Business 2018: the winners and the losers
The last 12 months proved to be another year of mixed fortunes in corporate Ireland
Aryzta had an unremitting bad year and was the standout corporate loser of 2018. Photograph: Reuters
It was another year of mixed fortunes in corporate Ireland. The economy continues to be the fastest growing in Europe while the live register fell to levels suggesting we are near full employment. The Government’s coffers are bulging thanks to record corporation taxes.
On the other side of the coin, Brexit continued to cast a cloud over the business community here with no certainty yet about the shape of a future deal between the United Kingdom and the European Union and the clock ticking down below 100 days. And the housing crisis is proving a major drag on the economy, with supply still far too low to meet demand from aspiring homeowners and those looking to rent.
Property developers and bankers had much to smile about but retailers had another tough years, and issues around data privacy impacted the big tech companies.
Leading the winners list must be Séamus Mulligan, the chairman and chief executive of Adapt Pharma, who agreed a deal in August to sell the company for $635 million (€554 million) up front.
A seasoned pharmaceutical industry veteran, Mulligan and his team sold Adapt to Emergent BioSolutions having developed a drug used to battle the US’s burgeoning opioid crisis.
Mulligan, who owned just over 80 per cent of Adapt, is a serial entrepreneur who has had successes in this sector before with the $500 million (€436 million) all-share sale of Azur Pharma to Jazz Pharmaceuticals in 2012.
There were pharma names aplenty among the winners this year, in fact. In Loughrea, Co Galway, the privately held Chanelle Group embarked on yet another expansion phase. Rather than winding down, Chanelle’s 71-year-old owner, Michael Burke announced an €86 million investment plan.
The former vet has built his business to become an international giant in animal and human generics, and he’s done it without ever having to move from his homeplace.
Another Galway business, Novate, was acquired in a deal that could earn its investors up to $150 million (€131 million). Having taken 12 years to develop a device to stop potentially fatal blood clots entering the lungs of patients after surgery, the company was sold to UK group BTG for $20 million (€17 million). If the therapy that has been approved by US regulators proves a success in sales terms, the former owners are in line for an additional $130 million (€113 million) payout.
For John Thero, it was also a bumper year. Having had his battles, the chief executive of Irish drug company Amarin released positive news on his Vascepa drug which showed that it reduced a variety of heart complications, including chest pain and procedures to clear clogged arteries by 25 per cent. Amarin’s shares are up more than 260 per cent this year on the back of its successes.
Fruit of the boom
There was no shortage of corporate M&A this year and another winner must be drawn from that subset of dealmakers. Total Produce chairman Carl McCann is one, after the company he founded acquired an initial 45 per cent stake in Dole, one of the largest producers of fruit and vegetables in the world.
In a move which McCann believes was the “single most positive step in our company’s history”, Total Produce handed over $300 million (€262 million) for the stake which significantly increases its presence in North America.
A series of acquisitions throughout 2017 in addition to the Dole purchase has pushed Total Produce on to offer substantial rewards for its shareholders. In August it said profit rose 19.4 per cent in the first half of this year.
Glanbia’s Talbot feasts on success
Total Produce wasn’t the only busy buyer in the food space: Kilkenny-based Glanbia moved to increase its exposure to lifestyle consumers this year with the purchase of diet brand SlimFast. The $350 million (€305 million) deal also included nutritional supplement brands Healthy Delights and Nu-Therapy.
It was a good year for chief executive Siobhán Talbot as well. In May, Talbot was named The Irish Times Business Person of the Year for her efforts in overseeing a deal to spin off Glanbia’s Irish dairy and agribusiness operation into a joint venture.
Now, Glanbia plans to boost revenues by over a third to €5 billion by 2022 as it grows into new markets and bolsters existing ones. In July, the company reinforced its position as Europe’s leading mozzarella cheese manufacturer with plans to open a new €130 million production plant in Co Laois.
‘Two boggers from Cork’
Moving away from food and into the technology sector, the two businessmen behind Teamwork.com, who refer to themselves as “two boggers from Cork”, firmly deserve their place in the winners list. In October, Peter Coppinger and Dan Mackey scooped the prestigious EY Entrepreneur of the Year overall award, having impressed judges for their ingenuity and innovation.
Teamwork.com, a software-as-a-service company which creates business management applications, counts many of the world’s most influential companies among its clients including Disney, Netflix, Forbes, Paypal and Spotify. Founded in 2007, it remains a privately owned company that has never received any outside funding and both its founders maintain ambitious growth plans.
“We ultimately want to be a billion dollar company and, for us to achieve that, we need people. And winning an award like this help put us on the map,” Coppinger said when they picked up the EY gong.
Hunt gets ahead of the pack
On to banking and while relatively little is known about Colin Hunt’s year as a whole, he certainly had a positive December. So positive, in fact, that he makes our winners list.
The veteran finance executive took one of the most coveted banking jobs in the State this month when he was appointed as AIB chief executive. Well, perhaps not coveted but high profile at least. Succeeding Bernard Byrne, who announced in October he was leaving the bank to join stockbroking company Davy, the appointment of Hunt – a former economist at rival Goodbody – is expected to take effect “early next year”.
