Enterprising firms impress on world stage

Indigenous companies in general had stronger exports than multinationals last year, with Enterprise Ireland-aided firms' overseas sales hitting €1.3bn, writes Una McCaffrey

Not that many people noticed, but last year brought with it a rather substantial revolution in the nature of Irish business. For the first time since the current wave of prosperity began, indigenous companies had a better export performance than the much-feted multinationals, seen by many as the source of all riches.

It was a result that was the source of much joy within Enterprise Ireland, the agency that is charged with supporting and developing the State's home-grown businesses.

The body had targeted new exports of €1 billion for its clients over the year, with the actual out-turn standing at €1.28 billion as 2006 began.

Frank Ryan, chief executive of Enterprise Ireland, is not afraid to describe 2005 as a "landmark year". Nor does he shy away from remarking that indigenous companies have been sitting "in the shadow of foreign direct investment [ FDI]" for some time.

"It's very hard to get the message through that indigenous companies are dynamic and very ambitious," he says.

The figures - detailed in this week's Enterprise Ireland annual report - clearly bear this out. The agency's clients grew their sales abroad by 7.2 per cent at a time where overall exports from the Republic expanded by just 3 per cent.

The "crossover" has left Ryan visibly proud while remaining aware of the job that continues to face his agency. He observes, rightly, that any developed economy needs to have multiple growth engines. In the case of the Republic, this should naturally see multinationals and home-grown firms making equal or near to equal contributions to overall growth.

"It's a sign of maturity." Ryan points out that the composition of companies driving exports has changed hugely over the past few years, with almost no company currently operating in commodities or textiles, for example. On the other hand, chemicals and services companies have been in the clear ascendancy. Ryan cites life sciences companies such as Trinity Biotech and Biotrin as being worthy of particular praise, with Qumas and Iona getting special mention on the software side.

The sectoral shift has led to huge changes within Enterprise Ireland too, with Ryan paying tribute to his staff's "energy levels" and ability to respond to "evolving needs".

The agency has a basic annual budget of €250 million, with additional funds promised by the Government for particular strategies. Currently, for example, an additional €220 million is on the table, with €175 million of this to go on a special venture capital fund.

Changing times translate into nimble responses, with the agency most recently closing an office in Copenhagen and opening one in Toronto, closing one in Belfast and opening a new one in Sao Paolo.

Moves such as this reflect a judgment on where export growth will come from over the next decade or so, with Ryan holding clear views on the subject.

The Middle East, China, Russia and Brazil will be the places to be, he says. While the UK may be the biggest market for some time yet, these new markets will simply grow faster.

This means Enterprise Ireland needs to be absolutely familiar with how business works on the ground in places such as Moscow, a city visited by Ryan just six weeks ago.

Russia, he points out, is the seventh-biggest economy in the world, with a cosmopolitan society and excellent universities.

But what of the corruption that is also said to be widespread on the Russian city streets? Transparency International's most recent rankings placed Russia close to the bottom of a list of 158 countries, in the same batch as Albania and Sierra Leone.

Ryan takes a pragmatic approach to issues of corruption in potential export markets, arguing that Irish companies should be able to bring their standards with them wherever they go, while also taking care to respect the local way of things.

"You have to be sensible with risk," he says, adding that the best advice to companies is to avoid placing all their investment eggs in one basket. Exposure to markets in a number of currencies should be helpful here, he suggests.

Asia has been a particular priority for Enterprise Ireland, which has organised large, high-level missions to China and India over the past two years. Both were led by the Taoiseach, Bertie Ahern, with the India trip marking new ground by taking in companies from the North.

A presence is already established in China, with a new office soon to open in New Delhi.

This week Ryan and his team were preparing to lead another Asian mission - this time to the newly-optimistic Japan, with a stop-off in China also included.

"Once you're crossing €5 million in turnover, you should be looking at where to develop your sales," he says, suggesting that lack of scale and internationalisation is the thing most likely to hamper growth in the future.

With this in mind, Enterprise Ireland has established a specialist "scaling unit" that encourages companies with sales of €5 million to get to €20 million. At the moment, 46 companies are in the unit, with Ryan believing some have the potential to get to sales of €200 million.

All of this will help Enterprise Ireland to meet its target of generating €3 billion in new exports in the years 2005-2007. "We feel we'll exceed the €3 billion target - that's the benefit of a stretch target," says Ryan.

Part of Enterprise Ireland's strategy in this regard is the age-old practice of supporting new companies by taking equity stakes. Not all of these work out, but one recent success came in Glenisk, the Tullamore-based organic yoghurt company, which is selling 37 per cent of its shares to Danone for a few million euro. This provides an exit for Enterprise Ireland and frees up funds for new projects.

Another recent payout came from Kingspan, where a €1 million investment grew into a €27 million payout.

Typically, the agency takes a 2 per cent stake in new companies in return for its investment. Growing companies will get a combination of grants and repayable monies, with no equity stake provided in return.

Last year Enterprise Ireland funds supported 75 entrepreneurs, bringing the total to 750 companies over eight years. The agency is known for being a "patient investor", but it also takes lots of care when choosing who or what to support.

"We'd be approached by a larger number of entrepreneurs than the 75 we supported last year," says Ryan.

"I'm happy that we've got it mostly right," he adds.