Magills Financial Diary - Jan. 1978

UDT - From the way Willie Sandys (as in Braids) writes his chairman's report for U D T (Ireland), you would never think that this was a subsidiary of the second biggest U K finance house that was only saved from disaster by the 'lifeboat' the Bank of England launched in 1974.

In total, UDT was beholden to the Lifeboat fund for £400 million due to massive withdrawwals of deposits. In Ireland howwever, there ·does not seem to have been any drain at all, possibly because the very people who put money into companies like this have absolu tely no idea of the risk profile involved.

Denis Bernon has thus been able to push U D T forward despite its English parents' prooblems. Last year deposits rose by 23% to £38'14 million and, not surprisingly, apparently all of its £'I4m. net profits is paid out in dividends to London, but with Irish Life, of course, getting its 25% share, in lieu of its holding of a quarter of the Irish commpany's equity.

Merck Sharpe & Dohme

After the Schering Plough disasster, the Mayor of Clonrnel, Hubert Burke, must be delightted with the news that the other pharmaceu tical gian t, Merck, Sharpe & Dohme intends to expand its Clonmel plant.

This expansion will cost £7V2 million and will add a near 20% to Merck's Clonmel capacity. However, employment will only get 'a modest increase' which on the basis of the existing workforce of 185 people, will mean no more than 25 extra new jobs.

On this basis this means that the capital investment will come out at a phenomenal £300,000 per job. Merck is an IDA client of course, so this situation is not a bit surprising but it is a damn disgrace that State money should be ploughed into proojects like this which, whatever else, are grossly ineffectual job creators.


The ESB 's professed image of itself is one of a relatively effiicien t organisation that charges its consumers fairly competitive prices. A recent surv.ey however shows that, as many industries have though t, the E S B really puts in the boot in a number of categories.

In ligh t engineering charges, for example, the E S B 's rate is 2.44p· per unit. In the UK., the same sector can get a supply at 1.83p per unit, showing that the E S B charge is 33% more than this. The worst single case however, was for commercial premises. The E S B. here charges 3.25p per unit.fhis looks simply outrageous against the 1.4 2p per unit that is charged in the UK

The only consolation for Irish industrialists in this was that in some cases, the Northern Ireland Electricty Board charged almost as much as the E.S.B. The Quigley Report saw this as one of the major disadvanntages of operating in the North. The E SB is thus one factor that holds back the level of Irish competitiveness.

Roy Mason has now done something about electricity charrges in the North. These have been subsidised by around one-third This will further aggravate the dilernma j., of labour 'intensive industries in the twenty-six counnties. The £20 per-head tempoorary employment subsidy in the North was specifically identified by companies like Castleguard Textiles and A ETas the main problem. Electricity charges will now have to be added to this anomaly.

Shield Insurance

Of all the companies quoted in Ireland, the Shield Insurance Company has by far the most convolu ted capital structure. This originally arose because of the 1936 Insurance Acts whereby it was impossible for foreign companies to own Irish insuurance groups. Shield did not have the resources to trade inndependently, it had to get a backer, and this is why the commplex arrangement arose.

Because of this and all the priority charges Eagle Star have over any profit earned by Shield Insurance, together with the fact that the ordinary shares are only half paid up and thus liable to call on shareholders at any time for a further SOp, trading in these shares has been almost non-existent. This partly exxplains why the current share price is still 15p below par value.

Over and above this however there is another explanation and this is one common to all innsurance companies. Because of the need to build up a capital base in line with premium inncreases, Shield has to retain practically all the profit it earns. Last year, for example, only one fifth of the £'I4m. net profit was paid out in dividends. But even then, retentions were innsufficien t to maintain its capital ratio, so another capital raising issue is on the cards, with Eagle Star, of course, very much in the driving seat.


I see where John Sisk and his sons are really breaking out. This is one of the really big private Irish companies about which little or nothing is known other than the familiarity with its placard.

In a surprising break with tradition, John Sisk released some details of the group's activities. But, as you might expect, nothing about profitability, other than that the group has no intention of going public, as its cash flow is more than sufficient to fiinance internal growth.

Total group turnover is £34m. and employment 2,900. £28m. of this is accounted for by connstruction activities handled by the main Sisk company and others partly owned like Aquaacon, Thermolag, William Cox Irish Clay Industries, and Ascon.

Other interests cover Beaver Engineering, Cesco and I.C.C. Cleaners, Funnily enough, Sisks' latest development is the accquisition of the Bosch agency. It will be interesting to see just how Sisk takes to the motor trade.

Peterson Tennant

The confectionery wholesaler and pipe manufacturer, Peterson Tennnant, has continued to make steady progress in the current year. If Wally Chambers, the chairman, can keep this kind of growth up, he deserves to be well praised.

In the first half of this year profits have risen by nearly 50% to £0.27m. The main motor behind this is Dick Tennant's company, Tennant & Ruttle, but Kapp & Peterson is also doing well.

The group is, of course, benefitting this year for the first time from its London accquisition, Glass & Co., and to a lesser extent from the incluusion of the Belfast distributor, J. Thornpsons, Son. Unfortunateely the integration of Kapp & Peterson and Glass's U.K. dis-

tribution arrangements have not yet shown the benefits planned.

