Synopsis of Sunday business pages

Sunday Business Post There is a lot written about negotiations around Brexit and the possibility of a hard border between the South and North. Tom McGurk has a special feature on it. Fianna Fáil are putting pressure on the government regarding funds it has supported using the Section 110 structure which minimises tax. It is understood that the Minister for Finance and Public Expenditure Paschal Donohoe has been warned by his officials that there is no room to cut tax or USC for middle income earners, despite the fact that he has said these taxes are not fair. The government has committed that for every one euro in tax cuts, there will be a two euro increase in spending. Later in the paper Stephen Kinsella writes about the lack of fiscal space. Bobby Kerr is exiting his investment and involvement in Bang Restaurant later this year. He says that, “I think it is a business that needs to be run by a proprietor, either a chef proprietor or somebody who is associated and lives and breathes it. It is not a business you make an investment in and expect a multiple return.” It reads like his front-of-house partners Joe and Anne Barrett will continue running it. Kerr said that Insomnia will turn over €30m this year and is looking at UK expansion. Kerr is interviewed by Ian Guider. The National Association of General Practitioners is encouraging patients on waiting lists to avail of the ability to get treated across the EU. While reducing the waiting lists would be good news to the HSE, it would be forced to pay for the treatment. The Sunday Business Post and the Sunday Times cover Oaktree Capital Management’s plan to launch a house builder on the Dublin stock market. Oaktree is said to be working with Irish developer Bridgedale, led by Stephen Garvey, Credit Suisse and Davy to IPO a large property fund. Oaktree will need an anchor site and fell short on the RTE Montrose site but is hopeful of finding another. It is suggested in the article that Oaktree bid €103m, €4m less than what Cairn Homes have acquired it for. It is understood that both Oaktree and Bridgedale have a significant number of residential sites already which will be reversed into a new quoted company. David Van Dessel of Deloitte has done research on insolvencies and reports that there were 170 in the first half of the year, compared to 2012 when there were 1,600 in a twelve-month period. Van Dessel claims that the examinership process is being “dramatically under-utilised”, he goes on to say that “In the US, one in three insolvencies is a restructuring, Britain one in seven. We’re one in 50.” Irish Examiner owner Landmark’s regional titles, including the Cork Evening Echo, the Waterford News & Star, the Western People, the Kildare Nationalist and a number of other papers, are possibly going to be sold. Iconic Newspapers, Trinity Mirror and Independent News & Media are said to be interested. The Wexford Echo group was placed into liquidation last week. The entire group is said to be struggling with a debt burden estimated at €18m. By carving out the Examiner and radio stations, the probability of some of these groups not facing veto from the competitions watchdog would be increased. Activist hedge fund Hanover Investors has spent over €5m almost doubling its stake in Irish postal technology company Escher to 25.4%. Other shareholders with lesser holdings, according to the article, include Legal and General, the British Growth Fund and Michael Smurfit. The Sunday Times also covers this story. Tom Lyons interviews Vincent Carton, having sold the family business Manor Farm which has been run by his family for 242 years. The reported price was €94m to Nordic listed chicken producer Scandi Standard. Capvest is an investor in Scandi Standard. 50% of all fresh chicken in retail and 25% of all chicken in Ireland is estimated to originate from Manor Farm. The reason he sold was that none of the next generation were passionate about chicken. Cartons will take a near 10% stake in Scandi Standard as part of the deal and current management will stay on. Manor is at a million birds a week and Scandi is at 1.5m. We understand that Merrion Corporate Finance, which is headed by Jack O’Keeffe, advised Cartons on the deal. Carton chairs the Family Business Network and his counterparts will be faced with similar intergenerational problems. Private equity can be a solution for partial exits for some of these family businesses. The Sunday Independent also reports on the sale of Manor Farm. We in Renatus would love to talk to companies and their advisers on the same and can propose some unique succession solutions. We have a network of potential CEOs who can solve succession dilemmas for many SMEs. An international consortium including Westmeath brothers Alan