Inside the world of business
Company car is latest perk in danger of being parked
IS THE company car heading for the great garage in the sky?
A study of company car policies in 2012 and 2013 by PricewaterhouseCoopers suggests 40 per cent of organisations will change their approach to the perk either this year or next. Unsurprisingly, given both the recession and upward pressure on fuel prices, cost is their main motivation.
Despite the tough prevailing business conditions, company cars remain an enduring employee benefit – for senior positions in certain sectors, it almost comes as standard. PwC’s survey finds that four-fifths of chief executives or heads of unit are in receipt of a car or a car allowance.
However, the accountancy firm notes that many organisations are now moving from a car-only option to a car allowance-only option, or a choice between the two.
“Car only” benefits are now most prevalent in functional roles such as sales, PwC says, where the car is perceived as a “business need” rather than a straightforward perk.
PwC reports an average market list price of €59,046 for company cars offered to chief executives and heads of unit – down from €70,137 in 2008. For senior sales executives, the average market list price is a rather more modest €29,467. But organisations are increasing the amounts they offer in cash alternatives, with the value of car allowances rising since 2008. The average annual cash alternative is €20,527 for chief executives and €9,917 for senior sales executives, according to PwC’s survey of 61 companies.
As for those who still get handed a set of keys with their executive contracts, what’s their motoring poison? The PwC survey reveals that an Audi is the car of choice for employees in senior roles, followed by a BMW. Sales executives, meanwhile, are obliged to opt for Opel and Ford, followed by Volkswagen. “Most senior level roles tend to have company cars with higher CO2 emission levels,” PwC observes.
Compilers of corporate social responsibility statements take note: if your company does decide to ditch the company cars, it can earn a few green credentials while it is at it.
Citi casts a decidedly cold eye on Bank of Ireland's prospects
BANK OF Ireland chief executive Richie Boucher may have been quick to dismiss any correlations between Citi’s recent reiteration of its sell call on the bank and the bank’s plan to lend €3.1 billion to Irish Bank Resolution Corporation as approved at yesterday’s egm, but there are plenty of other reasons for the investment bank to remain negative on it.
Last week’s report cut Citi’s target price for the bank to eight cent from 10, a level at which it was trading as the report was published.
Although Citi noted that Bank of Ireland is making good progress on its restructuring programme, it found several areas of concern, and expects the bank to remain loss-making until 2014.
One of the major challenges for the bank will be the forthcoming insolvency Bill, which, Citi says, will increase losses at Irish banks.
Other factors include pressurised margins. With funding costs still high, intense competition in the deposit market, and a mortgage book that is weighted towards tracker mortgages that are difficult to re-price, Citi expects margins to remain under pressure at the bank.
While the bank’s switch away from wholesale markets to deposits as a source of funding has been helpful for deleveraging, Citi noted these are “not necessarily much cheaper than the wholesale funding they replaced”.
Another drag on the bank has been the cost of the Eligible Liabilities Guarantee (ELG) scheme. In 2011, it cost Bank of Ireland €449 million in fees, and Citi doesn’t expect the bank to be able to leave it until the first quarter of 2013.
Finally, the macro environment remains distinctly unfavourable, and Citi forecasts unemployment to rise to 15.1 per cent in 2012, a little higher than the ESRI’s projection. Moreover, Citi is forecasting a 50-75 per cent probability that Greece will leave the euro zone.
One of the few positives in Citi’s report on the bank is that having suffered significant outflows during 2010, the Irish deposit base is now more stable than its peers, thus mitigating any contagion risk from other peripheral countries.
A ferry interesting move by One51
SPRING-CLEANING is continuing at One51, with the announcement that the investment company has sold its stake in the Iseq-listed ferry company Irish Continental Group.
The move had been widely expected since the departure last year of Philip Lynch, given Lynch’s history with the holding. In 2007 and 2008, Lynch was involved in a protracted takeover bid of the ferry company as part of the Moonduster consortium.
However, chief executive Alan Walsh poured cold water on the notion at last September’s shareholder meeting, saying that, despite the plan to sell certain assets “within a realistic timeframe”, One51’s 12.3 per cent stake in ICG would be retained.
“We have no intention of selling the ICG holding at this point in time. I see a lot of upside in the share price,” he told shareholders.
ICG was then trading at just over the €14 mark. Yesterday, it was trading at around €14.92, closing at €15 late last week.
It is also worth noting that the Doyle Group sold its stake in the ferry firm at €15.75 in May 2011.
One51 began buying in to ICG in 2007, offering €22 per share as part of the Moonduster consortium. The sale of the stake at this point means it may have taken a hit of more than €20 million on the investment. However, ICG has provided an attractive dividend yield for One 51.
While the argument for selling the stake is strategic – ICG was identified by management as a non-core business – it does raise the question as to what kind of businesses are “core” to One51, whose investments have always been extremely disparate.
As the company continues to divest itself of investments acquired at the height of the boom, shareholders will be keen to know that the decision to sell is being made as part of some higher strategic good.
QUOTE OF THE DAY
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TODAY
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