barry is interviewed by Róisín Burke; he talks candidly about the difference between a professional manager and an entrepreneur. He also explains how private equity firm Exponent who bought the business for €180m; it subsequently tripled the value under its stewardship, was the right thing for the company and endorses the benefits that private equity bring to companies.
Pat McDonagh of Supermacs fame is expected to spend €12m upgrading his existing four hotels and is on the hunt for similar hotels. He is also adding to his 108 Supermacs. In the 12 months to 2015, Supermacs had revenues of €116m and an operating profit of €14m.
Combilift is upping its R&D spend to €20m, which will be just under 10% of revenues. It is developing remote control forklifts for a DIY chain in Australia. It is also investing €40m in a new state-of-the-art facility in county Monaghan. This year it is experiencing a 25% uplift in Germany, 16% in the US and 10% in Britain. Chief executive Martin McVicar thinks there is considerable confidence in Europe at the moment.
The two largest shareholders have been mopping up shares in C&C in recent weeks as the share price has fallen. Egyptian billionaire Nassef Sawiris’ fund Southeastern Asset Management now owns 18.05% and Brandes Investment owns 10.14%.
Version 1 has beefed up its board of directors ahead of a possible IPO. Andrew Langford, former CEO of FBD and a non-exec of KBC Insurance, joins the board as an executive director. Seamus Keating has been appointed chairman. He is also chairman of First Derivatives.
Cork man Kieran Murphy is about to become head of GE Healthcare which employs 55k people globally.
The head of Mercer, Julio Portolatin, is interviewed. He claims that for any child currently under 3, 75% of their potential jobs of the future don’t exist today.
The vibrant Legal & Finance Network have a Lions Test Breakfast with Ronan O’Gara, Hugo MacNeill and RTE’s Daire O’Brien next Saturday in the Intercontinental. Book @ HELLO@legalandfinancenetwork.com
The Quote of the Week is given to Leo Varadkar, our new country leader, who said, “the government will not be of left or right but of the new European centre”.
Longford-based energy tech firm Airsynergy is currently raising €5.2m and has appointed the accomplished ex-CEO of HMV and Xtra-vision, Gerry Butler. It has three products that it is currently bringing to market: wind turbines for farmers, wind-powered street lights and passive-energy air extractors. Butler has aggressive growth plans and is targeting €30m in turnover for the business. Irish-American Gerry Ryan is a member of the board and has also invested in the business.
Serial entrepreneur Adeo Ressi believes Ireland should be a true hub for global start-ups.
Ian Guider writes how we are more than likely losing the battle to be an alternative financial hot spot post-Brexit to the likes of Frankfurt and Luxembourg, who have the infrastructure to absorb such an influx while we don’t.
Michael Murray has a good article which is well worth reading for anyone thinking of buying AIB shares.
Textile and hospitality entrepreneur Richard Caring’s Caprice Holdings is said to have signed a lease on Green REIT’s One Molesworth Street across from Marco Pierre White’s. It is expected that it might put the Ivy restaurant concept there.
Word on the Street: “One big name Irish distressed debt holder is poised to go nuclear with foreclosures”
Mark O’Meara, Leonard Ryan and Michael O’Rourke of Setanta Sports fame are said to be looking to expand their Smith and Wollensky operation from the US and London to Asia, Dubai and possibly Mexico. They opened the first new European restaurant a few years ago in London and subsequently acquired the global rights of the brand and the US restaurants through their Danu investment vehicle.
There is a pull-out on Cork 2017. UCC and CIT are given credit for really supporting business in the Cork region and being good partners for various business and producing excellent business graduates.
Ronan Murphy and Rory O’Doherty, who head up an emerging Cork hospitality company, The Emporium Company, have invested €7m acquiring and renovating four premises.
Asset-backed lender Close Brothers has three locals on the ground in Cork: Stephen McCarthy, Chris Guilfoyle and Willie John Manley.