Irish Times

In one way it is easy bu t in another difficult to understand why Major McDowell agreed to sell the Irish Times' Distribuutors Ltd.

The money received, that is £v.m., should go some way to relieving the near £3m. that the Irish Times Trust must now owe the Bank of Ireland. But on the other hand, I.T.D. was specificially se t up to broaden the Irish Times' base and limit its exposure to the fortunes of the newspaper industry.

The Irish Times was losing some money in I.T.D. but this was almost inevitable for such a new en terprise. Having gone to all the trouble of setting it up, it now does seem a bit crazy to sell it off before it even begins to pay its way at a price that only just recovers the Irish Times' outlay.

Although the rent of the Irish Times' shops is very high, with those in the Rathhmines, Dun Laoghaire and Bray shopping centres around the £10,000 mark per annum, the man buying them, Peter O'Hara, must know more about their trading viability than anyone else outtside the Irish Times itself, for this was one of his responsiibilities as a director of the Irish Times until March this year when he resigned.

James Crean

Whatever about the risks he has run by borrowing heavily, Ray McLaughlin does at last appear to be forging together quite a viable operation. Not all of the loose ends have been tied up yet, however, so there are bound to be changes ahead.

Last year was an exceptionally good one for James Crean with profits forging ahead 27% to £l.lm. This was helped by the inclusion of the acquisition last year of the U.K.-based Eltham Welding Group. The latter added about seven points to the profit increase.

Crean's balance sheet is lookking stronger these days but its holding company, Shelbourne Seecurities, still is in a very geared up state. With Crean's good results under its belt, a further placing of shares by Shelbourne seems almost inevitable.


If anyone thinks for a moment that inter - union disputes are not really a major factor in how foreign industrialists view Ireland, they have only to look at what has happened to one of the recent newcomers, Asahi, the Japanese trading giant.

Asahi had no end of trouble building its major £20 m. plant in Killala, Co. Mayo, but even now that it is operating it still does not know whether or not it will be able to get the raw chemicals necessary to operate the plant in the country. The problem here again involves a dispu te between Irish Transport & General Workers Union and Marine Port & General Workers Union.

Asahi unwittingly employed I.T.G.W.U. members to man the unloading of its imported raw chemicals in Dublin port, but the M.P.G.W.U. regarded the docks as its exclusive domain

Asahi, too, were very interestted in buying the Kildare carpet yarn company, Newbridge Inndustries. This factory has been closed for over two years now and at the righ t price would have fitted in nicely with Asahi's Mayo operation.

Unfortunately, the employees in Newbridge are represented by

the Workers Union of Ireland. As Asahi signed an exclusive deal with the I.T.G.W.U., it is obviously nervous about taking on any further labour problems. This is most unfortunate for everyone concerned, not to speak of the unemployed in Newwbridge.

B & I

In Britain, Eric Varley, Minister for the Department of Trade and Industry, has just given the National Enterprise Board - the British Government's direct interrvention agency - specific guideelines on what is expected of it, financially. The criteria used is a return on investment of beetween 15% and 20%.

If this is applied to B & I, the Irish Government's shipping line, then it should be making a proofit of at least £4Y2m., that is 15% on its capital employed of around £30m.

Bill Mulligan, B & I's boss, has just announced that his commpany hopes to have pushed up trading profits in 1977 by 26% to £2Am. From this however, depreciation and interest have to be deducted. This would leave a net profit of only £'Y4I11., one sixth the minimum required in the new British directive.

Against such an unsatisfactory background, which inciden tally means B & I is never able to fund the cost of its own developpment by ploughing back profits, the B & I's deferral of the 1976 wage round, until such a time as it earned enough profit to pay it, is totally cosmetic. This in fact tended only to distract atten tion from the main issue of using resources effectively.

Property - Moore Street

At long last the Dublin Corporaation has handed over its 5 acre

Moore Street site to Irish Life Assurance, so another of Dublin's gaping holes will be filled - in over the nex t two years.

So far the Corpo has got £3m. but on top of that it has also a ttained a half in terest in the equity of the developpmen t so that any profit earned by Irish Life will be shared equally by the Dublin Corporaation.

The most interesting thing about this centre however, is that it contains layouts for two major new stores. Kevin Nowlan of Irish Life has confirrned that he is already in negotiation with two firms for these stores, so we will soon know just how tough the competition is going to be in Henry Street in the future.

British Home Stores on O'Connell Street has already said that its Dublin store has so far been one of the most successsfulof the whole B.H.S. Group's openings. C & A, the giant Dutch group with 200 stores in Briitain has of course sold the £Y2m. store it built in Mary Street - and which is now leased to Winstons, because of the political climate in Ireland over the last eight years. With B.H.S. proving so successful however, C & A could well change its mind and jump into the Irish Life centre.

The other big British store chain that has already looked at Dublin is Marks & Spencers. Five years ago this group decided that it would move outside the U.K., has already set up four stores on the Continent 'and developed a chain in Canada. With Dublin on its doorstep it must be inevitable that Marks & Spencers arrives here at some stage. If Irish Life has the imaagination to take a leaf out of Robin Power's book, it will be over in London knocking on some doors .•