Saturday, June 30, 2012
Monday, June 25, 2012
IKEA's latest set of results makes for fascinating reading. The Dublin store saw its profits fall 40pc to €6.8m -- but the company still posted a turnover of €102.8m last year, which means that we were spending about €2m a week at the Swedish superstore.
That is a lot of flat-pack furniture to come out of one, admittedly huge, shop. Even in the middle of the worst recession this country has experienced in generations, the equivalent of 50 cent per adult is being spent in the Ballymun shop every week.
IKEA's success is universal. The UK-based research company Mintel calculates that IKEA has 9.6pc of the market share, despite only having 18 stores in the UK. It has also found that more than one-third of British families have bought items from IKEA in the past three years and more than two-thirds visit the shop more often than they go to church.
How do they do it? The answer is a combination of sales techniques that run the gamut from the good and bad to the ugly. Let's take three of each.
IKEA offers fantastic service compared to almost any rival. The assistants rarely sit around looking bored and being rude. The stores are warm and the displays are excellent.
The prices. There is no doubt -- IKEA is cheap and we all need value at the moment.
Design. Most Irish people live in modern and small houses that were built in the past few years. IKEA focuses on furniture for small spaces and devotes a lot of the store to storage solutions. The furnishings are funky and bright and a million miles away from the faux Georgian fare found in many Irish stores.
Quality. Too often, this is patchy. But as the saying goes: you get what you pay for.
Warehouse shops. Building huge warehouses on the edge of motorways makes commercial sense for companies, but not for society. If every shop did the same thing, we would end up living in Los Angeles, without the weather or the film stars.
Queues. The generally good service breaks down here and means that a visit can end on a low note. A survey carried out in the UK showed that one in three couples has a row when they go to IKEA. It's easy to see why.
The ugly: IKEA has brought tax avoidance to an art form. The Swedes may have some of the best social services in the world, but IKEA's founder lives far away from high-tax Sweden, in Switzerland.
Slave labour: IKEA has used it. It developed links with the communist German Democratic Republic in the 1970s, opening manufacturing facilities which used political prisoners to construct sofas. It is currently investigating reports that it used political prisoners in Cuba to make products.
The meatballs. Disgusting. Enough said.
IKEA is often called a category killer because it destroys almost all competition for 50km in any direction. Like it or not, Irish companies are going to have get used to competing with the likes of IKEA in future because the memorandum of understanding dictated by the troika includes provisions for more superstores like IKEA. This will present enormous challenges to many Irish retailers that have been protected from the sort of extreme competition posed by giant rivals.
These are already tough times for Ireland's brave retailers. Every report predicts consumer demand will shrink again this year and many economists, including the ESRI, are beginning to believe that spending habits are changing for good. With customers losing their jobs or emigrating, Irish retailers are badly placed to resist foreign companies with deep pockets, but the lessons from IKEA are stark.
By failing to meet the demand for well-priced furniture that reflects 21st-Century expectations, many retailers left themselves vulnerable when the inevitable challenge came.
Retailers who suspect they are also vulnerable to the arrival of a category killer on these shores should start thinking now about how to hang on to their customers.
McFeely bankruptcy application expedited - The Irish Times - A "Shinner" claims to be a British subject!
PROPERTY DEVELOPER Tom McFeely, whose first application for bankruptcy was overturned by the High Court in London earlier this month, is to have the hearing of his second application accelerated, it has emerged.
Overturning his bankruptcy on June 15th on the application of one of those who bought a house from him, Theresa McGuinness, Mrs Justice Sonia Proudman repeatedly said she would not agree that a new application should be rushed before bankruptcy registrars.
However, documents sent to Ms McGuinness on Friday by lawyers for Mr McFeely – the developer of the controversial Priory Hall apartment block in Dublin – said the petition is to be “restored to the registrar to be heard as a matter of urgency” on the judge’s direction.
The former IRA hunger striker, who served 12 years in the Maze Prison for shooting an RUC officer, objected to Ms McGuinness’s challenge to his bankruptcy declaration, saying he was a British subject who should not suffer Ireland’s “punitive” bankruptcy laws.
A bankruptcy declaration in Britain for Mr McFeely would mean a bid by Ms McGuinness to have him made bankrupt in Ireland – where he could be barred from serving as a company director for up to 12 years – would fail.
