International
Sunday Newspaper Review Ireland: April 10, 2005
By Finfacts Team
Apr 10, 2005, 20:49

The Sunday Independent reports that rumours have been rife in recent days of a takeover of Bank of Ireland's asset management division, BIAM, by Italian bank Unicredito.

Such a deal should not be dismissed as strong synergies would be generated from a merger with Unicredito's existing Dublin-based business, Pioneer.

Unicredito may consider now an opportune time to pounce, given BIAM's difficulties over the past 12 months, and such a deal would be in line with the Italian bank's stated strategy of European market share gains in asset management.

Unicredito's CEO recently hinted, at the time of his bank's Q4 2004 results announcement, that another deal could be expected in 2005 which "should be value-enhancing from year two".

Cross-border consolidation recently started in earnest for the European bank sector with a takeover bid by Spain's BBVA for Italian bank BNL, and a takeover bidby Dutch bank ABN AMROfor Italian bank Banca Antonveneta.

The Sunday Independent also says that with Elan's share price now around the $3.70 level, what should investors still holding the shares do? Two of the shares' biggest cheerleaders of recent months, NCB's David Marshall and Goodbody's Ian Hunter, are now divided over what to do.

Marshall believes that even assuming Tysabri has zero value, Elan's shares are still worth between $4 and $6. As a result, he recently upgraded his Elan rating to Buy. But Goodbody's Hunter vehemently disagrees, now telling his clients to Sell with a "Reduce" rating. His view is that without any revenues from Tysabri, the company will be unable to pay the $1.1bn of debt due for repayment in 2008. Given the massive amount of uncertainty surrounding Elan's future, what can be said for certain is that soon one of these advisers is likely to be proven very right and one proven very wrong.

The Sunday Independent says that Ireland's 20 most valuable companies are deferring almost €1.1bn in tax. By using a variety of tax breaks they have been able to long-finger a large proportion of their tax bills.

Most of Ireland's major companies seem to pay a significant proportion of their profits in tax. According to its most recently published results, Ireland's largest industrial company, CRH, paid €247m in tax last year. That is 24.3 per cent of its 2004 pre-tax profits of €1.017bn.

Even Michael O'Leary's Ryanair had a tax charge of €21.9m last year, according to its profit and loss account. That represents an apparent tax rate of 9.6 per cent.

The only problem is that the tax charge listed by many Irish companies in their profit and loss accounts bears only the faintest resemblance to reality. While CRH's P&L states that the company paid €247m in tax last year, its cash flow statement tells an entirely different story. In fact, CRH paid just €188m in tax, reducing its real tax rate to 18.5 per cent.

However, CRH is only trotting after Ryanair in this game of financial smoke and mirrors. While the Ryanair profit and loss account for the year to the end of March 2004 shows that the company apparently paid tax of €21.9m on its profits of €228.5m, a 9.6 per cent tax rate, an utterly different picture emerges from the cash flow statement, which shows that the company actually paid €2.05m in tax, a mere 0.89 per cent of that year's pre-tax profits.

In fact, Ryanair pays less tax than its flamboyant chief executive, who very publicly handed over a €14m cheque to the taxman in November 2003.

David Went's IL&P tax bill also shrank dramatically somewhere between the profit and loss account and cash flow statement, more than halving from €73.6m (an apparent 15.2 per cent tax rate) to €35.7m (a real tax rate of only 7.3 per cent) last year.

The Sunday Business Post reports that Minister for Justice Michael McDowell is to propose radical new laws to overhaul the drinks trade.

The new measures include special licences for continental-style cafe bars, a new nightclub licence and powers for local councils to designate the locations and opening hours of pubs.

These proposals will be brought to cabinet by McDowell within the next three weeks. Sources said that the package would propose the consolidation of 100 licensing laws dating from 1833.

If approved by cabinet, the Intoxicating Liquor Bill 2005 will be published as part of a public consultation process. The drinks and restaurant industries will be invited tomake submissions, as will consumer lobby groups.

The legislation arising from the consultative process is expected to be brought before theDáil in the autumn.

“This will introduce more competition, it will bring down licence prices and it will reduce our legal bills,” said Eoin Foyle, co-owner of 14 bars, clubs and restaurants including the Globe, Cafe Bar Deli and RõÂ Rá. “It has the potential to change the face of the business. It's good for the consumer - it's a move away from the superpubs.”

