One More Thing

Ryanair cool on capital; Sports workers win; Another Bebo? Drury hires Fine Gael adviser; Hilfiger gets makeover

Staff to benefit from JD's Champion deal

THIS WEEK saw Champion Sports sold to Britain’s JD Sports Fashion.

Anglo Irish Bank will get €17.1 million in cash as settlement for €30 million-plus of debt provided at the time of the buyout in 2006.

In the normal course of events, this would hardly be a reason to celebrate, but it’s probably the best result that could have been achieved in the current climate.

Having already taken a writedown on the debt in its accounts, Anglo will also be able to book a profit in its next set of books.

It’s bad news for the consortium of Irish investors – Bernard McNamara, Jerry O’Reilly, Bernard Doyle, David Courtney and Terry Sweeney – who bought the business for €40 million. Their equity has been burned and it will be interesting to see if Anglo seeks to enforce personal guarantees given at the time of the deal.

The big winners are the 600 staff, who will be part of a listed group with significant operations in Britain and France.

JD is majority-owned by Pentland Group, which holds the Lacoste and Speedo brands. It already has eight shops in the Republic, employing more than 100 staff.

JD’s finance chief Brian Small told me that it had been looking for a deal here for a few years, but was put off by the high valuations.

But JD wasn’t put off by December’s hairshirt budget and the effects of the four-year plan on consumer spending here.

“It’s not going to get any easier, but we believe in the business and think that Ireland will recover,” he said.

“Ireland’s had a tough couple of years, but we think we’re calling it somewhere near the bottom.”

Small said its priority was to “stabilise” the Champion business, which made a “small operating profit” last year.

“We believe we [JD] have better information systems and our combined buying power will help the business,” he said. “We also have a number of brands that we’ll be able to give them.”

A champion deal for JD then, although Irish-owned rivals Elverys and Lifestyle Sports might not see it that way.

Prudent hoteliers deserve a break 

SPARE A thought for the staff of Breaffy House in Castlebar and the Clare Inn, which were both owned by the Lynch Hotel Group until yesterday.

It’s less than 18 months since Lynch hotels emerged from examinership, with creditors taking haircuts of up to 90 per cent on what they were owed.

All of this uncertainty can hardly be good for staff morale.

It’s business as usual, according to the receivers at Grant Thornton, who assured customers that bookings will be honoured.

That’s to be welcomed. But it calls into question the original examinership process.

How could it be that just a year and a half on, these hotels should effectively be back to square one?

Unsecured creditors now face being burned on whatever they are owed.

The receiver will continue to trade the business until such point as a new owner can be found.

Breaffy and the Clare Inn are now both effectively on life support.

The hope is that, at some point in the future, the can operate independently.

They join a long list of Irish hotels, built with tax breaks, loaded with debt and oftentimes in the wrong location, that are in the hands of receivers.

In most cases, the landlord is effectively either the National Asset Management Agency or Bank of Scotland (Ireland).

They are just muddling through offering cut-price deals in the hope of attracting customers.

This is good for tourists and backpackers but it’s also distorting the market.

Meanwhile, long-established operators in towns and cities across the country, who went about their businesses properly during the boom, are having to face up to the consequences of this artificial competition.

Wouldn’t it be better to pay up the tax breaks, close many of these loss-making monuments to Celtic Tiger folly, and give the hotels that have a viable future a fighting chance at riding out the recession?

Maloney ventures into 'hot' social media

IRISH VENTURE capitalist Barry Maloney is hoping his latest investment will be the next “hot thing” in social media.

Just before Christmas, Balderton Capital invested €15 million in second round funding into an American company called SCVNGR.

This valued the company at about $100 million and Maloney has joined its board of directors.

Based in Boston, SCVNGR was founded by young buck entrepreneur Seth Priebatsch and is a location-based service for use on smartphones.

It’s based around games. So you download a free App, go to a particular place, do the challenge and earn points that you might then use to get a free burger or a discount on your dry cleaning.

It has secured Google Ventures and Highland Capital Partners as early-stage backers while Coca Cola, IBM and Sony have signed up to run campaigns with the company.

“They want to launch in Europe and we convinced them that we were the best company to help them achieve that,” Maloney told me this week.

“A big company will be built in this space and we’re hoping that SCVNGR will be the one.”

Maloney has form in social media. In 2008, Balderton got $140 million for its 15.7 per cent stake in Bebo, which was sold to Time Warner. That was a handy nine times its initial investment.

Dublin still too pricey for O'Leary

Earlier this week, Ryanair quietly announced that its Dublin-Manchester route would get an extra two flights a day for the summer season.

So does this signal a softening in Michael O’Leary’s attitude to expanding its services from Dublin airport?

“Nope,” O’Leary told me bluntly. “We’ve done a deal with Manchester, they needed certain traffic volumes for it so we’re doing four new routes and increasing the Dublin frequency.”

Will Ryanair respond positively to the Government’s decision to cut the air travel tax from €10 to €3 in March?

“At Irish airports yes but Dublin no, not while the DAA is increasing charges by 15 per cent on April 1st.”

“We’ll open up new routes this year from Knock, from Kerry and some in Shannon and Cork. But very little from Dublin.

“Most of that is outbound summer sun stuff. So it’s not going to have much effect on Irish tourism, which is in the toilet.”

O’Leary reckons the travel tax will yield just €30 million in revenue this year. “Why have they still got a travel tax? It’s pointless. Scrap it.”

LITTLE THINGS:

DRURY COMMUNICATIONS has beefed up its public affairs division with the appointment of Gerry Naughten, the head of communications at InjuriesBoard.ie.

More importantly, Naughten is a former political director at Fine Gael, advising Enda Kenny, and he also worked as a government programme manager and adviser during his 20 years in the Civil Service. His connections with the Blueshirts should prove useful to Drury when the new government takes office.

Drury has also poached Morwenna Rice from Corporate Reputations, and it has picked up the contract for the National Paediatrics Hospital Development Board, which is responsible for the controversial new children’s hospital at the Mater Hospital in Dublin. Fleishman Hillard had held the contract.

The board is due to lodge its planning application shortly, which should keep Drury busy.

*****

If at first you don’t succeed . . . refurbish the shop and try again. This would seem to be the motto of high-end American fashion retailer Tommy Hilfiger, which has given its flagship Irish store a makeover.

The shop on Grafton Street in Dublin will reopen today, having been closed for a couple of weeks to facilitate a refit that I’m told will give it a “fresher” look.

It’s part of a programme to upgrade the American group’s network of stores worldwide.

Hilfiger opened in Grafton Street in late 2008, just as the economy was going south, and is paying rent of €1.6 million a year for the store. It had accumulated losses of €4.8 million by the end of March 2010. So here’s hoping the new look finds favour with Irish consumers.