His bankruptcy declaration was overturned by Mrs Justice Proudman after it became clear that Mr McFeely’s witness statement, in which he declared he was not involved in other legal proceedings, was shown to be wrong.
During the June 15th hearing, Mrs Justice Proudman indicated it could take months for a hearing to be listed with a bankruptcy registrar if she did not expedite it, which she was not then minded to do.
Ms McGuinness, who lives in Rush, Co Dublin, is to write today to the judge’s clerk querying the decision.
“If the hearing is expedited and if he is declared bankrupt there then it will take the proceedings out of the Irish courts,” she told The Irish Times.
Ms McGuinness, who was awarded more than €100,000 in damages to repair a house badly built by Mr McFeely – still not paid due to a challenge to the Supreme Court – will appear before the July 4th registrar’s hearing.
In a witness statement opposing the application to overturn his bankruptcy, Mr McFeely said he had fought against Ms McGuinness’s bid to have him made bankrupt in Ireland, alleging that she has been “vindictive” towards him
Eddie O'Connor, the 'Green' Bill Gates is developing a massively ambitious €12.5bn plan to export electricity from to the power starved UK.
The gigantic project could see the creation of up to 40,000 jobs in the largest infrastructure development seen in the country since the electrification of Ireland in the 1930s.
"We see this as a massive opportunity to supply Britain. This is a one-off opportunity," he told the Sunday Independent. Ireland is on target to meet mandatory levels of renewable energy by 2020, but Britain looks as if it will fall a long way short unless it takes drastic action.
Exporting electricity produced by vast windfarms to the UK would see David Cameron's government able to meet the strict 2020 targets.
Last week Minister for Communications, Energy and Natural Resources Pat Rabbitte, and his English counterpart Charles Hendry signed a memorandum of understanding which may pave the way for the export of electricity from Ireland to the UK.
O'Connor's Mainstream Renewable Power has a serious track record in developing major windfarm projects. The company was formed after O'Connor sold his previous business, Airtricity, to SSE for €1.1bn in January 2008. Airtricity's North American operations had earlier been snapped up by E.ON for €1bn in 2007.
Mainstream's plan is to create a network of windfarms in the midlands, which will be joined together through underground cabling to a series of hubs. The electricity will then be exported to the UK via an undersea cable.
Some €2.5bn worth of power could be zapped over to the UK each year under O'Connor's scheme -- a larger export market than the entire dairy sector, he said.
Ireland's peak demand for electricity is about 4,500 megawatts. "We've already booked 5,000 megawatts on the UK grid," he said.
This has involved an initial outlay of over €500,000 from Mainstream, which has already spent close to €1m planning and developing the landmark project.
Estimates from other windpower-producing countries have shown that about eight jobs per megawatt are created by major projects. This could lead to nearly 40,000 jobs in construction and operations under Mainstream's 'Energy Bridge' project.
Some 400 wind turbines will need to be constructed for the project, which may see huge special factories built in Ireland.
O'Connor plans to export the first electricity to the UK in 2017, ramping up to full capacity as the network of wind farms is built out.
Funding the scheme may need up to €12.5bn according to O'Connor, who has already raised more than €250m from investors for various Mainstream Renewable projects. He told the Sunday Independent that financing would become available from "large pension funds" once power purchase agreements are in place.
"Mainstream won't own 100 per cent of this. There is room for other players, such as grid people. We'll do the connection part but we don't need to own things like the nodes," he said.
"We have talked to a lot of people and we have found them very willing."
European funding is an avenue that will be pursued, with the green pioneer pointing to the €160m granted to Eirgrid by Europe for its east-west connector. "Only a silly person would ignore the role of China in this.
"The development stage funding will have to be put in place," O'Connor, said, adding that Mainstream was looking to raise at least €10m in coming months.
The company is moving ahead with plans to float in 2014, although O'Connor conceded "we might bring it forward".
- Nick Webb
YET another of 's biggest and most indebted developers has slipped the so-called 'Nama noose' and declared bankruptcy in the UK.
Landmark Enterprises chief Paddy Shovlin will have a clean bill of financial health on May 29 next, or just 11 months from now, notwithstanding the hundreds of millions of euro his companies owe, and the millions he owes Nama personally on foot of personal guarantees he gave in the course of borrowing a fortune during the boom.