Under the bill, a new special type of licence will be created for cafe bars which serve meals. These establishments, similar to bistros in France and bodegas in Spain, will accommodate children who are accompanied by adults. Fast food sit-down outlets will be specifically excluded.

The Post also reports that car park operator NCP could be sold by its private equity owner following a strategic review, it was reported today.

Cinven is understood to have asked investment bank Citigroup to advise on a possible sale or refinancing of NCP, which owns 600 car parks in the UK and employs 4,000 staff.

According to the Sunday Times, no final decision has been taken but a deal could value the business at around £500m (€730m).

NCP has been in business for more than 70 years and has built up a portfolio that includes car parks at ten of the UK’s busiest airports such as Heathrow and Gatwick.

Its property assets in the UK are valued at £392m (€572m), while the group has diversified into new areas such as wheel clamp and removal services for local authorities.

A parking management contract for the City of Sunderland Council began in 2003 and NCP also manages on-street enforcement for the Congestion Charge in London on behalf of transport authorities in the capital.

In an editorial, the Sunday Business Post says that this week's revelations that Bank of Ireland has overcharged customers to the tune of €15 million is just the latest in a long line of episodes where bank customers have been left out of pocket.

Most of the banks have been culpable. National Irish Bank and AIB have been the subject of lengthy investigations, and a range of other institutions have been also been caught up in controversy. Some episodes have resulted from sloppy procedures; others from more questionable practices.

"We can only hope that, in the wake of all the adverse publicity, the banks and the regulatory body, IFSRA, are now taking a much more proactive approach to ensuring that the correct charges are levied, and that any mistakes are speedily rectified. However, customers would remain well advised to monitor all their dealings with banks closely.

What is more serious about the Bank of Ireland revelations, however, is not so much the overcharging as the evidence that large numbers of people are buying payment protection products which push up the cost of loans in return for a questionable benefit. Even IFSRA appears to be taken aback by the volume of sales of these policies, and has pointed out that they can often push up repayment costs by 10 per cent or more. All the main banks offer payment protection products. It is very doubtful whether bank branch staff satisfactorily explain the costs and benefits of these policies.They are offered as awayof securing “peace of mind'‘, whereas in reality they are often expensive and unnecessary add ons.

Payment protection is clearly necessary in the case of amortgage; the case for such policies on smaller loans is questionable, particularly given the costs they are offered at, and the limited protection they give borrowers. Banks are under pressure to continually push up their profitability, and they can only do this by increasing revenue or cutting costs. However, they continue to market themselves as friends of the consumer, helping people tomanage theirbusy financial lives."

The Sunday Times says that Cork airport has blamed pilot inexperience for a record number of flight cancellations last month. Ireland’s second busiest airport had 46 flights cancelled or diverted in March.

Joe O’Connor, its director, said bad weather was partly to blame but added that some pilots were not adequately trained to land in foggy or low-cloud conditions.

“Cork airport has the equipment and landing aids to ensure flights are not disrupted if there is fog. For this to happen, pilots must be properly trained to carry out specialist landings. It would seem that some are not qualified to do this or the aircraft they are flying are not equipped for that kind of landing and so we are faced with cancellations or diversions.”

Last year, Cork airport recorded a total of 116 cancellations out of 14,270 arrivals — this affected 0.8% of all flights for 2004. In March alone, 2.1% of flights were disrupted — through either aborted take-offs or diverted landings.

The Times also says that the reasons for the lack of women in senior management positions in Irish companies is to be investigated. Researchers from the National College of Ireland will consider whether women face a “glass ceiling” that prevents them from being promoted to top-level posts. Only 11.7% of state company chief executives are women.

In the past, the lack of female chief executives has been attributed to poor childcare provision, the difficulty of returning to work after maternity leave, a lack of confidence and the fact that women network less than men.

Joyce O’Connor, the president of the NCI, says that previous studies have given conflicting explanations.

“People have been looking at this for 20 years,” she said. “What we’re trying to do now is to see what the reality is.

“The fact remains that the number of women in senior positions hasn’t increased as people expected. The glass ceiling has been around for a while and the cliff is a new thing, just shown in that one study.”