When will Green Property become the €1 billion (£790 million) corporation? To reach that level it will need to double its present size. Its results out on Thursday will show it is continuing at a relentless pace and has the capacity to become a billionaire in three to four years time. Estimates for 1998 vary from a pre-tax profit of €20 million (£15.75 million ) - a rise of 30 per cent - to a pre-tax profit of €23 million (£18.11 million) - a rise of 50 per cent.
The profits are likely to be above the highest projection and that will be after redundancy costs at Trafford Park Estates, the Manchester-based group, acquired last year, for €195.54 million (£154 million).
Green has already gained some benefits from Trafford. The 1998 results from Green will show a six months contribution from Trafford. Also, Green has bought out the joint venture partner in Electric Park for £5.5 million sterling (€8.08 million). Green now has 100 per cent of the 49 acre site at Trafford which is zoned industrial with planning permission for 900,000 square feet. The Manchester-based subsidiary has also sold some of its peripheral assets for £7.5 million sterling. Further sites are being reviewed. And the rent from an office block in Cambridge has been boosted from over £14 to over £17 million per square foot as part of the plan to make Trafford's assets work better.
A further development in the UK, involves an office block near the M25. This £50 million development is under construction.
In Ireland, the second phase of retail development is almost complete. This will provide an additional 190,000 sq ft. Also, the ACC building at Hatch Street, Dublin, is under construction, at a total cost of more than £20 million. The benefits from these two latter developments should come through this year which should see profits of some €40 million and net assets per share (NAV) of some €7. That would represent a 50 per cent increase over 1997's NAV.
Sustaining that growth would lead to a doubling of the company in four years. That would catapult it from its position as Ireland's 20th largest publicly quoted company, into the top dozen layer. That is a likely scenario.
Green's managing director, Mr Stephen Vernon, the architect of the group's recent growth, in an interview with this newspaper, made it clear that Green continues to be in an acquisitive mode. Green "could in the future be among the top 10 real estate companies" in Europe, he asserted. "We hope to see ourselves as serious players in Europe", but he added the cautious rider that there were no plans to move further afield.
Green has shown its capability to acquire reluctant companies. It did this with Trafford. With the euro in operation, Green can now firmly set its sights on continental Europe without any currency exchange risks.
Contrary to what some fund managers think, investing in a small company, can be profitable. It is not so long ago (five years) that Mr Vernon's target for Green was £100 million. It is now quadruple that. And there are quite a few companies out there that were once minnows and are now growing rapidly. Fishers International, the insurance servicing company, and ITG, are typical cases. When Fishers gained a full listing in 1995, it was capitalised at a mere £8 million sterling. It is now valued at £55 million and this will rise to £64 million sterling when the shares are issued in connection with the takeover of Pycraft & Arnold Holdings. Growth by acquisition without growth in earnings is, of course, pretty meaningless. But reflecting real growth, Fishers' share price has more than trebled in three years. Fishers now has the capability to become a €400 million ($270 million sterling) company in three years time. ITG, the telecom and computer group, got a listing on Dublin's DCM, and London's AIM, less than two years ago, placing the shares at 156p (198 cents), valuing it at a mere £7 million. It has taken on Telecom Eireann with the development of payphones. In a hectic expansion, it acquired six companies in this fiscal year.
Esat seeing the niche being carved out by ITG approached it with a suggested offer of 450p per share when ITG's shares were being traded at 300p. The approach was rebuffed and ironically Esat has now entered this market and coaxed three of ITG's payphone executives to join its new payphone division. However, ITG's shares subsequently rose to a high of 620 cents (488p) and traded at 580c (457p) on Friday, valuing it at €55 million (£43.3 million). It would hardly have been in ITG's interests to succumb to Esat's overtures as ITG is still in an embryo stage, with much potential still to be realised; the alternative was to be the hind tit of Esat, valued at almost $1 billion (€1.1 billion) on Nasdaq. The smaller companies are, of course, more vulnerable. But then they, as shown by Green, also have the potential to notch up greater percentage gains.
