Inside the world of business
Looking to the future of McInerney’s Spanish division
IT MAY have more pressing issues on its mind at the moment, but the fate of house builder McInerney’s Spanish division will still have to be sorted out in any restructuring of the troubled business.
Part of it, Alanda Homes, an apartment developer, is now under the charge of an administrator appointed by the Spanish courts last May when the Irish group stopped funding that operation. Two other elements, Alanda Club Marbella Ltd, a profitable tourism and leisure operation, and development land at Sotogrande are still solvent, and remain under McInerney’s control.
In April, McInerney’s then managing director, Barry O’Connor, told the board that he wished to step down from that role as he was interested in buying the Spanish operations.
The board agreed, and Mr O’Connor, who owns 5 per cent of McInerney, headed off to pursue this project. The only known development on that front since then was the administrator’s appointment to Alanda Homes.
From O’Connor’s point of view, this simply means that if he wants to buy that operation he has to talk to the administrator rather than the company. He must still negotiate with his old employer to buy Alanda Club Marbella and Sotogrande.
McInerney’s management would be happy to leave Spain as keeping it is not central to the group’s survival. On that basis, it is likely that Oaktree Capital, the US investor that is said to be interested in bidding for a stake in the Irish group, should be equally happy to sell the Spanish division.
So the only questions remaining are: how much? And when? The three operations, albeit including Alanda Homes, were valued at €34.5 million on McInerney’s balance sheet at the end of December. Given subsequent events, it’s not possible to say if an offer would bear any relationship to that figure.
The answer to “when” would appear to be “as part of an overall group restructuring”. If that restructuring were to involve an offer from Oaktree this would lead to a dilution of existing shareholders’ interests. In that situation, it could well be worth speculating that McInerney could propose distributing the proceeds of the sale of its Spanish division to those shareholders as a sweetener.
Not this McElhinney
When news emerged at the start of June that Co Meath’s destination outfitter McElhinney Fashions of Athboy was going out of business, another shop in Donegal was quick to react. It’s not us, shouted McElhinney’s of Ballybofey, we’re doing fine and will continue to do so, thank you very much.
Happily for the Donegal department store, accounts lodged with the Companies Office this week support its solvency story, albeit without great gusto. Pretax profits at the family-owned store last year amounted to €512,010, down by about half on 2008, a result that allowed shareholders’ funds to grow from €8.8 million to €9.2 million. The directors – John and Eileen McElhinney – said in their report that they had expected sales to fall sharply in the run-up to 2010 and had taken “appropriate steps” to counter this. No detail is given, but the accounts show that staff numbers fell from 184 to 158 last year, with the wage bill consequently dropping from almost €4 million to €3.3 million. The directors took the medicine too, with their shared pay package tumbling by 45 per cent to €475,000.
Measures such as this have, in the words of the directors’ report, left the business “well positioned to deal with the continuingly difficult retail market”. Phew, say all the brides-to-be and aspiring First Communion girls in the northwest, hoping to carry on the McElhinney shopping tradition. The thing with tradition, though, as learned the hard way by McElhinney Fashions in Athboy (which has since reopened), is that it only translates into lucrative brand loyalty when it is cleverly nurtured and supported by nimble business practices. So far the Ballybofey business seems to be getting by fairly comfortably on both fronts.
Boucher’s smooth operation
Yesterday’s announcement by Bank of Ireland of its interim results confirmed the gulf that is beginning to emerge between itself and its one-time peer AIB.
On the basis of its mid-term report last week AIB is in the midst of a creeping nationalisation. In contrast, Bank of Ireland boss Richie Boucher made it clear that he wants his institution to stand on its own two feet as quickly as possible.
The contrast between Boucher’s comments on the Government’s bank guarantees and those by AIB boss Colm Doherty was also telling.
Doherty, whose personal performance was far less assured than Boucher’s, warned that if the guarantee scheme was not extended beyond December there could be “systemic” problems for the Irish banking sector.
However, Boucher is a smooth operator; as an insider he ascended to the job at the bank with relative ease. In contrast Doherty’s appointment was the subject of a protracted stand-off between AIB and the Department of Finance. Could Boucher’s indifference on the subject of the guarantee be simply a clever way of marketing the health of his institution? If AIB and Anglo both need the guarantees to be extended so that they remain solvent the Government will have no choice but to do so.
Today
The Society of the Irish Motor Industry will present its annual review of the performance of the car trade, which has rebounded from the lows of 2009.
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