Deloitte has also invested significantly in its Cork office to serve Munster with its various partners featured including recent corporate finance signing Ronan Murray who calls for Cork companies to enter the Deloitte Best Managed Companies Programme and the Fast 50 Awards.
The expected cost of repair work at the Beacon South Quarter apartment complex has doubled to €20m, it is understood. Work is needed at the Sandyford complex to fix fire safety, water ingress, other structural defects and also likely the cladding that covers the outside of the complex.
A 16-acre site in Tallaght, which market sources believe has the potential for up to 1,500 units, has been acquired by developer Pat Crean’s Marlet Property Group. The purchase price for the site is believed to be in the region of €16m.
Terry Clune is reported to be in negotiations with a number of US banks in relation to a new product, which could revolutionise the international money-transfer sector. €10bn has already been transferred by TransferMate, a subsidiary of Clune’s Taxback Group, for large corporate and university clients since its inception five years ago. The service will use TransferMate bank accounts in each country in order to cut out expensive interbank transfers. It is also noted in the article that the companies which are constituents of the Taxback Group are growing on average at 25%-35% per annum. There is also an interview with Clune in this week’s paper.
Richard Curran discusses AIB’s upcoming IPO and argues that it should not matter who buys the shares, as long as the best price is received for the shares, particularly since only 25-28% of the bank’s shares are being floated. He highlights that bank shares are relatively boring investments since the financial crisis, with investors largely expecting to rely on dividend certainty rather than massive growth, which Curran suggests is consistent with the outlook for those who are likely invest in AIB.
Curran highlights a number of worrying trends for Irish tourism: in Q1 2017, the number of British tourists was down 55k on the same period last year and while overall tourist numbers were up, net income in the sector was down. This is as a result of a falling average length of stay per visitor and also a falling average spend. Curran points out that Britain is our number one source of visitors and the 2.9% inflation rate there is exceeding the 2% average increase in income, meaning real incomes are falling. He also highlights the importance of Ireland remaining competitive pricewise.
The Sunday Independent reports that Peter Wood, who is the senior managing director of State Street Global Advisors (SSGA) Ireland, is stepping down from his position after 30 years with the business and will be replaced by Ann Prendergast, who is currently the head of the Irish relationship management team.
It is reported that mining giant Teck is in discussions to sell its stake in a Limerick joint venture with John Teeling’s Connemara Mining. It is understood that Group Eleven Resources is the potential acquirer, a company which was set up in 2015 by former the Davy corporate finance boss Hugh McCutcheon and which is run by former Davy equity analyst Bart Jaworski. The prospect mine in question is the Stonepark prospect which is located near the Pallas Green site where Glencore has recently resumed drilling.
The company which owns the Kilkenny gift and clothing stores wants its ongoing court proceedings to be held in camera rather than public.
Almost all of the country’s major construction sites are likely to face disruption as further industrial action from crane operators appears likely following an overwhelming majority of the workers voting for industrial action last week in a dispute over pay. Crane drivers are key to the operation of major building sites and any industrial action by them will have a major impact on building as little work can progress in their absence.
Analysts at Barclays expect the strong performance at Ryanair to continue. Barclays projects Ryanair revenues to grow at a compound annual growth rate of 10% and enough excess cash to be generated to buy back 5% of the company’s market capitalisation each year. Barclays identified potential “upside to almost every moving part of the business, including average fares, ex-fuel unit costs and ancillary revenues”.
There is a two-page spread with 20 Irish CEO’s giving their opinion on Brexit.
John McGee discusses the deflationary pressures facing the fast-moving consumer goods (FMCG) sector. According to research from Nielsen, FMCG spend year-to-date in Ireland was up a modest 1.5% to €16.4bn; volumes were also up 2.7%, however prices overall fell by 1.3% (1.9% if the impact of price increases in cigarettes were stripped out). McGee highlights that this is a global trend, with the US and UK exhibiting similar deflation.
