Inside the world of business
Property takes toll on solid Londis till
LOOKING AT the top-line figures, convenience store group ADM Londis had what chief executive Stephen O’Riordan called a “robust” performance in 2011.
According to the numbers, filed recently with the Companies Office, the retail and wholesale business saw pretax profit rebound 37 per cent to almost €1.5 million, from €1.1 million a year previously – recovering from a fall of more than 50 per cent in 2010.
That was good news for the group’s 144 shareholders – mostly store owners – who received a dividend of 25 cents a share. However, headline figures don’t always tell the full story. The improvement at Londis was due almost entirely to a tighter focus on costs as revenue across the group fell 7.3 per cent during the year. In the accounts, Londis notes that national retail sales, in general, are now one-fifth down on the 2007 figure.
While the trading performance was creditable, the continuing impact of the collapse in property values was very evident elsewhere in the figures – where a revaluation of its investment assets saw the company ultimately record a loss of €1.73 million for the year.
This resulted from a €2 million writedown of the company’s fixed financial assets, comprising a portfolio of investment properties. It follows a €1 million writedown on the same portfolio in 2009 and 2010, the accounts show, representing a 50 per cent loss on the company’s investment properties since the end of 2009.
It also wrote down the value of tangible fixed assets used by the group – ie buildings other than investment property – by €773,000. In this case, however, the assets were marked to cost and not market value.
The net effect for the group is a loss of €1.73 million in shareholder value. That puts a slightly different colour on the year’s performance and illustrates how so many Irish companies continue to struggle with the fallout from the property bubble.
HSBC exit a sign of the times for high rollers
BY COMPARISON with the mammoth fires that HSBC is fighting on the libor-rigging front and over the US senate money-laundering report, the announcement of the closure of its private banking arm in Ireland is positively small fry.
But from an Irish perspective it’s a telling sign of what’s happening
in our once-booming high-net-worth individuals sector.
According to HSBC, this decision was a direct result of an ongoing review of its global business, including its wealth-management operations.
The bank applied a so-called “five filters” strategy to evaluate its businesses against five core criteria: international connectivity, economic development, profitability, cost-efficiency, and liquidity. Presumably, the six-man Irish private banking operation fell down on one or more of these.
When HSBC set up this unit in 2008, the omens were already there – the Central Bank had begun to lower its growth warnings. But at the same time, industry estimates suggested the Irish market contained more than 30,000 millionaires.
The bank’s spokesman declined to comment on any particulars relating to the Irish market, and how changes in the market may have driven the decision to shut its private banking shop. However, it is safe to assume that its potential client base has shrunk since 2008.
Another theory goes that foreign private banking and wealth-management service providers are struggling, and in some cases failing, to compete with the artificially high interest rates being offered by Irish banks in a desperate bid to attract deposits. It makes little sense for well-funded banks such as HSBC to pay these sort of rates – in the longer-term they are unsustainable.
But in the meantime, we may see more high-profile exits from the private client market.
Muddy waters run deep in potential sale of ports
THE GOVERNMENT would appear to be a little economical with the truth when it comes to the reason for asking the Competition Authority to review the State ports.
The privatisation of some or all of Drogheda, Dublin, Dundalk, Dún Laoghaire, Cork, Galway, New Ross, Rosslare, Shannon Foynes, Waterford and Wicklow was one of the clear recommendations of the Review Group on State Assets which reported in early 2011.
Its mandate was to identify suitable assets for sale in the wake of the bailout, and the Government has been dragging its heels on the issue. The group recommended that the ports should be restructured into several competing multiport companies built around the three strongest ports of Dublin, Cork and Shannon Foynes. Between them, they account for €107 million out of the combined turnover of State-owned ports of about €140 million. Dublin accounts for the lion’s share, with turnover of €70 million.
The group said that the Competition Authority should be consulted during the amalgamation process but it was clear that its approval was not a deal-breaker.
The recommendation was that ideally the ports should be restructured before they were sold but, if necessary, they could be sold piecemeal. In reality, this would mean the sale of Dublin Port which has net assets of €238 million.
There is quite some distance between the review group’s recommendations and yesterday’s spin that the Competition Authority would look at the ports to see if competition could be improved through a change in ownership structure.
The clear inference being that they will only be sold if it makes sense from a competition policy perspective. The waters around what is a very sensitive issue are being muddied and it remains to be seen if the troika will play along.
CANTILLON ONLINE
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