Decisive action needed to save ailing ISEQ
This is a low-profile Clonmel, Co Tipperary-based engineering services company that, quite frankly, can blow your mind.
It was started by a group of Irish engineers and has since evolved in to a world class business that employs more than 3,400, providing services to the strongest companies in the world’s oil and gas industries.
In the first half of 2011, it made a profit of $643 million (€461.8m), up 50%. Moreover, it has an order book of over $9 billion (€6.46bn) which will keep its staff busy for many years supporting companies like Chevron and ExxonMobil.
Yet, Kentz is invisible on the Irish stock exchange. It instead chose to list on the London stock market in pursuit of investors.
This is a troubling fact for those who control the Irish exchange and individual stockbroking firms. Why is it that we cannot deliver a platform that makes it a no-brainer to use the ISEQ and its supporting brokers as a platform for investing and expansion? After all, Ryanair, which attracts the highest valuation multiples of any airline in Europe, sits comfortably on the ISEQ. So too does Paddy Power, which achieves a higher price earnings ratio than all other gaming companies in Europe. Kerry Group, which never strayed from its ISEQ roots, trades at a premium to many consumer food companies in Britain and is one of the best performing food sector shares anywhere in the world over the past 20 years.
These companies are testament to the fact that Ireland still provides the stockbroking needed to give world-class services for ambitious growth companies.
When, however, is the last time you heard that message from the Irish stock exchange?
Instead of fighting its corner, it seems to be caught in post traumatic stress disorder after the collapse of financial companies on the ISEQ.
These provided plenty of commission and trading up to 2008 but since have withered away, leaving a market dependent on a small number of companies.
In the past three years, a domestic recession and persistent marketing by London brokers about FTSE advantages appear to be causing more damage. Greencore has upped sticks with its purchase of Uniq and regular rumours of more departures abound.
Instead of a supine response to this challenge, the Dublin exchange needs to make itself an accessible go-to market for equity and fixed income finance.
That requires a huge amount of dynamism and drive, and includes:
*Lobbying for a cut in stamp duty from 1% to at most 0.5% to bring it in line with London.
*A more robust marketing campaign with quoted and unquoted companies to make them aware of ISEQ advantages while deriving advice on how Dublin can be made more attractive.
*A benchmarking exercise comparing the ISEQ with other exchanges and identifying at least five action points that make Dublin a better market for corporates to work in.
Without dramatic actions, the Irish stock market runs the risk of making itself irrelevant. Ireland has no God-given right to have a stock market. Just look at Brussels or Lisbon, whose stock exchanges have been extinguished in recent years. The same fate faces Dublin unless leadership is found.
Just about 800 well-paid jobs exist in Irish stockbroking. And, despite some perceptions, not many of them are pony-tailed cigar chomping Ferrari drivers.
In fact, most Irish stockbrokers are hard working sons and daughters of an average slice of society, many with parents from farming, teaching, nursing and accounting backgrounds.
We are lucky to have a stockbroking community where silver spoons are in short supply. Those people need a lot better leadership than they currently enjoy.
Without it, a significant piece of financial infrastructure could disappear.
*Joe Gill is director of research with Bloxham Stockbrokers
