Business Irish

Saturday 30 August 2014

St Patrick's Day massacre is a distant memory for ISEQ stars

Padraic Halpin

Published 18/03/2014 | 02:30

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Where are Ireland's biggest listed companies six years after the St Patrick's day massacre?

Though the memory of the St Patrick's Day massacre still lingers – that catastrophic day in 2008 when more than €3.5bn was wiped off the value of Irish stocks – things are looking up for Ireland's largest public companies.

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Executives at the country's biggest listed corporations are confident that half a decade of weak earnings, gloomy outlooks and shrinking dividends are behind them and that the economic upturn under way is sustainable and sensible.

Last week one of our banks turned a profit for the first time since the downturn, its main state-owned rival said it would soon be investor-ready and the largest builders' merchant said recovery had taken hold.

Meanwhile, unemployment is falling below the eurozone average, consumer sentiment is hitting a near seven-year high and mortgage arrears are stabilising.

"We're probably more confident about the economy than we have been in any time in the last six years, and the last six years have been very tough for us all, for Irish people and for Irish companies," Andrew Langford, chief executive of general insurer FBD, said.

"It is still difficult on the ground but there are a number of very encouraging signs. It looks like there might be a rise in consumer demand this year, which follows six years where it has fallen by a total of 25pc, an incredible figure."

While the home market is of less significance to major international players like builders' supplier CRH and airline Ryanair than ever before, FBD is one of the few Dublin-listed companies that is 100pc geared to recovery at home.

The insurer, which has just upped its dividend by 16pc, said in recent days that the level of cover being demanded is finally on the rise following a contraction of 15pc.

The number of new cars licensed jumped by almost 50pc in January, while the property market has begun to rebound with prices in Dublin up 14pc compared to a year ago.

Signs of life in the property market are also being felt by building merchant Grafton, whose profits rose 27pc last year.

Among the most bullish about Ireland's prospects, Grafton – which has cut its workforce by a quarter – said there were few risks to the 7pc rise in building merchanting slowing as builders' order books fill up and the Government renews its focus on the construction sector.

"I think the risks are relatively low but I do think it will be quite a gradual, shallow recovery rather than necessarily a significant spike upwards," said chief executive and industry veteran Gavin Slark.

"There's always risks in any economic cycle but the really positive thing about Ireland is if you look at the depth of the downturn, there's an awful lot of pragmatism now in terms of people making sure the recovery is sensible and sustainable."

The main concern shared by the country's top executives is that an external shock or slowdown in growth abroad could stop Ireland's open-economy achieving the 2pc growth needed to start reducing one of the highest debt levels in Europe.

An event outside Ireland is the biggest risk, according to Bank of Ireland chief executive Richie Boucher, whose bank returned to profit in the first two months of this year. Two investors who kept it out of state hands in 2011 tripled their money last week when they sold part of their stake.

Recovery stories like Bank of Ireland's have helped the ISE rise by 14pc this year to almost three times its 2009 level, although it is still at just a third of the value hit during the heady times of the Celtic Tiger economy.

For Allied Irish Banks, which said last week that it hoped to begin reducing the State's 99pc holding from next year, the risks are the same.

"The real exposure for us is European growth and not the Irish domestic. I think we've done a lot and it seems like the Government is very disciplined and will execute the rest," chief executive David Duffy said.

"You're so geared towards the export universe, European growth and the UK market, you need growth in those to be able to step beyond the 2pc mark on GDP."

The signs from abroad so far look good, with eurozone private businesses enjoying their fastest growth rate in over two-and-a-half years last month.

But with an economy whose exports are worth more than the total size of the economy, Ireland's growth story needs that narrative further afield to continue.

"At the moment it looks like Europe's larger economies are emerging from recession but any shock won't be good for what still is a fragile economic growth story," said FBD's Mr Langford.

Irish Independent

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