Having been adjudged a bankrupt in London's High Court of Justice just four weeks ago, Mr Shovlin would incredibly already appear to be in the process of restarting his property career. Records relating to the developer's case filed with the UK's Insolvency Service describe him as trading under the name of Placepartner LCPM at the World's End Studios in Chelsea.
The fully serviced office is located just 20 minutes away from Mr Shovlin's present home in Coleridge Gardens. While it is unclear whether the developer owns the two-bedroom unit which the Insolvency Service records as his current address, the apartment commands a rent of £6,342 (€7,860) per calendar month according to the UK property database, Zoopla.
While Mr Shovlin was nearly as well known during those years for his love of racing Ferraris as he was for his developments, the unfinished shell of an apartment block at the Beacon South Quarter in Sandyford, Dublin, has since become the abiding image with which the Landmark Enterprises boss is most readily associated.
Thankfully, work at the development is expected to recommence shortly following a recent pledge by Nama to invest €11m there as part of its overall plan to pump €2bn into projects between now and 2016.
While the agency's investment in the Beacon development is a welcome one, it is somewhat ironic given how Mr Shovlin and his co-directors at Landmark -- Pat and Anthony Fitzpatrick -- hold the dubious distinction of being the first developers against whom Nama secured judgements in the commercial court. In October 2010, Mr Justice Peter Kelly granted judgements in favour of Nama for €25m against Mr Shovlin and €12.5m each against the Fitzpatricks arising from personal guarantees they had given on a refinancing loan of €277.6m from Bank of Ireland for the Beacon development.
Asked by the Sunday Independent if it would look to challenge Mr Shovlin's bankruptcy, a spokesman for Nama said: "We monitor each bankruptcy proceeding very closely to decide on the best course of action to take. We make our decisions on a case-by-case basis. As a secured creditor, we are in a stronger position than other creditors."
While the spokesman declined to comment on Mr Shovlin's case specifically, it is understood that Nama paid prices specifically linked to the market values of the assets secured by the borrowings it took over from his banks. This should leave the agency in a position to recover the maximum amount possible once it realises the value of the Landmark chief's assets. It is also open to Nama to seek an attachment on Mr Shovlin's future earnings.
In availing of UK bankruptcy, Mr Shovlin joins the growing number of Ireland's broken property titans who have done so. Cork-born developer John Fleming was discharged as a bankrupt in the UK last November, having declared himself hopelessly insolvent and unable to repay his companies €1bn plus borrowings in November 2010.
Glenkerrin Homes chief Ray Grehan -- who famously paid €171m, or €84.5m an acre, for the former veterinary college site in Ballsbridge -- meanwhile, is looking at a fresh start by year-end, having been declared bankrupt in London on December 29 last.
Explaining his decision in an interview with this newspaper at the time, Mr Grehan said: "By doing this [declaring bankruptcy], maybe it will free me up from that and leave me in a better position to rebuild than staying on and allowing Nama to prolong that agony with a noose around my neck over the next several years."
- RONALD QUINLAN
A generation of people now have very different views from their parents about property. In recent years they have chosen – or been forced – to rent for longer. It is usually a more expensive choice
THIS WEEK the Economic and Social Research Institute found that nearly half of us who rent accommodation could afford to buy somewhere to live. On that evidence, renting, once viewed as the preserve of students and those seeking stopgap accommodation, is now a proactive choice for people who are cautious about buying given uncertain job prospects and the potential for negative equity.
But in the UK this week Barclays calculated that owning a property is £200,000 cheaper than a lifetime – 50 years – of renting, on average.
So how does the reality of renting live up to the image, and is it better to buy?
Angela Keegan, the managing director of MyHome.ie, is seeing a shift in behaviour. “Over the last few years we’ve seen people renting for longer. The other thing we’ve noticed is people making a lifestyle choice to rent. Lots of young professionals would have seen older siblings get burned at the top end of the market, so they’re renting property instead.”
For Keegan the whole notion of the property ladder has changed. “A few years ago we were talking about the rush to get on to the property ladder. Right now that doesn’t necessarily mean owning a house. It means living in an area where they want to live in, living a lifestyle they want.”
