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Golden Vale profits soar

by Kevin Mills
FOOD group Golden Vale yesterday announced a 17.4% increase in operating profits to £23.4 million for last year compared to £19.9 million in 1997.
However, an extensive rationalisation programme aimed at improving efficiency is currently under way resulting in an exception charge of £19 million for 1998.
The company also reported a goodwill amortisation charge of £0.4 million in 1998 arising out of acquisitions. Turnover for the year increased by 2.6% from £580 million to £565 million.
Profits were boosted by strong volume in cheese, spreads and retail butter, the acquisition of Rye Valley Foods, the achievement of operating efficiencies and an increase in agri trading volumes.
The company's core cheese and spreads business achieved an 11% increase in volumes.
The acquisition of Rye Valley Foods in July added a new food sector to the group and the performance since the acquisition has been excellent.
On the negative side, profits were hit by a decline in butter and milk powders due to margins and volumes and disappointing results from Golden Vale Holland.
"Overall the results for 1998 are very satisfactory. With the exception of butter/milk powders and the Dutch cheese business our business performed very well in competitive market circumstances," group managing director Jim Murphy said.
Looking ahead, Mr Murphy said the markets would continue to be highly competitive "but we are positive about the outlook for continued growth. A full year contribution from Rye Valley Foods, the acquisition of Dairyborn, the savings which will accrue from the rationalisation plan, together with continuing solid performances in our existing consumer products businesses, under this view."
He said some of the important issues the group needed to focus on in 1999 were:
• The maintenance of the strongest possible focus on customers and markets in terms of continuously improving service and bringing new products to the market.
• The need to finalise major expansion plans for the group's prepared meals operation.
• The need to improve margins in the group's butter and milk powders business.
• The successful implementation of the rationalisation plan. And the redevelopment of the group's Coleraine facility.
"On a broader level considerable resource is being allocated to improving manufacturing standards , environmental management, health and safety at work and to the critical area of human resources," Golden Vale's group managing director said.

£826m bumper profits for AIB

by Brian O'Mahony
AIB produced bumper profits yesterday, after top-class results in Ireland, the US and the UK.
By the end of last year, the company had chalked up profits of £826m, just £100m short of the price they paid to buy Dauphin bank in the US about two years ago.
Profits before tax were boosted by £25m form the sales of properties and land, and some exception was taken to this by the market, who marked down the shares.
Despite the market negativity, chief executive, Tom Mulcahy, described the results as a "colossal performance in any one year".
If there was a black spot, it was Asia, which impacted on the capital markets results, but was, otherwise just a blip.
Key figures for the year to December 31 show:
Basic earnings per share up 23%;
adjusted earnings per share up 33%;
second interim dividend up 28%;
AIB Bank profit up 39%;
Cost income ratio down to 55%, from over 60%.
"These results reflect AIB's commitment to shareholder value, service to our customers and our focus on efficiency", said Mr Mulcahy.
The bank is well-placed to support customers and to grow its businesses in all our markets as the millennium approaches, he added.
Loans in the domestic market increased by 26% over the 12 months, while deposits were up by 13%.
Branch banking, Ark Life, corporate banking and credit card business all did extremely well.
Mr Mulcahy said the rest of its businesses also enjoyed significant growth due to the strength of the economy.
In the US, economic buoyancy also told its own story. For the first time, the amount invested in funds outstripped the amount of money on deposit.
This is simply unprecedented and the US continues to surge ahead.
Poland, which is evolving, after just 10 years as part of a market economy, showed good growth. In addition, the UK arm performed well and is
predicted to grow significantly again this year, despite pessimistic projections for the country's economy.
Profits rose by £246 million from £580m to £826m in the period. Basic earnings per share rose 23% to 58·8p, while the dividend payable on March 31 has been increased to 14p per share, net.
This makes a total for the year of 22·1p and an increase of 25%.

