Cantillon

Inside the world of business

FitzPatrick finally gets a Rub of the green

NOW AND again, something must go right, even for Sean FitzPatrick. The former Anglo Irish Bank chairman is infamous for his reverse Midas touch – everything he touched seems to have turned to dust. But while his forays into syndicated property deals and investments in financial stocks were spectacularly ill-fated, it turns out Mr FitzPatrick’s managed punt on the potential of tungsten carbide burs was more prescient.

Among the tangled web of the one-time multi-millionaire’s investments is a 7 per cent stake in a little-known company called Rub Edibrac, which manufactures the aforementioned burs (a kind of cutting tool, apparently).

Obscure it may be, but it turns out there’s more money to be made in the burring game than in property these days, with Rub Edibrac delivering a pre-tax profit of €653,527 in 2010. This compares with a loss of almost €800,000 a year earlier.

The latest accounts for the company give an insight into the elevated company once kept by the former deal junkie, who now finds himself bankrupt.

Fellow investors include former IBI corporate financiers Peter Crowley and Neill Hughes, who run the private equity vehicle FL Capital Partners, and who are directors of Rub Edibrac. (Incidentally the accounts show that Rub Edibrac incurred management fees of €135,000 with FL Partners.)

Former Smurfit group executives David Moffitt and Peter Cosgrove are also shareholders and directors, while Smurfit Kappa’s chief executive Gary McGann (a former Anglo director) is also a shareholder.

Indo banking on better days ahead

WITH ONGOING talk of the newspaper industry facing a potential Armageddon, it’s good to hear that, for one publishing chief, the problems in the sector are cyclical rather than structural.

Speaking at yesterday’s publication of Independent News & Media’s (IN*M) interim results, chief executive Gavin O’Reilly said he was convinced that there were “better days ahead”.

“I think the worst is over,” he said, adding that consumers are still buying newspapers, just not with the same frequency as previously.

The group, which runs six national titles and a host of regional brands in Ireland, has already seen the closure of the Sunday Tribunethis year, but has no plans to cut back any further. "Any market consolidation won't be coming from IN&M," he said.

The tabloid version of the group's Irish Independentcontinues to grow in popularity – it now accounts for 70 per cent of total sales – but according to Mr O'Reilly, there are no plans to phase out the broadsheet option.

But if newspapers are going to stick around for some time yet, their model is likely to change further. Earlier this year, the New York Timesput up a firewall around its online content and early feedback appears promising for the initiative.

Now it seems something similar might be on the way at IN&M’s titles.

“Globally, the free-to-air model for quality content is not sustainable,” Mr O’Reilly said, adding that IN&M is increasingly “looking in that regard” when it comes to its own titles.

HP’s bombshell more of a damp squib

Just over a week after HP dropped the bombshell that it was getting out of tablet computing, looking at hiving off its PC division and paying a hefty premium for British software firm Autonomy, the markets remain unconvinced that the strategy will work.

The shares were languishing at just over $25 yesterday having been up at $37.60 as recently as late July. The value of legendary Silicon Valley firm has fallen by over $10 billion. Given the wipeout that has been August on the equity markets, that might not seem catastrophic. But Bloomberg data shows HP is now trading at about five times estimated profit – a 70 per cent discount to the average in the technology industry.

Analysts have been quick to speculate that such a low value makes it ripe for a takeover and possibly even a break-up.

Software giant Oracle, always in the market for a big purchase, is considered a likely buyer of HP’s server division, while any number of private equity firms would love to take on HP’s evergreen printer division which is 70 per cent more profitable than the company as a whole.

The blame for the current sorry state has to lie at the door of chief executive Leó Apotheker, appointed late last year after a stint as SAP boss.

The contrast with another rookie CEO of a major US technology company – Larry Page of Google – could not be more stark. Page’s first earnings call after taking over from the more seasoned management of Eric Schmidt was pretty dismal.

Analysts said Page did not communicate the company strategy well and they zeroed in on Google’s ballooning staff costs.

But Page turned things around and by his second quarterly call had the financial community on side.

Apotheker will have do something to rapidly win back the faith of the markets. If he doesn’t new owners may be the ones deciding if his strategy has any chance of success, and that could have implications for the company’s Irish workforce.

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Next Week

The Central Bank publishes monthly banking statistics which will indicate if recent bond market relief for Ireland is a false dawn or the first real sign of a recovery