Business World

Sunday 17 December 2017

The business week in 60 seconds with Colm Kelpie

Ryanair investors renew their faith, despite dip in profits

Michael O’Leary: An up and down sort of week.
Michael O’Leary: An up and down sort of week.

IF only every slump in profits could be treated by investors in the same manner. Ryanair's results last week revealed its first fall in profits in five years, but shares rose by more than 10 per cent.

The profit fall wasn't unexpected, given last year's warnings, and investors were then buoyed after the airline predicted a profit rise of up to 18 per cent this financial year.

The carrier blamed the 8 per cent fall in pre-tax profits on a decline in fares, the warm summer last year, weak sterling and higher fuel prices.

But passenger numbers are expected to rise by more than 4 per cent this year to 85 million, leading to a predicted bounce back in profits.

GREENCORE FRESHER THAN EVER

IT was really a week of company results and most of them were positive – none more so than for convenience food giant Greencore, which aims to double its sales in the US as it steps up plans to take a bigger bite of the market.

Shares in the London-listed firm rose by almost 5 per cent as it reported operating profits soaring by 14 per cent in the first half of the year to €45.73m, while revenues grew by 8.2 per cent.

It announced plans for a £30m (€37m) investment in a sandwich maker in Northampton, Britain to sell more to its largest customer, M&S. The deal follows multi-million investments in the USA, in a food plant in Minneapolis and sites in Jacksonville and Rhode Island.

VODAFONE HANGS UP ON €8.1BN

IT wasn't overly positive for Vodafone Group, however. It announced that it had written off €8.1bn across five European countries while vying for business in different markets.

It was a mixed picture for the telecoms giant, with a strong performance in emerging markets but with difficult conditions in Europe due to economic, competitive and regulatory challenges.

In Ireland, the company said it enjoyed a 14 per cent increase in contract customers and maintained its total customer base of 2.4 million.

SBCI TO BE RUNNING THIS YEAR

ON Thursday, the Government unveiled its latest scheme to try and revive lending to small and medium businesses.

It is hoped that by the end of the year the new state-backed company will be up and running, facilitating potentially cheaper loans on more favourable terms to SMEs. More than €500m will be initially available, with lending expected to start by the end of the year.

Under the scheme, existing high-street banks will borrow from the Strategic Banking Corporation of Ireland (SBCI) and lend to SMEs. The banks will assess the risk of lending and will continue to hold that risk. But the lenders must demonstrate that the lower cost of sourcing the funds is passed on to SMEs. This is needed in order to avoid breaching European state-aid rules.

SBCI will have a lower cost of funding, providing a potentially cheaper option for businesses to access financing. Money will initially come from German development bank KfW, the Ireland Strategic Investment Fund (ISIF) and the European Investment Bank (EIB).

But preliminary discussions are also under way with Banque Publique D'Investissement to secure more funding. There are also plans to engage with development banks in other member states.

HP WIELDS THE KNIFE YET AGAIN

IT'S a bleak situation for Hewlett Packard. The computer company revealed plans to cut by as many as 16,000 staff across its operations worldwide in another attempt to turn the business around.

It's the latest attempt by CEO Meg Whitman to try and revive the company's flagging fortunes.

HP, whose sprawling global operations employ more than 250,000, estimated about three years ago when it first hatched its sweeping overhaul that it would need to shed 27,000 jobs. That number rose to 34,000 last year.

On Thursday, it estimated another 11,000 to 16,000 more jobs needed to go, scattered across different countries and business areas.

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