and Ted Wright is said to be developing a €135m whiskey storage facility in Westmeath which could store nearly one-third of all Irish whiskey stock by 2030. The Wright brothers already provide fire protection systems for distilleries. The 100-acre site destined for this is between Mullingar and Ballymahon. Former head of operations in AIB, Anne Boden, who has set up an online mobile-only bank, will set up an Irish office by the end of the year. This will be the bank’s second market after Britain. Boden is interviewed about the venture in the Business Post. “The health and safety technology company Effective Software is planning to raise up to €5m next year to fund global expansion.” The Broadcasting Authority in Ireland has approved the restructuring of Communicorp’s newsroom operations. Ten prominent hotels are opposing plans to pedestrianise Dame Street as it is thought that there is not enough evidence to suggest it will congest traffic in the city. Gerry Barrett is said to be making a return to developing multimillion euro projects in Dublin, Galway and Drogheda. He is bringing a high-end Donnybrook apartment block to the market later in the summer. WLR Cardinal financed him out of his debts. Large US healthcare group UPMC is said to be in talks with ISIF about building a lot of high-end nursing homes and eldercare villages nationwide. UPMC was an investor in the Beacon but when Denis O’Brien bought the loans it did not remain as an investor. Ciaran Murtagh, chairman of ISME, warns the current shortage of civil engineers and other building professionals could inhibit the growth in the sector. Only 200 civil engineers are qualifying in Ireland each year, compared to 600 in the boom. The cost of living and renting here is not that appealing for a lot of those who left to return home. Gerry Houlihan and Aidan Crowe appear to have sold their stake in a German hotel operating company for €6m. From the Business Post interpretation of accounts, the proceeds were used to pay down debt and reinvest in the Irish co. “A company owned by the Loughnane family of Galway has bought the Rudd’s breakfast products brands from O’Brien Fine Foods, one of the best known food companies in Ireland.” A separate article reports on how John O’Brien of O’Brien Fine Foods has teamed up with Manor Farm to produce a home bird range for supermarkets promoting Irish chicken and turkey. O’Brien’s bought turkey producer Hogan’s Farm last year. Quanta Capital, which acquired the Avon Ri resort in Wicklow, is investing €1.2m over the coming months revamping the resort. “Food company Around Noon has acquired London sandwich and snack manufacturer Chef in a Box from Donegal Investment Group plc.” Belfast IT consultancy company Neueda is forecasting €25m of revenues for this year. Cork-based IT recycling firm Wisetek will open its third US base this year. Wisetek recorded €9.9m gross profits last year. Conor Flanagan, CEO of Atlantic Aviation, is quoted about the career opportunities his firm give school leavers to go direct into apprenticeships. Sunday Independent The Sunday Independent reports that Aer Lingus has been hit with a pay and profit-share claim of c. €80m from airport trade unions. According to Labour Court documents, airline staff are seeking a 5% increase in pay each year, an ongoing profit-share, as well as a lump sum payment to staff of a share of the airline’s €233m reported profit in 2016 and €13m worth of double increment payments for two years to make up for increments not paid to staff between 2008 and 2016. Also covered in this morning’s paper is a row that has broken out between Aer Lingus and the DAA due to what Aer Lingus’ chief operating officer describes as “unacceptable infrastructural deficits” at Dublin Airport. The malfunction of a DAA software update forced Aer Lingus to resort to trolleys in order to handle baggage in Terminal 2 which led to hundreds of bags going missing and thousands of passengers being delayed. In a new report titled “The Media Landscape in Ireland”, RTE describes how the media environment has never been more competitive and the “seismic shift” which has taken place. RTE is facing “hyper-inflation” for the cost of rights as well as struggling to reach younger audiences who are consuming media in a different way. All three papers have coverage on the conditional takeover offer San Leon Energy, the oil and gas explorer led by Oisin Fanning, received from China Great United Petroleum. The offer of £305m - £347m gives an indicative value of 67p - 76p per share, whereas the company’s shares closed at 34.75p on Friday, giving it a value of £158m. Reports in December suggested that another Chinese firm, Geron Energy, lodged an offer at 80p per share. Martin Hughes, known as the Rottweiler, controls 59% of the