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Enterprise Ireland records losses of €19m after failed investments

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Failed Investments

Failed Investments

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Failed Investments

Enterprise Ireland (EI) has defended its operations despite making a €19m loss last year after investing in new companies, the Sunday Independent can reveal.

Correspondence from EI Chief Executive, Julie Sinnamon, seen by this newspaper, reveals that EI made a gross loss of €18.6m on the disposal of its investments and write- offs. The document states that write-off losses due to the liquidation of EI client companies amounted to €11.2m during the year.

The largest single loss on shares by EI in 2013 was €9.8m in Dublin-based TVC Holdings.

In May, TVC said it was effectively shutting up shop because it couldn't find any companies to invest in. It announced plans to distribute more than 90pc of its assets to shareholders and delist from the Dublin and London stock exchanges by July.

"This was resulting from the sale of shares held in a publically listed Fund Investment," Ms Sinnamon said in correspondence to the Public Accounts Committee (PAC), which demanded an explanation for the losses.

The hit taken on TVC was one of the biggest single investment losses suffered by the semi-state company.

Enterprise Ireland said it had originally invested in a fund which it hoped would put money into businesses to help them grow. But the public value plunged, Enterprise Ireland said.

The documents also reveal that net losses on equity investments from share sales for 2013 alone amounted to €7.3m while dividends paid from profitable companies totalled €3m in 2013.

Ms Sinnamon said that a profit of €61m was made on all of the agency's equity investments between 2003 and 2013. She also said that the investment return to the taxpayer from share sales and dividends during the decade up to the end of 2013 was €81.5m.

Defending the agency's operations, Ms Sinnamon said that when EI decides to invest in a client company it is only after undertaking an extensive commercial due diligence on the company. EI also seeks that the company raises an equal or greater amount of matching funding from the private sector.

"The majority of investments made by EI are in SMEs, mainly early stage innovative companies who are generally higher risk investments with a greater risk of market failure," she said.

The EI investments are aimed at helping the development of Irish companies operating in world markets and seek to fill a gap in the availability of adequate financial backing from banks, she added.

EI invests primarily by way of redeemable preference share investments. In 2013, EI-backed companies achieved their highest ever level of exports which totalled €17.1bn, which was an 8pc increase on 2012.

PAC member, Fine Gael TD Aine Collins said such failures have to be expected.

"I would be far more worried if EI did not incur losses in their investments. I hope one of the good things that will come out of the recession is that culturally our attitude to failure will change. If we are to be a truly entrepreneurial country - which we have to be for sustainable growth - then failure or innovative failure has to be a big part of that story," she said.

Sunday Independent