Winners and losers in a year of extremes in the business world
Green Reit and CRH among winners as Boeing, Denis O’Brien and RTÉ join losers
Noel and Valerie Moran walked away with a €266 million payout for Prepaid Financial Service. Photograph: Alan Betson
It was a year of extremes in the corporate world – financial reward and glory for some; the end of the road for others. And 2019 also saw a cast of figures that have been recurring features of the past decade as Ireland continues to come to terms with the fallout of the Celtic Tiger.
Some things have changed; other remain the same. Brexit, you’ll be tired of hearing, was a dominant feature in the business landscape this year while trade concerns with the United States continued to bubble over.
Our economy continues to outpace our European peers in boom mode but we’re apparently none the wiser when it comes to dealing with constraints such as housing (there’s still a shortage) and traffic congestion (more apartments were built in Leitrim in the past year than there has been progress on Metro North).
There were, however, definite winners amongst the Irish business class of 2019. This year saw multimillion-euro business sales, appointments to high office and even Oscar victors.
So, will history look kindly on 2019? Perhaps. But even as the economy led the way, corporate failures abounded, share prices dropped and some saw their businesses cease to exist. More on those later.
First, let’s start with the winners. The feeling that we’re edging towards the end of an economic cycle was made more acute by the sale of Green Reit by property sages Stephen Vernon and Pat Gunne. In August, UK property group Henderson Park Capital acquired the commercial property company for €1.34 billion after it put itself up for sale bemoaning the fact that the stock traded at a discount to the underlying value of its properties. Vernon and Gunne’s shares in the group were valued at more than €55 million.
Having pulled off one of the largest property deals in the history of the Irish market, industry observers were left wondering whether the duo were simply again calling the top of the commercial property market. If they have, expect winners in this sphere to be few and far between in the coming years.
Substantial business sales weren’t as common this year as previously. But that didn’t stop Noel and Valerie Moran walking away with a €266 million payout for the payments business he built up from his kitchen table. This was the story of a local boy done good, a man who had shimmied up the greasy corporate ladder only to tumble in the last recession. He picked himself up with the help of his wife to build a payments company, Prepaid Financial Services, with a massive European presence.
And even though the couple have sold their prime asset, they could well appear on this list again. They now aim to sell their Ecomm Merchant Solutions business within the next decade, develop a €50 million fintech hub in Trim and bring a new five-star hotel to Meath.
Mergers and acquisitions may not have been as prevalent as in 2018 but one listed group gambled on a big change in strategy. Paddy Power owner Flutter Entertainment agreed to merge with Poker Stars in October to create a company with annual revenue of £3.8 billion. What this means in practice is that Flutter will increasingly target growth in the US – a fact probably most exciting to shareholders, but of little consequence to most punters.
Another significant deal that hit the sweet spot was the decision by US confectionary giant Hershey, known for its Kisses, Reese’s and Twizzlers, to take a minority stake in the fast-growing Irish snack brand Fulfil. How significant the stake is wasn’t disclosed but the expectation is that that the investment could help deliver consumer sales of close to €100 million for the protein bar brand this year – making it the second-largest confectionary brand in Ireland by sales behind Cadbury.
A major coup was pulled off by US-Irish investor David McCourt, who in November finally put his name to the agreement to deliver the National Broadband Plan. The deal paves the way for the start of the rollout of high-speed broadband to almost 540,000 premises around the State. It is, of course, a win for rural Ireland but there’s no doubt that McCourt has done well here. A process dogged by delays and controversies from the start was shunned by most of the State’s industry players as the projected cost of the scheme ballooned to nearly €3 billion – six times the original estimate. To the end, the deal flew in the face of advice from the Department of Public Expenditure, which strongly recommended against it being approved on the grounds that it no longer represents value for money for the taxpayer.
Look at that pile of corporate tax money we have lying around, we presume the Government said as it approved the plan – viewed in some quarters as the most significant infrastructure project since rural electrification.
As always, 2019 brought with it its share of award winners. Three stand out. First, the brothers behind payments company Stripe, Patrick and John Collison, picked up The Irish Times Business People of the Year award after their company was valued at $22.5 billion. The pair announced a $100 million follow-on funding round and confirmed plans to create hundreds of extra jobs in Dublin to coincide with it securing an e-money licence from the Central Bank.