Following a €1m investment in technology, Viatel has launched a pay-as-you-go data storage service for businesses in partnership with Zadara Storage.
Bluestone Asset Finance has raised €30m by issuing asset-backed bonds, which are backed by over 2,500 loans secured on cars and commercial equipment.
Applegreen has appointed Niall Dolan as its new CFO. Dolan is currently head of corporate finance and treasury with the company, having previously been CFO of the facilities management business ISS Ireland for five years.
Dan White discusses the possibility of interest rates on mortgages being cut and the impact this would have on the banks’ net interest margins; this comes in the wake of Bank of Ireland cutting its fixed mortgage rates by 0.35% recently and also a report issued by the Competition and Consumer Protection Commission which described the sector as “distorted” and “dysfunctional”. The most recent ECB figures showed that the average interest rate on residential mortgages in Ireland was 3.19%, compared to a eurozone average of 1.72%. It is estimated that if Irish rates fell to eurozone levels, it would cost Bank of Ireland €360m a year and AIB €435m. Such a fall in mortgage rates would also have a significant impact on the banks’ net interest margins which have expanded greatly over the last few years and have been a key driver in the banks’ return to profitability.
Amazon’s $14bn acquisition of Whole Foods Market is covered in two articles and is likely to be a worry for large supermarkets both in Europe and across the globe as the ecommerce giant moves into traditional food retail.
AIB is under fire from retired employees, pension trustees and trade unions over a unilateral decision to stop increasing staff pensions in line with inflation. The move has wiped €1bn from the bank’s liabilities ahead of its stock market flotation next week.
Cormac Lucey believes that there have been several warnings in recent weeks that the government's fiscal policy is too loose and is in danger of over stimulating the economy. He believes the large level of public and private debt makes us vulnerable to adverse shocks and interest rate rises.
One of Nama’s most senior executives, Felix McKenna, is leaving the state agency to head a new fund that plans to invest in social and affordable rental accommodation. McKenna, will be chief executive of the Dad Property Fund, set up by Bill Nowlan and Frank Kenny, the founders of property group Hibernia Reit. The fund's first investment is understood to be a scheme of 131 apartments in Tallaght for more than €30m, of which the fund will offer 30% for affordable and social housing.
Cantor Fitzgerald Ireland, the subsidiary of Cantor Fitzgerald Securities, has acquired L&P Group, a Dublin investment firm specialising in advising charities, trusts, not-for-profit and religious organisations. Cantor has also agreed to acquire the client base of RaboDirect Ireland; the deal will result in Cantor taking on more than 2.5k clients with nearly more than €100m in investments.
Cairn Homes has acquired the RTE Montrose nine-acre site for €107.5m, the equivalent of €12.4m an acre.
Retail investors in AIB have been told the indicative investment range is €3.90 to €4.90 a share. They must commit to whatever range is selected by the government and the minimum investment is €10k.
AIB plans to move its head office operations from the Bankcentre building in Ballsbridge to 10 Molesworth Street, a seven-storey office block being built beside the former Passport Office.
Sean Murphy, the founder of Ballincollig based CoreHR, and his family earned €60m from the sale of a majority stake in the business. US private equity group JM1 Equity and JM1 Services, the family firm of BMC Services founder John Jay Moores, acquired the interest. The terms of the deal were not disclosed but it is understood a total of €82.5m was invested in the business, with €60m being utilised to acquire shares.
The Department of Finance has dismissed concerns about the effect that corporate tax reform plans by US president Donald Trump could have on Ireland’s tax base. Rónán Hession, the department head of business tax, told the government committee on budget oversight last week that it did not expect Trump’s pledge to cut tax to 15% to become a reality with the likelihood being that any potential cut in US corporation tax will not be below 20%, which is well above Ireland’s 12.5%.