Hunt joined AIB as managing director of wholesale and institutional banking, having been poached from Australian banking group Macquarie in 2016. His latest appointment comes at a time when Irish banks are seeking a change in government rules to allow the return of bonus plans. Hunt will receive a salary of €500,000 plus a pension at the bank which last year returned to stock markets.
Packing a punch for independence
Elsewhere, the influential Smurfit family of paper and packaging fame can count their blessings this Christmas, having avoided a takeover of the company that bears their name earlier in the year.
Smurfit Kappa, led by chief executive Tony Smurfit, fought off an unwanted €9 billion takeover approach from US rival International Paper. Smurfit and his board remained resolute in their assertion that the offer fundamentally undervalued the group, despite pressure from a select group of shareholders to consider the deal.
Then, in early July, the company closed its €460 million takeover of Dutch company Reparency, illustrating its determination to among the leaders in Europe’s packaging industry.
While the Smurfits have a relatively small shareholding in the company, Tony is the third generation of his family to take the helm of the group having been appointed in 2015.
But it wasn’t all good. In the summer, the company’s Venezuelan operations were seized by the Caracas government amid complaints about prices the company was charging for its products. That led to Smurfit ultimately writing down €60 million of its net assets.
Sky’s the limit for media giant
And finally, international media mergers continued apace this year led by the high-profile battle for Sky. Ultimately, Comcast won out with its £30.6 billion (€33.8 billion) bid for Sky, trumping 21st Century Fox and Walt Disney. Valuing the business at almost £4 billion (€4.4 billion) more than the Disney-Fox bid, Comcast’s offer brought an end to Rupert Murdoch’s long association with the business he founded in 1989.
For now, this most certainly appears to be a win. Time will tell if Comcast can make hay with its Sky ownership.
Christmas behind bars
And so to the losers. Annual readers of this piece will be familiar with a number of the names that make this list but there is no shortage of new entrants.
Few will forget Drumm’s dramatic fall from grace which culminated in June, with a six-year jail sentence over his failures when he led the collapsed Anglo. Drumm was ultimately found guilty of conspiracy to defraud and false accounting relating to €7.2 billion in deposits placed in Anglo’s accounts by Irish Life and Permanent.
Having been found “not remotely credible” two years earlier in a US court, Drumm will be spending this Christmas in the slammer. And while he may never return to our winners and losers list again, he will eventually return to normality, likely serve just over 3½ years before being due for release.
Executives encountering legal troubles was something of a trend this year. Well, perhaps not a trend but it happened more often than one should reasonably expect.
As 2018 moved to its close, Carlos Ghosn, Japan’s most celebrated foreign executive was arrested, and ultimately charged with under-reporting his income by millions of dollars.
Irish businessman Peter Conlon was released just before Christmas, having spent the previous 12 months in detention in Switzerland. Conlon received a three-year sentence in November, two of which were suspended, after pleading guilty to using almost €4 million that was intended for charities to fund his technology company. Now that he has been released, Conlon will be in a position to make himself available for a February hearing in Dublin connected to the liquidation of a company with links to his Swiss operation.
Power outage for Elon
Across the pond, Elon Musk was unceremoniously dethroned as Tesla chairman (although he remains chief executive) after misleading investors with tweets in August that said he was considering taking Tesla private at $420 (€366) a share and had secured funding.
Musk, who has certainly had a tough year otherwise with outbursts at journalists on a conference call and on an episode of a popular US podcast in which he smoked marijuana, also agreed to pay $20 million (€17 million) to financial regulators.
Very unsocial media giants
In November, Google staff in Dublin joined thousands of colleagues across the world in staging a workplace walkout in protest at the company’s lenient treatment of executives accused of sexual misconduct. The Walkout for Real Change protest came a week after it emerged that Google gave a $90 million (€79 million) severance package to Andy Rubin, the creator of the Android mobile phone software, but concealed details of a sexual misconduct allegation that triggered his departure.
The technology giant was also fined a record €4.3 billion in the summer for the abuse of a dominant market position by its Android mobile phone operating systems. This followed a 2017 fine of €2.4 billion for Google’s abuse of its market position in favouring shopping services in internet searches.
And then there’s Facebook, which makes Google’s misdemeanours appear like mere slap-on-the-wrist offences.
Trust in the social media company was shot after a catalogue of scandals, including a data breach involving British political consultancy Cambridge Analytica, which saw Facebook at the centre of a dispute over alleged harvesting and use of personal data. Those allegations swiftly led to concerns that the data could have been used to try to influence the outcome of the 2016 US presidential election and the Brexit vote.
In July, Facebook was also exposed for flouting its standards of content moderation. A Channel 4 investigation revealed a series of failures to remove content flagged as inappropriate. The work is outsourced to Dublin-based company CPL Resources, which has worked with Facebook since 2010.