It was a good year too for Supermac founder Pat McDonagh, who picked up the gong for EY Industry Entrepreneur of the Year. That followed an impressive legal victory against long-time rival McDonald’s in January that saw the US fast-food giant forced to relinquish its “Big Mac” trademark in Europe. McDonald’s has, unsurprisingly, appealed.
And finally, at least where the award winners concerned, it was a positive year for Devenish chief executive Richard Kennedy, who won the overall EY Entrepreneur of the Year award. Under Kennedy’s leadership, Belfast-based Devenish – which has evolved from an animal feed manufacturer to become an agricultural technology company – last year received €118 million in funding from the European Investment Bank as it looks to grow its revenue to £350 million within the next three years.
Some in the business world are winners not for the size of the deals they make or the numbers they employ, but for their appointment to high office. And this year was one for the finance wonks, specifically the Irish finance wonks who saw one of their own rise to the top. Well, near the top. In March, Philip Lane, formerly governor of the Central Bank of Ireland, was appointed to the European Central Bank’s executive committee having been shunned a year earlier when he applied to be the bank’s vice-president. It was May when he was confirmed as the bank’s chief economist.
It was also a good year for French economist and lawyer Christine Lagarde, who was appointed as president of the European Central Bank, leaving her role as director of the International Monetary Fund. She will, however, have taken a salary cut in moving from Washington to Frankfurt.
Back home, our stock market heavyweight CRH had a wonderful year but for one minor hiccup. The building materials giant posted record half-year results in August, with cash profits of €1.54 billion. Shares exceeded the highs last seen in 2007 although, much like the sale of Green Reit, we’re hoping this isn’t a bad omen. But it wasn’t all plain sailing for the management team, with activist investor Cevian saying the company could double in value in the coming years if it engaged in extensive restructuring and became less complex.
Still, with all that cash, there’s little doubt that CRH deserves a place on our winners list this year.
It was an entirely different industry – and one that seldom appears on this list – that produced our next winners. Film producers Ed Guiney and Andrew Lowe were responsible for the Favourite, a film which took in $96 million at the box office and in February won an Oscar. Guiney was among the nominees for a separate Oscar for the motion picture of the year category. With plenty more on the horizon for the pair, including television projects, there’s every chance their names will be recurring features on this list.
One name recurring this year is John Thero, the chief executive of Irish drug company Amarin. Having delivered clinical results in 2018 that showed its highly purified fish oil drug Vascepa reduced a variety of heart complications, including chest pain and procedures to clear clogged arteries by 25 per cent, 2019 saw the drug fast-tracked by the FDA in the US this year for approval as a treatment for reducing the risk of heart attacks and strokes. It has also applied for approval from the European Medicines Agency to sell the drug here. The company also raised its sales guidance for the year and said it remained optimistic the drug would “generate billions of dollars of revenue in the years to come”. Here’s hoping they don’t disappoint.
Finally, Sam Dennigan, the founder of frozen food business Strong Roots. Having grown his company from nothing in 2015, his products are now available in about 4,000 stores globally. In both Ireland and Britain, Strong Roots is stocked by all of the leading grocery retailers outside of the German discounters. But more important to its ongoing success is its move into the US with products such as kale and quinoa burgers, roasted beetroot wedges and sweet potato fries.
Strong Roots, which was named Local Enterprise of the Year at The Irish Times Business Awards, has been on the up throughout 2019 and in September it raised $18.3 million in funding from a New York private-equity firm. Not bad for a company that’s less than four years old.
Where there are winners, there must also be losers. While Ireland saw its fair share of corporate misfortune during the year, there’s little doubt that the most deserving of 2019’s biggest loser title is US aircraft manufacturer Boeing. If ever there was an annus horribilis, this was it.
In March, a cascade of aviation regulators around the world grounded all variants of the Boeing 737 Max aircraft following a crash in the same month of an Ethiopian Airlines flight which killed all 157 people on board. That followed a similar fatal incident five months earlier when Lion Air Flight 610 came down in Indonesia, killing all 189 people on board.