The Powerscourt Distillery has received another €1.9m in funding. The funding came from the company founders and the Slazenger family, who own the Powerscourt Estate.
The Central Bank has written to foreign investment firms to clarify their plans after the UK leaves the EU; the bank has asked how Brexit would affect the way they would structure their businesses post-Brexit.
Ballymore Property, owned by developer Sean Mulryan, has agreed a new financing deal with Nama despite exiting the agency at the end of last year. Nama is believed to hold a number of mortgages against Mulryan properties.
Tetrarch Capital, best known as a hotel investor, is looking to enter the Dublin residential property market.
Mason Alexander, a Dublin recruitment agency founded in 2013 by Andrew Lynch and Rob Kearney which specialises in financial, legal and IT recruitment, has just launched a sports division which will place athletes during their careers.
Bleepbike, a new Dublin company, will launch a bike-sharing service tomorrow across Dublin that will see a fleet of 1k bikes located across the city. The company, founded by Hugh Cooney Jr, has invested €750k setting up the network. It is based on a “dockless model” that allows customers to use a smart-phone app to find a bicycle which does not have to be collected or returned to a docking station. Cooney, the son of the late former Enterprise Ireland chairman Hugh Cooney, has licensed the technology for the system from a Chinese firm, YoBike. The scheme will be priced at €5 for five rides of up to an hour.
Nick Webb’s Inside Track this week:
- Membership fees have plummeted from €50k at the peak to €5.7k at Powerscourt golf club in Co. Wicklow.
- Unilever is backing Irish grocery start-up Bymie, which is founded by former Salesforce executive Devan Hughes. It has invested €100k as part of the latest funding round.
- Brendan Proctor, the former head of Lidl’s Irish operations, is leading its expansion into the US.
- Fieldaware, the Irish tech firm backed by Bill McCabe’s Oyster, Brian Long’s Atlantic Bridge and the China Ireland Fund, has appointed Steve Wellen, a US tech veteran, its third chief executive in three years.
Pre-tax profits at premium food supplier La Rousse Foods were up from €1.5m in 2015 to €2.2m in 2016.
Cluey, a Dublin-based tech start-up, is to be wound-up following a creditors’ meeting last week.
Planning permission has been granted for 950k sq. ft of offices in Dublin, according to the Central Bank.
This week’s chief executive interview is with Donal Byrne of Corvil.
Sandra O’Connell has a good article on how Irish companies are looking to expand in China.
@RenatusCapital tweets this week:
125% - Amount above the EU average Irish consumers pay for a broad cross-section of products and services, the 2nd most expensive in the EU.
1.2% - The month-on-month fall in the volume of UK Retail sales for May, according to @ONS. @IndoBusiness
13% - @centralbank_ie's estimate of the number of homes that are still in negative equity, down from the 2013 peak of 40%. @IrishTimesBiz
796k - Number of visits to Ireland from Britain in Q1 this year, a year-on-year decline of 6.5%, according to @TourismIreland. @IndoBusiness
3.5% & 3.2% - The projected growth rate in Irish GDP for 2017 and 2018, respectively, according to @centralbank_ie. @IndoBusiness
0.6% - The year-on-year rise in Irish consumer spending in May; e-commerce spending rose by 7% and face-to-face spending fell by 2.5%.
2.1% - The year-on-year rise in UK pay (excl. bonuses) for Q1 of 2017; adjusted for inflation UK pay fell 0.2% in the same period. @ONS
2.9% - The year-on-year increase in UK inflation for the month of May, a 4-year high, according to @ONS. @IndoBusiness
€2.6bn - The value of cross-border trade between Northern Ireland and the Republic of Ireland, according to @ESRIDublin. @IrishTimesBiz
175% - The percentage above the EU average that Irish alcohol prices are, according to @NOffLA. @IrishTimesBiz
9% - The year-on-year rise in house prices in Q1 of 2017, according to @daftmedia and @MyHomeProperty. @IrishTimesBiz
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