Warning over lack of
inward investment

by Brian O'Mahony
AIB boss Tom Mulcahy warned yesterday that a fall off in inward investment could derail national growth.
In his view this was about the only real threat to continuing growth of 6-7% for several years to come.
But it was worth nothing, he said, that the US, a significant player in the Irish economic growth, is now becoming very dependent on Europe as a second market.
Growth figures for the EU lack buoyancy and the Asian crisis, coupled with problems in Russia, Brazil and Japan, all point to nervous times for global players.
And it is those factors above inflation or any other economic yardsticks that pose the biggest threat, said Mr Mulcahy.
In the meantime AIB will continue to pursue its own strategy. It has another £700m to spend in buying up new banks, and Poland and its other key markets remain the preferred options.
Mr Mulcahy was unable to comment on rumours of a bid by Deutsche Bank, now linked to the Nazi death camps, for the Irish bank.
Stock market rules preclude him from commenting. Asked if he would prefer to be able to comment on the speculation, he replied: "Perhaps I would."
This suggested that Deutsche has not speculated over the Irish banking group and this was as close as Mr Mulcahy could get to saying it.
Despite the barrage of questions he faced about Mr Haughey's financial affairs and Dr FitzGerald's £200,000 loan write-off Mr Mulcahy stood steadfast.
Tribunal officers had instructed the bank not to comment on Haughey, and client confidentiality precluded him from commenting on Dr FitzGerald's sorry saga with GPA. On the prospects of being taken over, Mr Mulcahy said any board would find it very difficult to justify the price it would have to pay to gain control of the bank at this stage.
In that sense he did not anticipate an approach, although it cannot be ruled out.

GPA investment put
FitzGerald in debt

by Brian O'Mahony
FORMER Taoiseach Garret FitzGerald's financial woes can be traced to the collapse of the GPA flotation in 1992.
GPA had been the most successful of all the aircraft leasing companies.
It was lauded as Ireland's most successful company ever before trouble struck. One US teachers' pension fund had bought shares at $32m.
So strong was the sentiment in the run up to the proposed flotation that the first murmurings of it going wrong were met with disbelief.
What went wrong doesn't really matter. It turned out in the end that GPA failed to float the company because big fund managers in the US refused to pay the asking price.
Market sentiment had turned sour.
At the time that Dr Tony Ryan was canvassing top pension fund managers in the US to buy into the flotation, three major US airlines were under Chapter 11, the equivalent of our examinership, an action used by companies to prevent creditors putting them into liquidation.
Unfortunately for all of the high fliers who had bought shares in GPA in the preceding years, the leasing company ran into a brick wall.
It is not clear at what price Dr FitzGerald bought his shares but it is clear that he borrowed well over £200,000 to fund the investment.
GPA was a disaster not just for Dr FitzGerald however.
All of the key planners including Dr Tony Ryan, the founder, lost millions of pounds each.
Maurice Foley, a former civil servant, then company president, was also severely burned.
One of the Department of Foreign Affairs finest envoys, Sean Donlon also suffered as did Peter Sutherland among others who made up what was regarded as a very prestigious board.
Experts agree that if the GPA was brought to market 18 months earlier the flotation would have been a huge success.
In reality there were no inherent weaknesses in the company, but by June 1992, when it hoped to go public the airline market had turned sour.
Conditions in the US, key to the launch, could not have been worse.
Markets were also jittery, suffering their worst bout of correction since the crash of 1987. Nervous investors became reluctant investors and when some of the big guns in the US refused to buy in at $20 a share, UK investors pulled out also. By then it was all over. Bad timing, misjudgement, and more than a smattering of arrogance, resulted in the flotation being scrapped, and the GPA dream in tatters.
At the time the company had orders to the end of this millennium placed with McDonnell Douglas and Boeing totalling $12 billion.
They based the orders on projected airline travel predictions. They reckoned on a 5% rise in air traffic annually and in that they have been proved correct.
But they did not reckon with the sentiment in the market at the time and made a huge blunder. Because of that Dr FitzGerald's shares were virtually worthless and the £200,000 to £300,000 became a millstone.
Peter Ledbetter, managing director private banking in Irish Permanent was one of the few top executives in GPA to escape unscathed.
About 12 months previously he had resigned his position and cashed most of his shares.
Dr FitzGerald and the rest of the GPA crew were not as lucky.
Regrettably for Dr FitzGerald he bought into the company when the shares' internal value had risen quite sharply and the flotation failure, coupled with the $12bn in orders wiped the company off the map overnight.