Ronan Lyons, an economist at Daft.ie, has a calculator on his website for working out the cost of renting a property versus buying it. Using an average house price, an average rent, an average mortgage interest rate and normal fluctuations in the rental market, he calculates that renting a property in Ireland over 30 years would at present cost an average of €90,000 more than buying it would.
“Let’s take an average house price of €160,000,” he says. “The rent on that is probably going to be about €800 a month. If you’re talking about someone who had a 10 per cent deposit and we go for a 30-year mortgage, I’m expecting the average interest rate of a mortgage to be 6 per cent, so the mortgage repayment is going to be €865 a month.”
As rent and house prices typically rise by 2 per cent each year – outside of bubbles and busts – 12 annual mortgage repayments over 30 years will cost €300,000 on a €160,000 property, and the property might then be worth about €290,000.
Paying €800 in rent 12 times a year on that property for 30 years, allowing for 2 per cent rent inflation, would mean the renter would have paid €390,000.
“If you were going further up the scale, looking at south Co Dublin, something that was €800,000 and the rent €2,000 a month, you’d find the mortgage repayment was €4,000 a month and the rent was €2,000 a month,” Lyons says.
“It that case it makes more sense to rent than to buy. But for the average house there’s only a small gap between paying rent and paying a mortgage.
Lyons says that in order to make smart decisions, buyers need to pay attention not to house prices but to rents. “The fire sales that Allsop do in the Shelbourne, they’ll look at the rent ratio,” he says. “So if something’s getting €10,000 a year in rent, then they’d say, ‘I’ll give you a €100,000 for it.’ Trying to get first-time buyers to think on the same terms is important, because then they’re much less likely to make mistakes buying.”
Keegan says a new group of renters, particularly young professionals, are making lifestyle decisions based on location and services over owning property. “There has certainly been a change in one pattern, which was buying and commuting. People are appreciating amenities and local communities, and the affordability of renting property in cities has brought people back in.”
From Clontarf. Rents an apartment in Dublin 1 with a flatmate
“I’ve been renting for just under a year; before that I was at home. Buying would appeal to me, but it’s not something I would consider for the next few years. It’s not even in the distant future.
“Looking at friends of mine who are the same age as me – 25 – maybe one or two would be considering buying, but that might be out of a group of 30 who all graduated at the same time.
“All of those people are not living at home; they’re all renting. They’ll be renting for the foreseeable future, and it could turn into a permanent thing. I think things are changing.
“It would be lovely to own a house, but I don’t even own a car.”
From Kildare. Rents a house in Dublin 7
“I’ve been renting for the past 10 years. I’m not thinking about buying at the moment; I can’t afford it.
“Me and some friends discussed buying a house together a couple of years ago. I look back on that and think, Thank God I didn’t.
“The idea of owning my own house and having a garden, closing the door and knowing it’s mine – that’s appealing.
“People say rent is money down the drain, but on the Continent everyone rents. It’s pretty much the same cost as a mortgage.
Sure, with a mortgage in 35 years you’re going to own your house, but will you still want it in 35 years? It’s a massive commitment for what is essentially a pile of bricks.”
From Westmeath. Rents in Dublin 8
“I’ve rented in Dublin for two and a half years. Before that I was moving around Europe renting, and prior to that I owned a house in Bristol. I don’t think buying is something I’d like to immediately do again. I like the flexibility and freedom of renting. When you live in other countries you realise property ownership isn’t a be-all-and-end-all goal.
“Most of the people I know are renting, and they’re all in their 20s, 30s, 40s. I think owning a property is wrapped up in national identity, progression, acquiring status, whereas perhaps in more socialist countries you see a more collective approach to living. People here think that’s a bit hippyish, but it’s not: it’s commonplace elsewhere.”
From Drogheda. Rents a house in the town with a friend
“I’ve been here over two years. Before that I lived with my parents. I would intend to buy eventually. I’m 24, and I’ve a friend who’s 23 who bought a house last week, so I suppose now really is the time considering how cheap they are.
“I think people are holding off a bit. It’s hard to put all your eggs in one basket. People feel they have to emigrate as well, be it to Australia or Canada. I know a lot of people working over in the mines in Australia with a view to coming back and buying a house and not having a mortgage over your head. I’ve two friends who bought houses who’d be under 24. The rest would be renting.”