business. Richard Curran’s pieces this week: - The EU Commission’s latest report on the Irish economy highlights a number of things that it thinks the government is either getting wrong or may be about to get wrong, including measures which narrow our tax base like the Help-to-Buy scheme, the financial implications of scrapping the water charges and other measures as the erosion of the USC tax. The report also states that Ireland may breach EU fiscal rules this year. - c. 6,500 retail investors invested an average of €46.2k into AIB’s IPO last week. These investors are up 9.5% to date and new mortgage data and estimates of the mortgage market bodes well for AIB, given its sizeable share of the mortgage market. The mortgage market is expected to hit €7.4bn this year and Davy Stockbrokers estimates that it could hit €12.8bn by 2020. - The Irish Tax Institute has released a new report titled “A Future Tax Strategy to Grow Irish Indigenous Firms”. The focus of the report is on how we can encourage indigenous Irish exporting firms fulfil their potential and how SMEs are unable to avail of many of the tax breaks that are available to larger mainly foreign-owned entities. Specific reference is made to the 33% Capital Gains Tax angel investors have to pay from gains on investments in high-risk start-ups. Biomarine Ingredients Ireland has just closed another €4m in fundraising, bringing the total raised to €15m since the company started 3 years ago. The company is about to start full production, from its €10m plant in Monaghan, of a range of protein and calcium powders derived from fish. The company is led by former Bord Iascaigh Mhara boss Jason Whooley who is featured in this week’s interview. Berkley Group, the Irish recruitment firm specialising in the IT, life-sciences and engineering sectors, has been sold for an undisclosed sum to longtime employee and Berkley director Paddy O’Donnell and a number of new investors. The company was purchased from Rethink Group with financial support from Capital Step and Mazars Corporate Finance advised the buyers on the transaction. The company currently has annual turnover of €14m and has plans to grow it to €50m. A new economic assessment carried out by DKM Economic Consultants found that the Connect Ireland initiative is expected to have generated between €277m - €333m for the Exchequer by 2020 and created between 3.4k - 4.5k jobs, far more than the government or the IDA have previously admitted. Targeted Investment Opportunities ICAV, a fund connected to Oaktree Capital Management, has applied for planning permission from Dublin City Council for the development of a new 165-bed aparthotel for the site of Zanzibar and the Bondi Beach nightclub on Dublin’s Ormond Quay. It’s reported that the fund intends to spend €45m on the development after it acquired Zanzibar for over €10m last December. “Airbnb is planning to launch a new rental service for mega-homes, mansions and penthouses that will be inspected to ensure they pass muster.” The number of new and second-hand houses transactions taking place has slowed down dramatically in recent months, with just 324 transactions being registered in the first half of June, compared to the 4k reported for the whole month of June last year. C. 50.9k homes changed hands in 2016 and 50.5k changed hands in 2015. When new houses are removed from these figures, that is equivalent to every one of Ireland’s c.2m houses changing hands every 43 years. According to a report by Savills, the housing transactions per head of population in Ireland are only a little more than half the UK level. According to a new survey by the Construction Industry Federation, John Sisk & Sons has topped the list in terms of revenue. The company reported 2016 revenue of €1.05bn, compared to €385m for its closest competitors, Jones Engineering Group and BAM. The revenue for the 50 companies surveyed has gone from c. €5bn in 2015 to c. €6bn in 2016. Deals Of The Week: - Ireland’s largest payment network Payzone has acquired the EasyPaymentsPlus and MyEasyPay payment platforms from Irish-owned FeePay for an undisclosed sum. - Following the withdrawal of safety deposit box services by major banks, Merrion Vaults has invested £1m into Newcastle Vaults to create the city’s first safe deposit facility. - BHSL, the Limerick-based agri-tech business, has taken over Hydro International, a wastewater and effluent treatment firm, in a deal reported to be valued at €5m. Focus Capital Partners advised BHSL on the acquisition. The news follows a €7m fundraising round that BHSL recently closed which will be used to fund growth plans as the business actively seeks acquisitions in the waste processing sector. The Hydro deal is said to be the first step in plans to expand the range of applications of its