Irish plcs to spend over €1.9bn on share buybacks in falling market

Irish publicly listed companies are on track to spend more than €1.9 billion buying back their own shares this year amid a slump in stock prices and a growing reticence among businesses globally to make acquisitions and invest in expansion in a slowing economy.

The Irish list is led by CRH, which is on track to spend $1.2 billion (€1.23 billion) buying back its own shares this year, bringing the total it has spent repurchasing stock since 2018 to $4.1 billion, despite pausing its programme to conserve cash at the height of the Covid-19 pandemic.

The building materials giant’s shares have plunged almost 29 per cent so far in 2022 as a result of concerns about the global economy with central banks hiking interest rates to rein in inflation. CRH said in August that its acquisition pipeline also “remains strong” and that its “significant balance sheet capacity provides flexibility” for deals.

Glanbia completed a share buyback programme earlier this month, bringing the total it has spent this year on repurchases to €177 million.

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Glenveagh Properties has been the third-most-active in the Irish market in 2022. The housebuilder spent €87.2 million on a buyback in the first half of its financial year and is currently working its way through a further €50 million of planned repurchases.

“As economies unlocked post-Covid, there was a very sharp recovery in profits and many companies that had earlier reset their dividends at lower levels have returned capital to shareholders via buy-backs,” said Richard Flood, an investment manager with RBC Brewin Dolphin in Dublin.

“For many companies, dividends are an important part of shareholder return. However, the markets like consistency and do not reward companies who constantly lower or cut their dividends. So, when times are good, many companies will use exceptional profits to buy back their shares rather than pay a temporary increase in dividends.”

However, analysts and market strategists expect the global flurry of buy-backs so far this year – against the backdrop of a slump in mergers and acquisitions and a 26 per cent drop in global equities – to dissipate as companies focus increasingly on saving cash amid fears of a global downturn.

“With the economic backdrop worsening and with both inflation and interest rates rising, it does not feel likely that we will continue to see the level of buy-backs over the next 12 months that we have seen over the last year,” said Mr Flood. “Hopefully, however, dividends will remain uncut, at least in the shorter term.”

The amount committed by Irish plcs to buy-backs this year is broadly in line with what they spent in 2019, before the pandemic.

In the UK, FTSE 100 companies are on track to spend a record £50 billion-plus (€57.5 billion) on buy-backs this year, according to UK online stockbroker AJ Bell, with companies taking advantage of depressed valuations for their stocks and as they hold back on investing for growth.

AJ Bell investment director Russ Mould said in a note to clients last week that “such largesse does not smack of a lack of corporate confidence, despite the challenges posed by inflation, rising interest rates and fractured supply chains”.

Dublin-based, but London-listed Grafton Group has been fourth biggest buyer of its own shares among Irish plcs so far this year, completing a £100 million (€115 million) repurchase programme in September.

The Republic’s two largest banks this year launched their first share buy-backs since before the financial crisis, with AIB spending €91 million and Bank of Ireland €50 million.

Cairn Homes, Origin Enterprises, Irish Continental Group and Greencore round off the list of 10 Irish companies that have been active on the buyback trail in 2022.