Last month it faced further negative commentary when it hired a lobbying company that pushed negative stories about its critics, including the billionaire philanthropist George Soros. And, in the week before Christmas, the social media group was again in the dock following disclosures that, since 2010, it had given more than 150 “partners” – mostly tech businesses like Netflix, Microsoft’s Bing and Spotify, but also online retailers, entertainment sites, automakers and media organisations – more intrusive access to users’ personal data than it had disclosed, effectively exempting them from its usual privacy rules.
Mark Zuckerberg, Sheryl Sandberg and their team will undoubtedly welcome the end of 2018 and with another US presidential election on the horizon, will be hoping to avoid recent mistakes.
Apple loss is Athenry’s pain
Apple has not been a loser this year, or at least not so that it makes our list, but it deserves special mention because of what happened in Athenry. The Galway town very much lost out when Apple decided to pull an €850 million investment in a data centre there. The locals were in favour for the most part. A handful of naysayers, however, drove Apple out like Saint Patrick did the snakes. Perhaps, in years to come, the naysayers will be celebrated. But for now, there’s a bitterness lingering around the fields of Athenry.
Retail gloom costs designer Orla Kiely
One Irish entrepreneur whose stock went out of fashion this year was designer Orla Kiely. Along with her husband, Dermott Rowan, Kiely led the brand that had her name over the door until its untimely collapse on the high street this year. With debts exceeding £7.25 million (€8 million), the fashion brand’s retail empire abruptly announced its closure as of September 17th.
Kiely’s business, which first came to prominence for her colourful prints on handbags that were later applied to everything from biscuit tins to ceramics, faced “various challenges”, which led to its untimely closure.
While the closure of Kiely’s business sent shocks across the retail world, it wasn’t an isolated incident in a year in which the high street – more so in the UK than here – was battered. For House of Fraser, it was a case of hopping out of the frying pan to go into the fire after the beleaguered chain was acquired by Sports Direct owner Mike Ashley, the billionaire owner of Newcastle Football Club, in a deal worth £90 million (€100 million).
When it filed for administration, House of Fraser had debts close to £1 billion (€1.1 billion) and creditors of the company’s Dundrum store were owed about €2.8 million (€3.1 million).
Elsewhere, Debenhams, in which Ashley has a 28 per cent stake, had yet another torrid year resulting in the announcement that it is to close 50 of its underperforming stores, putting about 4,000 jobs at risk. A series of write-downs in the business led to a record full-year loss of nearly £500 million (€553 million) at the struggling retailer.
And hopes that at least the lost high street sales were being hoovered up by online retailers were dashed this month when Asos published a miserable trading statement warning that sales in the “very material month” of November had been “significantly behind expectations”. The update, which triggered a 40 per cent plummet in its share price and some unpleasant drops for other retail stocks, was notable because it comes at a time when the retail business is undergoing a structural shift in favour of pure-play ecommerce operations just like Asos.
Collapse and collateral damage
While retail bricks-and-mortar may not be in vogue, Ireland is again witnessing a construction boom. But that doesn’t mean there weren’t casualties. The collapse of British construction giant Carillion left over 30,000 small companies owed money. On these shores, Sammon Contracting subsequently went into liquidation with the loss of 200 jobs. Sammon found itself in difficulty in January after the suspension of a public-partnership school building project, to which it had been appointed as a sub-contractor by Carillion.
Speaking of public projects, the ungainly fiasco involving the national broadband plan claimed a casualty this year in the form of Independent TD Denis Naughten. Formerly the minister for communications, climate action and environment, Naughten was forced to resign after it emerged he held a series of private meetings with David McCourt, the lead investor in the last remaining consortium bidding for the rollout of rural broadband.
Passengers left high and dry
In the transport sector, Irish Ferries owner Irish Continental Group (ICG) was dogged by delays, first in delivery of a new ship, the WB Yeats and then to repair issues with an existing one that led to cancelled sailed and disgruntled customers. Discommoded passengers were also an issue for Ryanair as it tried to get to grips with a new industrial relations model that involved recognising trade unions. As the year closes, the airline is still battling pressure to pay compensation over disruption to passengers.
A stock market flotation would generally be cause for cheer rather than mention in this section, but the long-planned flotation of plastics group IPL Plastics, formerly One51, has not delivered as investors would have hoped, with the company’s market cap falling by about a third since its IPO last summer in Toronto.
Not-so-fabulous baker boys
But the standout corporate loser of 2018 must be Aryzta. No, the Swiss-Irish baking group didn’t collapse; no, there weren’t any executive scandals; it just had an unremitting bad year. Having issued yet another profit warning in May, Aryzta ultimately returned to markets to raise €790 million in a contentious rights issue that was narrowly approved as it looks to effect a major restructuring and reduce its debt.
And even in that, it managed to alienate a group of its original IAWS shareholders, who found themselves effectively disenfranchised and with just a tiny fraction of their original investment. Aryzta’s presence on the losers list is unlikely to be the biggest headache for its executive team this Christmas but they’ll most certainly be hoping that their strategy starts to pay off in 2019.