fluidised bed combustion technology which aims to help companies in the industrial sector extract value from waste. Samantha McCaughren’s Ergo Piece: - Matthias Hopfner, the German Ambassador, has written a letter of complaint regarding the planned demolition of Howl at The Moon in order for it to be turned into a hotel. Hopfner wrote that the hotel would “directly and negatively” impact on the ongoing development of the German Cultural Institute in Ireland, which is already underway. - Inline with the return of Game of Thrones in July, Sky has partnered with food delivery company Just Eat to promote its new service. Just Eat customers who order online or via the app will receive a free Now TV Entertainment Month Pass which allows users to watch live pay TV and on-demand shows. Sunday Times Four of the six founding shareholders of Certus, Joe Higgins, Siona Meghen, Gavin Lyng and Martin Akers, received €46m following the voluntary liquidation of the work-out vehicle. Certus, which ceased trading last year, took over the management of Bank of Scotland Ireland’s toxic loan book in 2011. Certus’ two other founders, Tom Fitzgerald and Mark Mohan, have similar vehicles which are still trading. “The Central Bank of Ireland has lifted an information blackout that has kept most clients of Custom House Capital (CHC) in the dark on what remains of their money, six years after the collapse of the investment firm.” An analysis of the EU Transparency Register has shown that Irish-based multinational and large domestic corporates are spending millions on lobbying Brussels. The register shows that 33 Irish-registered company each spent more than €100k a year in each of the last two years on making applications to European institutions and on membership of lobbying groups. These figures do not include cash spent lobbying national governments. Following comments made by finance minister Paschal Donohoe during the week that there was a danger of a labour shortage, Brian Carey discusses Ireland’s boom-to-bust nature and our dependence on external factors such as Brexit and US tax policy. Carey highlights that multinational companies account for 1.5% of all firms in the state but they account, either directly or indirectly, for 24.5% of employment, 20% of all workers’ pay and over 50% of the productive economy, while American corporations pay more than 60% of all corporation tax, constituting 10% of government revenue, which is twice the EU average. Carey also discusses the upcoming judicial review of An Bord Pleanala’s decision to let Apple build a $1bn data centre near Athenry. Carey notes that although Ireland is positioning itself to be a leader in data centres in Europe, we import 90% of our energy needs. Eirgrid estimates that, based on current plans alone, data centres will account for 15% of total Irish electricity demand by 2026. Losses for Carluccio’s Ireland, which owns two restaurants in Dublin, doubled to almost €540k in the year to September 2016, according to accounts just filed. Revenues rose from €4.1m to €4.5m and the company attributed the losses to non-trading items including an impairment provision and the effects of currency translations with its UK parent. Irish property group Tetrarch Capital, whose current investments include the Marker and Citywest hotels in Dublin and Mount Juliet in Kilkenny, is planning to develop a boutique hotel and hostel on a site in Cork city centre. Post Insurance posted profits of €2.4m last year, a 40% increase, according to new figures. The insurer, owned by An Post, saw turnover increase to €19.4m from €17m in 2015. US private equity company Bertram Capital has taken a stake in Anord Control Systems, a Louth-based provider of critical electrical power equipment for data centres. Management at Anord will retain a significant stake in the company and the funds will be used to help fund further US expansion. Under a recent restructuring, Anord was valued at $48m and posted sales of €31m in 2015. “Finance minister Paschal Donohoe has revealed that insurance companies were ordered last year to give a written undertaking that they would not provide false or misleading information to the Central Bank of Ireland.” Iomart Group, an AIM-listed Scottish IT provider, has bought Dediserve, a Dublin company specialising in cloud computing services, for €7.9m in cash. “The US chip-maker Intel is laying off up to 40 people at a specialised internet-of-things technology unit at its campus in Leixlip, Co Kildare.” The Sunday Times reports that, “Racing magnates JP McManus and John Magnier shared in a net profit of €224m on their investment in a retail and office development in Paris’s upmarket Place Vendome”. It is understood that Kevin Mitchell, who is behind the printing firm Datascope, is a potential