Morning business news - July 29Monday 29 July 2013 10.49
TIMING OF EASTER AND HIGHER FUEL COSTS HITS RYANAIR'S Q1 PROFITS - Ryanair has reported profit down just over 20% to €78m for the first quarter. The fall had been expected and was due mainly to fuel costs, the French Air traffic control strike and the timing of Easter 2013 which fell in the last quarter of its reporting year. Revenue was up 5%, nonetheless, to €1.34 billion in the three month period and the airline has maintained its guidance for full year profit of €600m.
Michael Cawley, deputy chief executive of Ryanair, said the airline's profit was in line with what the market expected and what the company had expected. "We had the absence of Easter in this quarter as against the same quarter last year. Fuel prices were up significantly but we hope to grow profit modestly for the year as a whole,'' he stated.
Mr Cawley said there had been no developments in talks with the Dublin Airport Authority about expanding routes in Dublin in recent months. "Unfortunately the most recent proposals haven't elicited a response that we can agree to. We've had no discussions for quite some time,'' he added.
The Ryanair executive would not comment on Ryanair's plans with regard to Aer Lingus, as the company's appeal to the EC in relation to its last takeover bid was ongoing and talks with the UK competition authorities are continuing. "We still believe that Aer Lingus doesn't have a long term independent future. We think its future lies as part of a larger group, most specifically Ryanair. The acquisition of Aer Lingus was a minor part of our strategy. We've placed the largest order in European aviation history for short haul aircraft. That's the cornerstone of our long term growth strategy, most of which, sadly, will be outside of Ireland due to a lack of response from the DAA," Mr Cawley said.
LEVELLING OFF IN ARREARS NOT AS QUICK AS HAD BEEN EXPECTED - Strategic non-payment of mortgages has contributed to a greater than expected mortgage arrears problem, according to a new study by Davy. Davy chief economist Conall MacCoille said there has been a levelling off in arrears, but not as quickly as had been hoped. "The labour market has been stabilising for the past two years and unfortunately that means we've had something of a strategic arrears problem. People are choosing not to pay mortgages and go into arrears, partly to do with the regulatory environment. Also the threat of repossession has been nullified until now. Arrears are going to be higher than we expected,'' he stated.
Mr MacCoille said there was no evidence that an upsurge in repossessions will affect property prices adversely as more properties come onto the market. "We looked at the US and mortgage modifications there. There have been 4 million repossessions to date in the US and in the states where they worked through them quicker, there's no evidence their property markets performed worse. Prices found a floor and the market recovered quicker," he concluded.
MORNING BRIEFS - US generic drugmaker Perrigo has agreed to buy Elan for $8.6 billion. It will pay $6.25 per share in cash and $10.25 per share in stock, a premium of about 10.5% over Elan's closing price on Friday. The company will be domiciled here.
*** IBEC has repeated its call on the Government to drop any plans to increase taxes in the Budget. The business group says the country does not need a full €3.1 billion retraction. We can will still meet our deficit targets in percentage terms with an adjustment of 2.6 billion euro in October, chief economist Fergal O'Brien points out in IBEC's latest economic outlook. IBEC says that despite a slow start to the year, there are signs that the economy is picking up and is forecasting GDP growth of 1.1% for this year rising to 2.3% in 2014. It also welcomes signs of stability appearing in the property market.
*** There was a greater than 7% increase in the level of mortgage approvals by the main lenders here in June compared to the same month last year, according to the Irish Bankers Federation. The average mortgage approval value was just below €175,000 - down by about 2.5% on the June 2012 number. In total, 1,652 mortgages were approved by lenders in June to the value of €280m.
*** The second and third largest ad companies on the globe announced plans to merge over the weekend creating the world's single largest advertising company with a market value of over $35 billion, knocking London based WPP off the top spot. Paris-based Publicis and New York-based Omnicom have announced plans for a merger of equals which will see the two companies' investors each holding 50% of the new entity and the two current CEOs will jointly lead the firm. This is all subject to the deal being passed by competition and competition regulators.