Belfast Telegraph

View from Dublin: highs for Aer Lingus and tycoon John Teeling

An employment rate of 70.3% suggests NI is approaching full employment
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By Richard Curran

It seems that no matter what you do, Brexit gets in the way of everything. Take Aer Lingus parent IAG, whose shares started the week of its full-year 2018 results at 650p. News then emerged its new share structure to deal with EU ownership rules after Brexit will see it drop out of some global stock indices. This dragged the shares all the way down to 595p by last Wednesday.

Then a stellar better-than-expected set of results, including from Aer Lingus, combined with a £700m special dividend raised the investor mood somewhat and by last Thursday evening the stock was at 599p. But the stock was still down nearly 8%, despite the strong results and dividend.

At Aer Lingus the operating story gets better and better. Its focus on transatlantic expansion while acting as a hub for traffic from Europe to North America is really paying off.

Operating profits were €305m last year, while return on invested capital at Aer Lingus is the highest in the group at 26%, compared to 13% at Iberia and 17% at British Airways.

As the former state airline plans another 15 routes to North America, one unanswered question relates to its short-haul performance. No short-haul passenger figures are provided and one might ask whether it is a game the airline plans to stick with for the long haul.

The future may be that low-cost airlines provide the capacity to the longer-haul hubs, like Dublin, for transatlantic journeys.

Aer Lingus's new single-isle transatlantic aircraft can be maximised by using them on onward short-haul routes to Europe, opening up the opportunity to restore 'business class' on some European routes.

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Flying business class on a two-hour journey sounds like a waste of good money. But when it comes to most business executives, it is a waste of somebody else's money. Cha-ching for the airline - for now anyway.

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CRH, which owns Northstone in Dunmurry, chipped in a solid set of results for last year. Revenues for the year to the end of December rose by 6% to €26.79bn, while its group profits jumped by 31% to €2.521bn. And there was good news across several divisions, not least in the Philippines where CRH has struggled in recent years since pretty much inheriting a presence there after its major acquisition of businesses from Lafarge and Holcim.

CRH has a joint venture with local group Aboitiz called Republic Cement, in a country run by strongman president Roderigo Duterte.

The government announced a massive $100bn infrastructure spend, which is music to the ears of cement-makers. Duterte is building new motorways, bridges and airports. Unfortunately, for CRH the Philippines also began importing huge amounts of cement to meet demand.

The response from CRH's joint venture has been to invest in new capacity and give out about the cheap imports. It seems to have worked.

Last month, it got a result when the Department of Trade and Industry imposed a heavy duty on imported cement.

CRH chief executive Albert Manifold had signalled last year there was some "light at the end of the tunnel" regarding the Philippines and the results for 2018 show higher volumes and better prices. However, higher fuel and power costs left operating profit "significantly behind 2017".

The Manila Times wrote last year about how Duterte's 'Build, build, build' programme could turn into a 'Bust, bust, bust'.

Indications were that only one-third of the budget allocated for infrastructure projects in 2017 was actually spent partially due to delays and a "lack of competent people".

Time will tell.

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YOU have to hand it to John Teeling when it comes to spotting a business opportunity. From mining diamonds, gold and distilling whiskey, to a company that sold women's underwear, the former UCD lecturer has seen it all.

He now reckons that cannabis is the next big gold rush and he is thinking about how to invest.

He isn't alone. Since its legalisation in several countries and US states, cannabis has become big business.

Canadian multinationals are sucking up rivals abroad and growing at home (so to speak) as the law has changed there too.

Now Mexico is moving towards legalisation.

Tobacco companies such as Philip Morris are holding off on making a big acquisition or investment, but food and drink businesses see opportunities from using some of the elements found in the plant as ingredients. Even Coca-Cola is considering a cannabis-infused range.

Perhaps Teeling sees it as a long-term threat to drinking and the likes of the whiskey industry.

When it comes to investing, Teeling has plenty of experience of the highs and lows.

Belfast Telegraph

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