buyer of the four weekly Wexford newspapers which were put into liquidation last week. Kieran Wallace of KPMG was appointed as provisional liquidator last week for the group which includes the Wexford Echo, Gorey Echo, New Ross Echo and Enniscorthy Echo. According to sources, American insurer Chubbs is considering relocating part of its European business to Dublin as part of its Brexit preparations. Stephen O’Brien discusses how Ireland’s €19bn export trade is exposed to a border adjustment tax (BAT) being considered by the White House and US Congress, which was highlighted by Sinn Féin’s Pearse Doherty. BAT is a tax on imports which would result in retailers paying three times more sales tax on imported goods than on those made in America and could result in repatriation of production back to America, if adopted. Department of Finance briefing documents reveal that four of Ireland’s largest pharma firms - Pfizer, Johnson & Johnson, Eli Lilly and Boston Scientific - are lobbying in favour of the BAT. Cormac Lucey examines whether or not Ireland is a low-tax economy and whether additional taxes should be levied on high earners. Lucey points to gross national income (GNI), a new measure devised by an official working group, as being far more comparable to the GDP from other EU countries. A preview of an IMF report showed that 2015 GNI was c.30% lower than that of nominal GDP, based on Central Bank analysis. Using this measure, Irish government revenues were 46.9% of GNI in 2015, compared to EU average of 46.5% of GDP, while income taxes in Ireland accounted for 14.9% of GNI, compared to EU average of 12% of GDP, with only three countries raising more in income taxes. Further, income tax constituted 42.6% of total tax revenues in 2015, compared to the EU average of 30.1%. Lucey concludes that the level of taxation in Ireland is similar to that of our EU neighbours, with two exceptions: - We pay substantially less in social contributions; this is due to lower savings early in life and corresponding lower returns later in life in the form of relatively modest old age pensions. - We pay significantly more in income taxes, with this burden borne disproportionately by higher earners. Danny Forston and Simon Duke have an article on the €2.4bn fine against Google and the other challenges the company faces. Gavin Daly’s interview is with Edmond Mahony, chairman of Tatterstalls group, Europe’s biggest bloodstock auctioneer. Philip Connolly has an article discussing Irish companies’ Brexit contingency plans and features quotes from: Justin Lawless of Intact Software, Michael Fitzgerald of Abtran, Katherine O’Sullivan of O’Donnell Furniture Makers, Jim Woulfe of Dairygold, Michael Brody of Silver Hill Foods and Anne Lanigan of Enterprise Ireland’s Brexit unit. Sandra O’Connell discusses the regulatory red tape which faces business in Ireland. This week’s How I Made It piece is with Mark Clendennen, managing director of blasting company Applied Concepts. Nick Webb’s Inside Track piece: - Michael Merrins, chair of the Irish division of Canadian drink distributor Mark Anthony International Brands and former head of C&C Ireland, has invested €100k into River Rye brewing company, maker of McGargles, and has become its chairman. - Julie O’Neill, executive vice president of global operations for Alexion Pharmaceuticals in Ireland, has joined the board of DBV Technologies. DBV Technologies is a Nasdaq-listed developer of treatments for people who are allergic to peanuts and milk. Twitter @RenatusCapital tweets this week: €380m - The value of Ireland's seafood sector in 2016, a year-on-year increase of 7.4%, according to @BordIascMhara. @IrishTimesBiz 34.5% - Year-on-year rise in the number of mortgage approvals in May; the average purchase approval was up 7.7% to €229k in the same period. €240k - The national average list price of a house as of June'17, a year-on-year increase of 11.7%, according to @daftmedia. @IrishTimesBiz 42% - The year-on-year increase in average wholesale energy prices in the first six months of 2017, according to @VayuEnergy. @IndoBusiness 3.3% - Year-on-year increase in the volume of retail sales in May; the value of retail sales rose by 0.8% in the same period. @CSOIreland c. £200bn - The amount of UK consumer credit outstanding as of April'17, a year-on-year rise of 10%. @bankofengland @IrishTimesBiz 29.2m - The projected number of passengers going through @DublinAirport this year, a year-on-year increase of 4.6%, according to the DAA. 4.4% & 3.3% - The projected growth in Irish GDP for 2017 and 2018, respectively, according to @NERI_research. @examinerbiz 5.1% - The year-on-year growth in UK consumer lending for the month of May, according to @bbavoice. @examinerbiz

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