ISEQ Overall Index disappoints share investors with tepid performance in 2011
Published 29/12/2011 | 05:00
INVESTORS in Irish shares saw a tepid performance from the ISEQ Overall Index this year. The index was down around 1.4pc towards the end of last week.
That disappointing performance was considerably better than most European indices but the ISEQ's reprieve came after several disastrous years of underperformance.
The two-year return on the ISEQ is now running at minus 3.2pc while the five-year return is minus 21pc.
It could have been worse. Like most indices, the ISEQ collapsed in August and then again in September when it fell as low as 2,366 points or more than 500 points below present levels as the sovereign debt crisis entered its most turbulent period.
While the index was briefly lower than this in 2009 it is a sad fact that the ISEQ is now back to 1995 levels. Wealth destruction on this scale is almost unprecedented but a sad fact of life for investors in Irish shares.
The fact that the ISEQ hardly moved in a year when the IMF rode into town suggests that the market has priced in almost everything at this stage.
So, who bucked the trend? Very few companies is the answer. Hardly any share outside the top 10 posted any growth at all this year and several shares in the top 10 were doing little more than recouping last year's losses.
Top performer in 2011 was Elan, whose shares have soared 141pc in the past 12 months.
Next up was Datalex, which saw a 75pc increase, followed by Paddy Power (up 38pc), AGI Therapeutics (up 35pc), Kenmare (up 35pc), Glanbia (up 24pc), TVC Holdings (up 12.3pc), Kerry Group (up 11pc) and CPL Resources (up 2.8pc). Rounding out the top 10 was Total Produce, which rose 2.7pc.
Some of the reasons for these advances are universal and some of the reasons are company-specific. Elan gained as the company finally put several legal issues to bed, began paying off debt and looks set to benefit from some of its drug portfolio.
Kenmare, which is effectively a giant titanium mine, also did well as commodities had a reasonable year and the mine in Mozambique began to show signs of ramping up production.
The obvious sector to benefit is the fashionable food area, with both Glanbia and Kerry featuring in the top 10.
It's been a particularly good year for Glanbia, which has been consistently well led by John Maloney for many years now.
Mr Maloney had the good fortune to take the helm after a series of setbacks and the dogged Waterford man has slowly turned the company around so that it is close to being a stock market darling. Kerry's performance has been less spectacular but more consistent.
The big story over the past few years has been the dizzying collapse of bank stocks and the gradual defection of large companies to the London stock exchange.
CRH's decision to move its primary listing to London earlier this month was the biggest in a long line of recent defections from Dublin to overseas exchanges of food companies Greencore (due to move in 2013 if it still around) and Aryzta, which moved its primary listing to Zurich.
DCC meanwhile told shareholders earlier this year that it is "actively monitoring" the possibility of moving its primary listing to London and switching its reporting currency to sterling.
AIB and Irish Life Permanent have delisted from the main market and are now quoted on the junior Enterprise Securities Market (ESM), while other companies such as Boundary Capital and McInerney Homes have delisted from the ESM as they ran into difficulties.
Defections like this are normal from time to time but the really worrying thing for the Irish Stock Exchange is that there are no replacements coming down the tracks.
Successful companies such as Clonmel-based Kentz have ignored Dublin and gone straight to London as have the dozen or so companies founded by serial entrepreneur John Teeling.
While the future of the Irish Stock Exchange might appear to be of little direct relevance to investors, it could have an effect on share prices if the exchange were allowed to die.
The few funds still tracking the ISEQ would have to be dissolved while smaller companies would be forced to move to London's AIM, where they would be minnows among shoals of other minnows.
The sad fact is that the now regular defection of Dublin-listed companies to London and elsewhere poses a threat to company values as well as robbing Irish businesses of an alternative method of raising cash.