The issue has shattered Boeing’s reputation. And even though carriers have ordered almost 5,000 of the Max models, the ongoing concern will be how travellers react to being told they’re going to fly on what one British tabloid has rather insensitively dubbed the “Death Jet”.
To add insult to injury, it emerged later in the year that there was an issue with another, earlier generation of the 737. The US Federal Aviation Authority issued an urgent directive in October that all 737 NG models above 30,000 flight cycles (one take off and one landing) be checked for a crack in a component known as the pickle fork that attaches the wings of an aircraft to the fuselage.
It was a serious setback for an aircraft manufacturer but it paled in comparison with the Max failure which has already cost the company one head – in the form of Kevin McAllister, chief executive and president of Boeing Commercial – and a substantial decline in the value of its stock. Worst hit of all in the debacle, however, is its reputation.
Boeing’s failure caused some collateral damage in the airlines sector, albeit on a much smaller scale. Budget airline Norwegian Air was ultimately forced to retreat entirely from its Irish long-haul offering. In August, Norwegian came to the conclusion that its flights from Dublin, Shannon and Cork to routes such as New York, Boston and Toronto were “no longer commercially viable”. Norwegian had to hire out aircraft from other operators to keep the routes afloat until then as a fleet of Max aircraft lay idle on the tarmac at Dublin airport.
Ryanair has been forced to trim its passenger projections for next year as it became clear that the Max would not return to market in time to secure all the aircraft the airline had hoped to use to expand services.
Also in aviation, Cathay Pacific shelved its Hong Kong to Dublin flights until March as a result of civil unrest in the administrative region. They also warned in October that the remainder of this year would prove to be “incredibly challenging for the airline”.
For all the grim headlines in 2019, Boeing and the others will survive the Max crisis. One US company that will not live on in its current guise is OxyContin maker Purdue Pharma, formerly owned by members of the Sackler family, among America’s richest. The company reached an agreement in principle in September on a $10 billion settlement that will ultimately see the company run for the benefit of the claimants with all of its assets put in a trust. The US opioid epidemic, which stems from drugs such as OxyContin, has claimed hundreds of thousands of lives.
Closer to home, our corporate failures have been somewhat less dramatic but troubling nonetheless. Close to the top of the list is travel software company Datalex, which first alerted the market of suspected accounting irregularities in January, sending its shares tumbling. It subsequently confirmed that revenue and earnings for the first half of the last year had been overstated.
As the year went on, things got worse, with the company’s shares suspended in May as the company failed to publish its 2018 results. The results, finally published in early September, showed it made a net loss of €44.8 million. Its single largest shareholder, Dermot Desmond, stumped up cash during the year to keep the company afloat.
Keeping the house afloat wasn’t an option for celebrity chef Jamie Oliver, whose main UK restaurant business collapsed with the loss of about 1,000 jobs. The Irish operations were not affected by the failure which saw all but three of the group’s 25 UK outlets immediately shut their doors in May. Oliver is unlikely to have been much troubled personally by the collapse, which was one of many UK high-street failures in the year.
Lest we forget, Debenhams too fell into administration with its lenders seizing control. Sports Direct owner Mike Ashley had offered to underwrite a rights issue but that was ultimately rejected by Debenhams, which has earmarked 50 of its 165-store network for closure within the coming five years. Sports Direct took a roughly £150 million hit from the collapse.
Another businessman who crystallised a substantial loss during the year was Denis O’Brien. He is estimated to have spent more than €500 million accumulating a 29.9 per cent stake in the newspaper group Independent News and Media between early 2006 and the end of 2013. When the business was sold earlier this year, O’Brien’s cheque would have amounted to about €43.5 million.
To add to his woes, O’Brien’s Caribbean mobile operator Digicel endured months of negotiations before 98 per cent of holders of $2 billion of bonds due for repayment in 2020 agreed to postpone getting their money back until 2022. Digicel bondholders left holding almost $2 billion of subordinated debt in the company following a debt restructuring earlier this year are also out of sorts, with their new securities currently trading at between 16c and 25c on the dollar.
Concerns about getting money back will also weigh heavily on the mind of Japanese investor SoftBank after the complete flop of WeWork’s initial public offering (IPO) earlier this year. The company, which sublets office space, had planned to raise more than $3.5 billion in the IPO in a deal that would have valued it at $47 billion.
