Questions surround Aer Lingus as 2011 profits reach €49m
AER LINGUS’s 2011 full-year results on Tuesday had much to recommend them. The airline made an operating profit of €49.1 million. This is not to be sniffed at in the current economic climate, especially as Hungary’s Malev and Barcelona-based Spanair both collapsed recently, and others are on life support.
The airline also had a plump cash cushion of €317 million at the end of December, which analysts expect to rise this year in the absence of any significant capital expenditure.
Aer Lingus’s regional service showed strong growth in 2011. It also increased the number of interline passengers – those coming from abroad to connect with its transatlantic services from Dublin – by more than 13 per cent, and netted a €21 million gain from returning the lease on its head office to the Dublin Airport Authority.
There is also now a definitive decision from the Government to sell its 25 per cent stake in the company, a move the airline has long wished for.
Yet many questions remain unanswered. There is still no clarity on how it will deal with the thorny pension issue. The deficit in the scheme is an eye-popping €700 million and the separate pilots’ scheme is €170 million under water. Aer Lingus says it will not pay a cent to plug either gap.
A threat of legal action from Ryanair on this matter continues to hang over the company, as does a threat of industrial action from staff if the airline does not contribute to the solution. Try squaring that circle.
There is also no clarity on a dividend payment. The Minister for Transport and Ryanair have both lobbied for a payout to shareholders and there was a real expectation that some clarity would be provided on this issue this week. Instead, Aer Lingus kicked for touch.
And where’s the growth strategy? Aer Lingus’s capacity will be flat in 2012. There will be no new aircraft until 2015, ruling out any major expansion.
The view of management is simple: what we have we hold. It hopes to sit out the recession.
It is hardly an inspiring strategy for a public company to adopt and is unlikely to result in investors clamouring to buy the stock. That might explain why the share price dropped by almost 11 per cent on Tuesday and Wednesday.
Musgrave plans to bring own-brand products to UK
HAVING RECENTLY launched a new own- brand range in the Republic, Cork-based grocery wholesaler Musgrave now plans to offer the products in its stores in the UK from April. It’s all part of a push to generate €1 billion in own-brand sales by 2014 from the current level of €700 million.
The 1,500 products in the SuperValu own- brand range will be made available in more than 2,000 stores across the Budgens and Londis chains in Britain and in SuperValu stores in the North. This will be the first time that the SuperValu brand will be available in the UK.
Musgrave chief executive Chris Martin accepts the sales target is “aggressive” but believes it is attainable as shoppers in Britain and Ireland continue to migrate to cheaper unbranded labels.
“Our aim is to capitalise on this by offering products that are up to 20 per cent cheaper than their branded equivalent,” he told me.
Musgrave claims this could create up to 161 new jobs at Irish food suppliers, as they seek to fulfil demand and capitalise on the export opportunity from supplying the UK stores.
“For example, Bandon Vale, who supply us with SuperValu Cheddar, and the Brady Family, who provide us with our repacked cooked meats, will benefit from €2.5 million and €1 million in new business respectively,” Martin says.
Shared Access scores with FA deal
IRISH TELECOMS infrastructure group Shared Access this week netted what could turn out to be its most lucrative contract yet.
Shared Access’s chief executive Chris Jackman was in London on Wednesday to sign a deal with the Football Association to provide floodlighting at pitches in England in return for being able to erect mobile phone masts on the poles.
Clubs also get a cut of the revenue generated by the masts.
“We’re looking at a significant number of locations with them,” Jackman told me over coffee in Dublin on Tuesday.
The FA has 31,000 registered clubs. Shared Access is focusing on an initial 250 locations, which would require an investment of about €18 million.
It has also opened talks with Cornerstone, a network joint venture between Vodafone and O2.
“We are looking at a significant number of locations with them.”
Jackman sad the company, which is backed by JP Morgan and Goldman Sachs, has “more than enough” cash to hand “for the next two years to fund developments in the UK and Ireland”.
The business model got legs in 2010 when the company signed a novel deal with the Football Association of Ireland to erect floodlighting at grounds here.
It has since signed deals with Tennis Ireland; branches of the Irish Rugby Football Union; GAA clubs and the Irish and Welsh football associations.
Progress in Ireland has been slower than Jackman would have liked. Twenty-six sites are at or near completion, involving an investment of €2.5 million.
Another 53 are in the pipeline. “It’s an [mobile] operator-driven thing. It’s been slower that we would have liked but we’re moving forward.”
Making gains in Canada
IT MIGHT not be involved in traditional exports, but Cobh- based consultants Leading Edge is finding success overseas with its education and training tools.
In Canada, the company has just secured another deal with Tim Hortons, the large Canadian coffee and doughnut chain, and it will announce a €250,000 healthcare contract in Toronto in the company of Tánaiste Eamonn Gilmore on St Patrick’s Day.
From a standing start in 2009, Leading Edge will this year book €1 million in revenues in Canada.
In consulting speak, Leading Edge “specialises in continuous improvement” through a process called “Lean”, according to founder Joe Aherne.
The move into Canada “came out of the blue”, he added. “There was no fantastic strategy. Tim Hortons found us on the web and they started dealing with us online before we set up in Canada.”
Being accredited to the Canadian Professional Logistics Institute helped to grease the wheels. That has been the springboard to other contracts there with a team of four now working its Toronto office.
...and some little things
DID YOU know . . . that Ryanair was more profitable last year than 11 US passenger airlines combined?
The US carriers posted aggregate net income of $390 million (€290 million) in 2011, according to figures from Airlines for America. This included a $2 billion net loss by American Airlines, which is currently in Chapter 11 bankruptcy proceedings.
For the nine months to the end of December 2011, Ryanair recorded an adjusted after-tax profit of €558.4 million. It is predicting a full-year profit of €480 million for the year to the end of March 2012.
The American airlines had a profit margin of 0.3 per cent, not worth getting out of bed for.
IT MIGHT have God (or a Supreme Being) on its side but the Church of Scientology Mission of Dublin Ltd is heading for corporate limbo after being listed for strike off by the Companies Registration Office.
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The controversial church, whose members worldwide include Tom Cruise and John Travolta, has been tardy in filing its statutory accounts. The Dublin mission last filed financial statements for the year ended April 30th, 2009, in July of last year.
It lost €688,114 that year, with members around the world providing loans to plug the deficit.