Market disinterest will not hit expansion

by Brian O'Mahony
GOLDEN VALE intends pushing on with its £30m investment programme over the next 12 months, unperturbed by the lack of market support for its shares.
Managing director, Jim Murphy, who joined the company two years ago, couldn't resist a side swipe at fund managers for this poor performance.
Implying some of them were brain dead, Mr Murphy said they were dictated to by their computer investment models and not by their "brains."
In Dublin, yesterday, at the issuance of the company's results for last year, Mr Murphy confirmed the group would grow organically and by acquisition this year. Europe is the chosen target for expansion, where Golden Vale is making in-roads in the French prepared-food market. This is being done through Rye Valley, its Monaghan-based acquisition, which contributed to six months of last year's figures.
Since joining the company, Mr Murphy has steered it in a specific direction. Rye Valley is involved in prepared foods, with the UK a huge market.
The needs of today's lifestyle, with a greater demand for ready-to-eat food, means the potential for expansion is vast.
France, where food and family meal times were once sacred, is also adapting to the inevitable pace of life as the new millennium dawns.
Rye Valley has been working on that huge market over the past two years and the benefits are beginning to kick in.
Mr Murphy is positive this lifestyle change opens up massive potential of which Golden Vale plan to avail.
Nevertheless, he refuses to be drawn on how much money he will spend in harvesting this potential, but says the bottom line is that the company has the backing of its investors. Money hasn't been a problem in the past and it will not be in the future, he maintained.
Conscious, perhaps, of previous Golden Vale disasters, Mr Murphy was short on specifics at yesterday's press briefing.
While he is delivering on his promises, a bit more openness about his plans for the company and the kind of scale he has in mind, might kick-start some of the brain-deads in the financial institutions to give greater notice to what's going on in the Golden Vale.

AIB's indulgence of politically powerful must be explained

by Brian O'Mahony
AIB BANK chief executive, Tom Mulcahy, faced down the press yesterday over the bank's dealings with two former leaders of government.
He was instructed verbally by the Moriarty Tribunal not to comment on Haughey's brass-necked attitude towards the bank
Client confidentiality, he claimed, prevented him from commenting on Dr FitzGerald's situation.
Others are entitled to expect the same protection from their banks.
He rubbish allegations that AIB was sending a clear message to the ordinary citizen that one set of rules applied to the rich and the powerful while another applied to the ordinary citizen, who can expect threatening letters once they miss two mortgage repayments.
Following the briefing, Mr Mulcahy said he wished he could have said more to assuage journalists' fears and, indeed, the public impression that different standards were applied to different people.
Wait for the conclusion of the tribunal and all will be revealed.
Questioned as to why the bank issued a statement in 1982, stating there was nothing wrong with the former Taoiseach's finances, Mr Mulcahy said he would not have issued that statement if he was at the helm.
It was the only concession he made while under intense pressure from journalists.
It remains to be see, how the bank answers allegations that it buckled under pressure from Mr Haughey.
Unless it manages to produce some very plausible reason, they will be shown to have been lily-livered when confronted by a bully, with lots of power. On the other hand, they were sensitive to any negative reaction resulting from a decision to bounce some of the former Taoiseach's cheques. The baser interpretation of the dealings between Mr Haughey and the bank was that the bank would have considered it unwise to get on wrong side of Fianna Fáil under Haughey.
In the broader context of the Haughey saga, the role of the Revenue Commissioners is also quite fascinating.
It is now emerging that Haughey's life-style cost £9,000 per week to sustain.
How was it that this apparent gap between his standard of living and his income was never seriously questioned or appears not to have been questioned by the Revenue, despite the fact that half the country was asking questions at the time. The commissioners, not surprisingly, also hide behind client confidentiality and, so far, are answerable to nobody.
Its powers have never been challenged nor its apparent failure to act in the case of Mr Haughey.
Without implying any compliance, it seems reasonable at this stage to ask why, when Haughey sent in his income tax returns, they appear never to have given rise to any serious suspicion?
Accordingly, doubts linger about the relationship between the tax man and Mr Haughey and the public is right to be suspicious. It may simply have been that a millionaire lifestyle, involving privately-owned islands and a big yacht weren't sufficient to raise the Revenue Commissioners' suspicions.
Under the law, we cannot establish what lengths they went to investigate Mr Haughey, but surely the entire process unfolding before us begs that question and it remains to be seen if it will be answered? The public would be most interested.
One final point about Dr FitzGerald. In the scheme of things, he would not have been regarded as being part of the derided Golden Circle closely aligned with Fianna Fáil.
His ability, nevertheless, to raise at least £200,000 to buy shares in what turned out to be a disaster of an investment, despite his meagre circumstances is interesting.
That he got off as lightly as he did suggests privileged treatment. That fact is inescapable and one that further intrigues the ordinary mortal.
Dr FitzGerald may have been seen in the past as a man of high moral standing, when compared to Haughey. However, the latest disclosure about another former Taoiseach wreaks of most favoured citizen status, for which he is not to blame.
His confirmation of £200,000 being written off by AIB just confirms to the ordinary citizen that people of power and privilege are treated differently. AIB and others of similar ilk should stop denying this. Everyone knows it's true. They should, at least, have the decency to admit this.