The failure of WeWork led to the most significant corporate dethroning during the year with the forced resignation of its illustrious founder Adam Neumann. Regrettably we don’t have the space here to regale you with the finer details of this debacle. But fear not, a Gulfstream jet was involved.
One company who won’t be much troubled by a corporate jet, or decent office space for that matter, was oil and gas explorer Providence Resources, which was forced to raise more cash from shareholders after Chinese backer Apec repeatedly failed to meet funding deadlines to develop the company’s most promising asset off the southwest coast of Ireland. Providence ultimately had to farm out the majority of its portfolio and it also announced its intention to vacate its former office to relocate to a smaller serviced facility.
As if that wasn’t bad enough, just last month the company lost its partner, French oil major Total, on a separate licence. With more funding required early in the new year, that seemed the final straw and long-time chief executive Tony O’Reilly jnr finally stepped down with immediate effect this month.
It wasn’t the only explorer to suffer a setback. Days after Mr O’Reilly’s departure Africa-focused Tullow also lost its chief executive Paul McDade along with exploration director Angus McCross as the company cut production forecasts and suspended its recently-restored dividend.
The announcement came less than a month after Tullow shares lost more than a quarter of their value as the company cut its 2019 output forecast for a third time amid issues at two oil fields off the Ghana coast in west Africa, and raised doubts about the commercial viability of two discoveries in Guyana in South America. Shareholders responded with alarm on McDade’s departure, knocking 72 per cent off the remaining value of the business and bringing its share down to levels not seen since 1999.
For Seán Dunne and Gayle Killilea, the events of this year capped off what has been a decennium horribilis. They pair have barely caught a break between the collapse of Mr Dunne’s corporate empire and their very public flogging.
This year, the backdrop to their troubles was the US justice system. It was June when a jury found against the pair over the illegal transfer of some assets to put them beyond the reach of creditors. Jurors awarded Mr Dunne’s US bankruptcy trustee, Richard Coan, €18.04 million, finding that Mr Dunne had fraudulently transferred certain property, cash and other assets to Ms Killilea. So far, so grim.
The trustee filed another lawsuit in July, seeking a further €25.2 million. And it has since transpired that the National Asset Management Agency and Ulster Bank are now pursuing Dunne in an effort to recover tens of millions of euro owed to them. Whether they’ll ever receive it is another matter: Dunne has told the US court he now earns just €200 a month.
Examinership has proved the saviour of many businesses in Ireland over the years but it wasn’t enough for a number of high-profile players in 2019. Celtic Pure, the Monaghan family-owned business supplying bottled water to the likes of Dunnes Stores, Londis, Applegreen and Lidl, was one, as it failed to find an investor after being forced into a product recall over elevated levels of arsenic in its products. A further quality issue that arose during examinership can hardly have helped.
Celtic Pure was also official water supplier to the Football Association of Ireland (FAI), which has had its own troubles for much of the year.
This was the year in which John Delaney, formerly Mr FAI, finally relinquished control of Irish football, although perhaps relinquish is too soft a word. His hands were prised off the FAI wheel end after a deluge of corporate scandals were revealed in the media. So deep were the issues, including loans to the organisation and questions over credit card usage, the Government has yet to resume funding to the FAI. And the Garda are now involved after a forensic audit was referred to them by the Minister for Sport.
Speaking of things that came to an end, this year marked the shutting of the printing presses for the Times Ireland edition, a sister paper to the Sunday Times. Indeed, media outlets are far from out of the woods despite the economic upturn. RTÉ was the highest-profile underperformer this year and was forced to turn to the Government with its arms outstretched. With no sign of a magic money tree in Budget 2020, the broadcaster laid out plans in November to save €60 million over three years. Among the money-saving measures were 200 job cuts, a 15 per cent pay reduction for “top talent” and the closure of RTÉ’s Limerick studio.
That prompted the Government to find €10 million down the back of the Department of Public Expenditure and Reform sofa as the Taoiseach urged the broadcaster to defer any decision on Lyric FM until a commission on the future of Irish broadcasting reports late next year. Maybe it’s best we reserve a space now on next year’s list for the beleaguered broadcaster.