Drowning not waving: Ireland's chiefs fight for survival
An unprecedented number of chief executives and chairmen present their financial results this week – right in the teeth of the recession. Very few will have good news for their shareholders and some may not even survive another year in the top job.
Emmet Oliver looks at the scale of the challenges they face and how much they get paid to overcome them
Christophe Mueller, Aer Lingus
Myles Lee, CRH
Kevin Murphy, Irish Life & Permanent (IL&P)
Stan McCarthy, Kerry Group
Gene Murtagh, Kingspan
Andrew Langford, FBD Holdings Plc
Aidan Heavey, Tullow Oil
Michael Chadwick, Grafton
Christophe Mueller, Aer Lingus
Total pay and benefits: Unknown for Mueller at this point
Aer Lingus will turn in a very alarming set of results for the first half. The carrier is not expected to provide any guidance on profits or losses for the period ahead. A cost-cutting programme, unprecedented in its scale, is being designed, although chief executive Christophe Mueller has not arrived at Dublin Airport yet. Operating losses at the airline could hit €150m this year and it is burning through its cash reserves rapidly, despite a deal on delaying aircraft from Airbus. Chairman Colm Barrington knows only cost-cutting can reduce the cash burn as the top line is unlikely to grow with Ireland in such a deep recession. With Michael O'Leary firing salvos from the sidelines, this is one of the most challenging roles in Irish business.
Survival chances: 1 out of 5
Myles Lee, CRH
Total pay and benefits: €1.1m
Profits are plunging at CRH and cost-cutting on a scale not usually engaged in by the firm is ongoing. A recent right's issue has strengthened its balance sheet and it has raised €1.2bn to pick off weaker rivals, many of whom are hugely geared. So far, the stimulus plan in the US has not helped to offset general weakness. Rivals like Lafarge and Cemex are also disposing of units, but when will CRH move on the acquisition front and if a double dip recession is in prospect should it move at all?
Survival chances: 4/5
Kevin Murphy, Irish Life & Permanent (IL&P)
Total pay and benefits: €942,000 was paid to the last CEO of IL&P
The recent decision to hit variable mortgage holders with a rate hike indicates that pressures are growing at IL&P. Murphy is busily hacking out costs at the company, but it's not enough to prevent a very sharp fall in pre-provision profits. The company's impairments are already at "stress-scenario" levels and while the life and pensions business is resilient, the bank is under serious pressure and could lose €109m in the first half. A state guarantee removes the risk of total implosion, but trouble abounds.
Survival chances: 2/5
Stan McCarthy, Kerry Group
Total pay and benefits: €1.5m
McCarthy's biggest problem is arguably the target he set for the business when he took over the Kerry job, following Hugh Friel's departure. McCarthy intends to double its turnover within five years, although that comment was made in the pre-Lehman months of 2008. Still, McCarthy will be one of the few CEOs this week reporting higher earnings figures compared to last year, although cost-cutting again is helping to propel this. The stock is rising even though some food stocks pay out a higher dividend.
Survival chances: 3/5
Gene Murtagh, Kingspan
Total pay and benefits: €756,000
Revenues, margins and profits are plunging at Kingspan. Davy reckon profit margins could crash as low at 5% in the first half. For Gene Murtagh, it's all about battening down the hatches and conserving cash. Since the middle of 2007, the company has been cutting costs and has taken €50m out so far. It will need to do more. While the construction industry may find a bottom in the UK, house completions in Ireland next year could be just 10,000, the lowest level of activity since 1970.
Survival chances: 4/5
Andrew Langford, FBD Holdings Plc
Total pay and benefits: €688,000
If FBD was confining itself to insurance its challenges would be a lot more manageable, but the firm has a property portfolio worth €209m to worry about and write-downs on its value is acting as a drag on the insurance business. The double whammy for Langford is that the property and leisure holdings are in recession-riddled Spain and Ireland. Even in the first half alone, a revaluation of the assets could cost the company €27.5m. Should they have taken the bid from Eureko last year?
Survival chances: 4/5
John Moloney, Glanbia
Total pay and benefits: €1.16m
While food companies are somewhat insulated from global chill winds, Glanbia has been hit hard by a severe drop in global dairy prices. The company's shares are up 15% on the year, but that was after a bruising 2008. The dividend remains intact and most of its revenues (52%) come from the USA and other markets which are likely to rebound quicker than Ireland. For years, Glanbia attracted little interest because of its relatively low-margin businesses. But debt is low and its move into nutrition promises an unusual opportunity for Moloney to chase margins of over 10%.
Survival chances: 4/5
Aidan Heavey, Tullow Oil
Total pay and benefits: €1.6m
This is a company in an entirely different phase to most Irish plcs. It has an extensive African exploration programme that will pay dividends in the long term, at least according to current market sentiment. Heavey is presiding over a company whose shares have risen 86% this year and every single major oil analyst, bar one, is on a buy or hold recommendation. Debt is rapidly rising to pay for the African developments, but the firm will benefit from higher oil prices in the second half. The question was asked a few years ago: could Tullow transition away from its North Sea fields and replace them fully with production from African fields? The answer is yes.
Survival chances: 3.5/5
Michael Chadwick, Grafton
Total pay and benefits: €680,000
Grafton became a listed company in 1987 and these are by far the most challenging conditions it has faced. For long-serving executive chairman Michael Chadwick it's very much a case of hanging in there and waiting for a bottoming out in the UK, where almost 70% of its operating income comes from. Turnover for the half year is down by almost a third and Ireland made a loss in the first-half, although nobody knows by how much. It has cash, but the challenge to stabilise the company and protect the dividend seems a very difficult one at this point in the economic cycle.
Survival chances: 3/5
August 23, 2009
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