Figures say spiralling housing
prices are here to stay

by Colette Keane
NATIONAL house prices jumped almost 30% last year, but while the rate of increase has been declining, it seems that spiralling prices are here to stay — and not just for first-time buyers.
Irish Permanent's quarterly review of the property market, produced in conjunction with the ESRI, revealed that for the fourth successive month, lower house growth was recorded in Dublin than outside the capital at 0.2% compared with 0.5%.
Nevertheless, the annual percentage increase in house prices remained higher in Dublin at 36% as against 25.8% outside the capital.
While first-time buyers have been under pressure to meet the spiralling demands of housing market, it seems they are not the only category labouring under the burden of high prices, as the prices of many existing homes are now beyond the reach of second-time buyers as well.
On a national basis, despite monthly fluctuations, first-time buyer prices in December continued to rise and second-time buyer prices were marginally lower, but the annual percentage increase remained stronger for second-time buyers at 30.4% than for first-time buyers at 27.1%.
Even the survey pointed out that comparing the position of first and second-time buyers in Dublin to those in the rest of the country provides some interesting highlights.
In the fourth quarter of 1998, price growth remained stronger for Dublin first-time buyers than for their counterparts elsewhere in the country at 5% compared to 3.6%. In both cases, prices increased at a slower pace than in the third quarter.
This left the average price paid by a first-time buyer in the fourth quarter at £106,077 in Dublin, and £72,853 outside the capital.
In contrast, prices paid by second-time buyers increased at a faster pace outside the capital than in Dublin, at 8.2% as against 4.6%.
This compared to growth of 4.8% and then 11.1% respectively in the third quarter.
Between quarter four 1997 and the same period in 1998, the amount paid by first-time buyers increased by 34.6% in Dublin and 23% outside the capital, while second-time buyers paid 40.1% more in Dublin and 30.2% more outside the capital.

Tanaiste gives her backing for merger

by Colette Keane
THE proposed merger of Irish Permanent and Irish Life to create the third largest banking entity in Ireland was given the go-ahead yesterday by Tánaiste Mary Harney.
The Minister for Enterprise, Trade and Employment had had the merger referred to her office in the context of the Mergers and Take-overs (Control) Acts and has now cleared the way for the deal to go ahead.
This move follows the approval of the merger earlier in the month by Irish Life shareholders, and the shareholders in Irish Permanent will be holding an EGM tomorrow to decide on the issue.
Welcoming the announcement, managing director of Irish Life David Went said the decision reflected the potential of the new company to provide increased competition in the Irish marketplace.
"The creation of Irish Life & Irish Permanent will be a catalyst for competition amongst financial institutions which can only benefit consumers," he said.
Chief executive of Irish Permanent Roy Douglas expressed his confidence yesterday evening that the merger would also be strongly endorsed at the group's up-coming EGM.
"In the weeks since our plans were unveiled, the merger has received an enthusiastic reception from customers, staff and investors.
"I believe that tomorrow's EGM will confirm the enthusiasm for Irish Permanent shareholders to press ahead with our proposals," Mr Douglas said.
The proposed merger of the two financial institutions will be one of the country's largest at £2.4 billion and would combine Irish Life's expertise in investments and life assurance with Irish Permanent's estimated 20% share of Ireland's mortgage market and its extensive network of bank branches.
The combined group would employ over 3,000 people and have assets of around £15 billion. Irish Life would account for two-thirds of the group's capitalisation.

Revenue at Dell up 48%, putting it at No 4 in list of most admired companies

by Colette Keane
DELL Computer Corporation, the world's leading direct computer systems company, has reported that for fiscal year 1998, revenue increased 48% to £12.4 billion.
In the fourth quarter, business grew more than 3.5 times the market rate and revenue increased 38% to £3.5 billion, as the company achieved customer sales the Internet of almost £10 million per day.
As a result of "its growth and shareholder returns through focused use of technology," Dell has vaulted to the No 4 position on the top ten list of America's Most Admired Companies in the Fortune magazine annual survey.
For the year, the company achieved a gross margin of 22.5% and operating expenses of 11.3%, producing an operating margin of 11.2%.
During the quarter, the company generated a record £510.5 million in cash from operations.
Gross margin increased to 22.4% in the fourth quarter, compared with 22% in the year-ago quarter, while operating expenses declined to 11% from 11.4% a year ago.
As a result, operating margin rose to a record 11.4% for the quarter, compared with 10.6% a year ago.
In Europe, Dell has reported that despite a relatively slow take-up in many European countries, euro currency orders are steadily increasing across the whole of the eurozone and are now approaching the one million euro per week mark.
European revenue in the fourth quarter increased 40% year-over-year. Dell achieved revenue growth in excess of 50% during the quarter in eight national markets in the region with five of those markets exceeding 80% revenue growth.
"Looking at the year ahead, industry demand appears solid.
"Major demand drivers, including processor transitions, operating system introductions and component cost declines, remain healthy and are setting the stage for a robust year ahead in our industry," Michael Dell commented on the results.
Dell's Board of Directors has also declared a 2-for-1 stock split. This split, the company's seventh in the last seven years, will be paid in the form of a 100% stock dividend to be issued on March 5 1999, to shareholders of record as of February 26, 1999.

