Monday 18 December 2017

Business Confidential: Desmond and McManus will face the might of Michael O'Leary at Cheltenham

Michael and Anita O'Leary with a pal
Michael and Anita O'Leary with a pal

The Insider

Desmond and McManus will face the might of Michael O'Leary at Cheltenham

Cheltenham is the one time of the year when drinking in bed isn't seen as a worrying sign. It's also a time when some of the country's richest and most powerful business titans do battle for equine bragging rights.

Ryanair's billionaire boss Michael O'Leary has the biggest raiding party to leave the shores, with his Gigginstown Stud holding a staggering 120 entries in races over the four-day festival. That's far more than anyone else. Obviously, some are duplicate entries and others will be pulled out before the race.

It's far bigger than fellow billionaire JP McManus's delegation. He only has 89 entries.

Another billionaire, Dermot Desmond, has his Derryvoss entered in three races but again it's not clear where it will run, if at all.

Icon founder Ronan Lambe won the Gold Cup with Lord Windermere two years ago. His Springheeled is entered in the Cross Country Chase.

Other runners owned by well-known business people include a bunch of horses from Barry Connell, one of the founders of Merrion Capital and later Rockview Capital.

Cork warehousing magnate Edward O'Connell has Un de Sceaux in the Queen Mother Chase on Wednesday.

O'Leary won the Gold Cup in 2006 with the epic War of Attrition. This time, he's got the supremely talented Don Cossack heading the betting at 7/2 and Don Poli not far behind. He's got five entries in total for the Gold Cup.

Ryanair may still be tight with money but it is ponying up for some mega-sponsorship of O'Leary's favourite sport. It now sponsors the Ryanair Chase and the Ryanair World Hurdle on Thursday. His Road to Riches and Valseur are the second and third favourites in the Chase, with Prince of Scars probably his best chance in the World Hurdle.

While the sport of kings is a hobby for O'Leary, it's not without its financial rewards. Since 2010, his gee-gees have won €13.56m. This season alone, O'Leary's 531 runners have trousered €2.72m. His strike rate is better than it has been for a couple of years too, with 24pc of his horses delivering the goodies.

However, backing O'Leary is a mug's game. For ever €1 punted on his horses this season, you'll lose a rather unpleasant €5.31.

Ryanair shares on the other hand - despite a curious move into kitting out of business charter jets - seems a far smarter gamble.

Glanbia audit shake-up: PwC out, Deloitte in

One of the most high-profile audit gigs in the country has just changed hands. Feargal O'Rourke's PwC has been bumped by Glanbia's Siobhan Talbot to make way for Brendan Jenning's beancounters at Deloitte.

PwC has had the contract since the Avonmore and Waterford Food merger that created Glanbia back in 1997. However, the Glanbia audit account isn't quite as peachy as it once was. Traditionally, the big accountancy firms send in the brown suits to do the audit and form-filling grunt work.

The real money comes from advice - particularly with regard to cutting tax bills. This is provided by partners in better shoes.

Over the last three years, this higher-value service has made up between 57pc and 66pc of the billings from PwC. Last year, PwC earned €3.35m from Glanbia. Their advice certainly helped slash Glanbia's corporate tax bills, giving it an effective tax rate of about 17pc, which isn't bad, given the scope of its global operations, which includes places with far, far higher tax rates than Ireland.

The dairy and nutrition firm has been able to pay less tax than it thought by using a series of approved schemes, including moving close to €1bn to companies in Luxembourg with no employees at all.

Details of these transactions came to light as part of the 'Lux Leaks' in 2014, when details of advanced tax arrangements (ATAs) were published by the Washington-based International Consortium of Investigative Journalists.

Responding to the Lux Leak revelations, Glanbia said that it "took great care that we met our legal, compliance and disclosure requirements".

However Glanbia has now decided that it won't be paying its auditors big bucks to come up with clever new wheezes to reduce its tax bills. The firm has said that it anticipates that the level of non-audit fees will "reduce significantly" in 2016, as it has decided to restrict the external auditors' involvement in due diligence and "taxation consulting services" on the back of new moves in Europe.

In other words, the partners with the good shoes may not be required as much.

Tesco could pull trigger to buy back 3 stake

Robert Finnegan and his team at Three have got to be looking at what they can do with the 50pc stake in Tesco Mobile that they acquired as part of the €750m buyout of O2's Irish operations two years ago.

Tesco Mobile has 3.6pc of the Irish mobile market (based on revenues), according to telecoms regulator Comreg. With Vodafone having 42.2pc, Three 34.2pc and Eir 18.8pc of the market revenues, it's clear that Tesco Mobile is going nowhere fast. Unless something major happens.

Tesco's group chief, Dave Lewis, had considered selling off the entire Tesco Mobile business as he sought to shore up the retailer's creaky balance sheet last year. But now the group looks more likely to diversify out of the savage grocery environment into something slightly higher-margin.

Following its €12bn buyout of O2 in the UK, Three is under pressure to satisfy competition regulators that it won't dominate the mobile market. Financial modelling by competition czars has suggested that if Three's purchase of O2 is rubberstamped by regulators, prices could rise by 6pc. However, offloading its interest in Tesco Mobile and allowing Tesco to make a serious stab at growing market share could see prices increase by just 1pc.

There are suggestions that Tesco is interested in buying out the Three stake in the UK for about €360m - but only if it can ink a good long-term capacity deal on the Three network. Given that Three's owner, Hutchison Whampoa, has invested over €1bn in breaking into the Irish market - both in a big cheque for O2 and seriously heavy operational losses - a call from Tesco Ireland boss Andrew Yaxley may not go unanswered.

Sunday Indo Business

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