Winners and losers: Last year saw the little guy punch above his weight in the finance sector, writes John McManus
The star in 2003 was in many ways the economy, which put in a better performance than most had predicted. Growth for the year came in at a respectable 2.5 per cent of Gross Domestic Product and 2.8 per cent of Gross National Product according to the Economic and Social Research Institute.
One man in particular who was pleased to get to the end of year in this sort of shape was the Minister for Finance. At the mid point of the year Mr McCreevy was staring down the barrel of a projected borrowing requirement of of €2 billion plus as tax revenues under performed. But by the time Budget day rolled around in December this has shrunk to a relatively comfortable €1.5 billion.
If the economy was a winner, then the loser has to be the dollar, and with it the competitiveness of the Irish economy. With the euro comfortably over $1.20, the Central Bank now estimates that Republic's competitiveness has been eroded by something like 14 per cent since joining the single currency in 1999.
The gradually improving economy, but falling competitiveness, provided a backdrop what must be seen as a reasonable year for Irish business, but one punctuated with regular diet of bad news on the jobs front. This culminated in June when the Central Statistics Office reported the number of unemployed was growing at the faster than at any point since 1986.
Last year also has the dubious distinction of being the first in recent times without a major domestic business scandal. But the ramifications of the John Rusnak affair continued to be felt in 2003, with the foreign exchange trader being sentenced in late January to seven and half years in prison for a fraud that cost AIB almost €700 million.
The Moriarty tribunal investigation in to the awarding of the second mobile phone licence to Esat Digifone dogged Mr Denis O'Brien for most of the year. The entrepreneur also found himself at the receiving end of criticism from an most unexpected source, Mr Kieran Crowley of the Small Firms Association who was less than charitable about Mr O'Brien's tax planning.
Not somebody to take such criticism lying down, Mr O'Brien hit back, putting his decision to move to Portugal in the context of the growing threat of communism to the Irish way of life.
Another man hitting out at his critics, and just about everybody else who got in his way last year was Mr Michael O'Leary, the Ryanair chief executive. He reached a new high, or low depending on how you view these things, when he presented himself at Government buildings in November brandishing a cheque made out to "dithering Bertie" for some €14 million, which he said represented his personal tax bill.
It was one of a number of such tilts at the Taoiseach, Mr Ahern, made by Mr O'Leary during the year as he grew increasingly frustrated at the lack of progress in the break up of Aer Rianta and above all a second independent terminal at Dublin airport. The minister for Transport, Séamus Brennan, was quick to spring to his boss's defence and one hopes he received some backing in return as he faced opposition regarding his break up of the State airport authority and CIÉ.
Mr Noel Hanlon, the Aer Rianta chairman fought a stout rearguard action, first opposing the break up and then pledging his loyalty to the flag as Mr Brennan indicated it might be time for a change at the top.
Not everybody at Dublin Airport was quite so pre-occupied with politics and some just got on with making money. Aer Lingus chief executive Mr Willie Walsh was one of them. Every time he spoke in public he seemed to revise up the company's 2003 profit forecast, now well north of €70 million. But the real winner out at the airport was Mr John O'Sullivan, who sold his Aircoach business to FirstGroup for €15 million, in deal which netted him €7 million in November.
It would be tempting to see the success of Aircoach as the reassertion of old economy style entrepreneurs as the glory days of technology IPOs fade into the background. The sale of the Dublin Business School in the same month to Kaplan - part of the Washington Post Company - would support this thesis. The amount paid to the beneficiaries, Mr Michael Meagher and four other directors, was not disclosed but must have been substantial given the schools projected profits of €1.5 million in 2003.
Last year saw the exit from the market of some of the better known technology stocks such as Riverdeep and Alphyra. Both were sold to management at prices well below their flotation prices. Riverdeep shareholders got €1.41 from Hertal, the buyout vehicle led by Mr Barry O' Callaghan. This compares to the €3.48 launch price in 2000.
It was a similar story at Alphyra, where Mr John Nagle led a €2.70 per share bid for a group which sought a full listing in 1999 at over £7 per share.
But the new economy still came up trumps in 2003 for Dr John Climax and Dr Ronan Lambe, the founders of clinical trials group Icon. They earned some €54 million in August in a share placement.
It was a profitable year also for shareholders in Valentia Telecommunications who got a €512 million dividend as part of a €2.4 billion refinancing of the group. This represented a significant chunk of the equity they put up when the group took over Eircom. A further pay day beckons for Providence and the other private equity investors, with a re-flotation now being pencilled in, possibly later this year.
Sir Antony O'Reilly was one of the beneficiaries of the Valentia dividend, but the news was less positive at his two big Irish investments, Independent News & Media and Waterford Wedgwood. Both had to refinance but now seem well positioned for the global upturn.
It was something of the year of the little guy in financial services with the two big banks making steady if somewhat unspectacular progress. The Competition Authority's announcement in August that it was to concentrate its investigation of the banking sector on current accounts and small business banking was as welcome as it was justified. A report is expected later this year.
Anglo Irish Bank showed up its bigger competitors with a stellar performance, turning in profits of €346.5 million. First Active also had a good year, selling itself to Royal Bank of Scotland for €887 million in October. The icing on the cake for First Active chief executive Mr Cormac McCarthy and his finance director Mr Michael Torpey is that they get the same jobs in the merged First Active and Ulster Bank. Mr Martin Wilson, the Ulster Bank chief executive steps up to deputy chairman.
There was good news late in the year for the last two fully fledged building societies, Irish Nationwide and EBS. Last month the cabinet approved changes to rules governing demutualisation which would in effect allow a trade sale of Irish Nationwide. This is the preference of its boss, Mr Michael Fingleton who took some stick during the year over his €800,000 plus pay packet.
The corporate finance side of things was a bit more competitive with a number of the newer players making themselves felt. These included Mr Niall McFadden, who played a role in managing Hertal, the Riverdeep acquisition vehicle, and popped up again in Boundary Capital which helped finance the €210 million buyout of Arnotts by Nesbitt Acquisitions.
Another niche player, Key Capital run by Mr Conor Killen, helped in the Mr Conor O'Kelly-led buyout of NCB from Ulster Bank. Mr Demot Desmond's IIU also provided financing before selling on its stake to Mr Seán Quinn's Quinn Group. The Fermanagh-based cement to insurance group also had a strong year, saying it expected to make profits of €150 million on a turnover of €650 million in 2003. Not altogether surprising in a year where the insurance industry as a whole bounced back with profits on non-life business of €216 million according to the Irish Insurance Federation.
As 2003 drew to an end and 2004 beckoned, the counterpoint between old economy and new economy continued.Elan, once the epitome of new economy hype, finished strongly, having met its repayment and refinancing deadlines, but with a valuation of €2.1 billion it remains a shadow of its former self. Meanwhile Mitchelstown-based Dairygold, which is about as old economy as you can get, shed 500 jobs in December in what is seen as step towards consolidation of the dairy processing sector.