Search under way for
science student of year

by John Carroll
THE SEARCH for the 1999 student of the year who best displays excellence, originality and innovation in engineering, science or information technology was launched yesterday by Hewlett-Packard.
"Competition, just as it helps drive developments in the computer industry, can also drive students to greater heights of achievement," Minister for Education Michael Martin said at the launch. "Ireland's future in the 21st century will continue to be at the forefront of technological development, and the pace of change is increasing at an incredible rate."
Minister Martin said policy makers, educators and industry will have to co-operate more closely to ensure Ireland retains its position at the forefront of technological advancement as changes are moving rapidly.
Hewlett-Packard's managing director Dave Young said the 1999 award was designed to accurately reflect the importance of the Irish education system to the future development of his company. This year, in addition to the £1,000 award, the winning University or Institute of Technology will receive computer equipment worth £1,000.
Students must submit final-year projects for evaluation by a panel of judges by May 14. Last year's winner was John Golden from Kerry, whose user-friendly software engineering training package is now a core part of the teaching programme in Cork Institute of Technology.

Shares fail to sparkle

THE Irish market weakened yesterday, mainly as a result of the poor performance of the financials. At the close of business, the ISEQ had shed 70.42 points to 5240.04.
The main news of the day was AIB results, which were in line with market expectations, but the shares still fell 70 cents to 1570 cents. Bank of Ireland also softened, although not to the same extent, falling 7 cents to 1910 cents. Irish Life lost 5 cents to 900 and Irish Permanent weakened 10 cents to 1445 cents. Anglo Irish Bank shed 2 cents to 253 cents.
Among industrials, CRH weakened one cent to 1636 cents. Independent Newspapers decreased 10 cents to 330 cents and Jurys was level at 665 cents. Waterford Wedgwood was 2 cents softer at 63 cents/
In a very positive day for the agricultural sector, Greencore gained 5 cents to 352 cents and Golden Vale advanced 4 cents to 106 cents. Kerry strengthened 30 cents to 1110 cents.
In other news, Norwich Union was down 13p stg to 462p stg.

Figures disappoint market

SHARES in AIB Bank slipped by over 4% yesterday, despite the company's report of record profits in 1998 and an optimistic outlook for the year ahead.
At the close of business last night, the stock was off 70 cents at 15·70 euros, or £12·36. Analysts said there was slight disappointment at AIB's pre-tax profit figure of £826 million, which represented a 42% jump over the previous year.
"We forecast profits of £825 million without allowing for a property disposal profit of £25 million; if you add that in, the headline figure was a little bit light," said one analyst.
"A lot of people who bought in over recent days in expectation of fantastic numbers now want out," he said.
The evaporation of take-over rumours, which recently drove the share price sharply higher, had helped spur sellers, he added. Trade volume was not excessive, dealers said.

Fundamental value in Irish equities

A RESEARCH analyst with Goodbody Stockbrokers believes there was fundamental value in the Irish equity market, with a strong domestic economy allied to the impact of the euro on cross-border investment likely to boost the market.
Speaking at an investment seminar in AIB at the South Mall in Cork, senior research analyst, Joan Garahy, added that investors could do well by concentrating some funds on smaller-sized companies, such as Grafton Group, Barlo and Greencore.
"Low interest rates and low bond yield share proved to be the key supports for stock markets in what have been very uncertain times," according to senior portfolio manager Paul Turpin. "If last year you had forecast that on top of ongoing crisis in Asia, Russia would default on its debt, the US Federal Reserve Board would have to organise the bail out of a massive hedge fund and Bill Clinton would be impeached, you would probably have been very worried about investing in stockmarkets," he added.
Mr Turpin said the fact markets outside Asia had recovered was testimony to the support of low interest rates.
However, while many of the markets have recovered since September, it has been slight, he added. In the US, the main rises were concentrated in technology, pharmaceutical and the telecommunications sectors, while other industrial stocks performed poorly.
In Ireland, the narrowness of market rise was even more noticeable. During 1998, the ISEQ index rose by 23%, due to AIB, Bank of Ireland, ELAN and CRH. However, more stocks fell than rose over the year.

© Examiner Publications Ltd, 1999