Time has come to take stock

The Irish Stock Exchange has managed a decent start to the year, but news that another top Irish company is considering switching its listing to London could prove a headache for chief executive Deirdre Somers, says John Daly

Despite having turned in reasonable trading figures for the first half of 2012, the news earlier this week that another major Irish company is considering delisting from the Irish Stock Exchange will doubtless have provided some food for thought for Iseq chief Deirdre Somers.

United Drug is considering delisting from the Iseq to move its main listing to the London Stock Exchange.

“The board believes that FTSE UK index inclusion would result in a further increase in UK and international investor awareness of United Drug,” the company said. United Drug anticipates that if its shares were only listed in London “they should be eligible for the FTSE UK Index Series, provided the company maintains the premium listing of its ordinary shares on the London Stock Exchange and there is adequate trading liquidity on the LSE.”

This potential delisting follows CRH last year moving its primary listing to London. Food group Greencore, which generates much of its revenue in the UK, also delisted from the Iseq to London earlier this year. In a response, the Iseq noted that United Drug, listed on the Irish exchange since 1986 and with a market capitalisation of €544m, accounts for just 1.1% of the Iseq Index.

“The Irish market provides a valuable and loyal support system for growing Irish companies in broking, analysis and corporate finance expertise, as indicated by the current strong trading volumes on the Irish market for United Drug and the company’s growth since listing on the ISE,” said the exchange.

United Drug generated 41% of its €77m operating profit in the UK in 2011, and already has a dual primary listing structure in Dublin and London. “The first thing to decide is whether it is the right thing to do or not,” said finance director Barry McGrane. “The earliest United Drug could have a FTSE UK Index presence would be December, if it decides within a month to proceed with a move to London.”

Somers, a chartered accountant, was appointed to the position of chief executive of the Iseq in Apr 2007, having taken over from the long-serving Tom Healy. The 45-year-old Cork native graduated with a Bachelor of Commerce from UCC in 1987 and joined KPMG, becoming a manager in its financial services, specialising in international tax.

Somers joined the Iseq in 1995 as listing policy manager, rising to become director of listing, where she was responsible for all public listings, including those by companies, investment funds, and debt securities.

On assuming the role of CEO, Somers undertook a strategic review of the Iseq with its stakeholders, resulting in a decision to separate the regulatory and commercial activities undertaken by the exchange. In 2009, the Iseq expanded its membership base internationally, particularly in relation to primary dealer member firms, and to participate in auctions organised by the National Treasury Management Agency.

Equities trading activity has increased by 14% in the first half of 2012, according to the Iseq’s quarterly statistics, published last month. The average number of equity trades rose by 2.3%, exceeding 10,000 trades per day in the second quarter of 2012. Equity turnover at €18.7bn for the first half of 2012 saw a rise of 0.3% year on year, while market capitalisation of Iseq-quoted companies for the same period grew by 5.2% to €91.3bn at the end of June 2012. “After the turbulence of 2009 and 2010, there was some improved stability in the markets during 2011 and this has been reflected in the Irish Stock Exchange’s revenues,” Somers said, noting the exchange had seen a strong performance across its diverse range of revenue streams.

Earlier this year, the Iseq joined forces with the Malta Stock Exchange to launch a new market for debt securities, the European Wholesale Securities Market. Trading in wholesale fixed income debt securities, it will operate and be supervised out of Malta with primary market infrastructure, listing and associated corporate services provided by the Iseq.

“Globalisation is going to continue. No one cares any more where you are listed and where you are traded,” said Somers.

“All of the markets that currently serve the fixed income market are in northern Europe, so we are hoping this will give us greater geographical access into the Middle East and the Mediterranean. In three to five years, we believe we can have 20 % of our total fixed income from this base.”

On taking up her current role in 2007, Somers described her place of work as “a unique organisation, a very enabling work environment. Its ethos is very commercial, but it takes its role as an institution very seriously. It is not completely profit driven — I find that a great environment in which to work.”

Having come a long way from its Victorian origins, the Iseq has changed much over the decades — reflecting the broader global market of which it is part.

“When I joined in 1995, we were still part of the London Exchange, from which we split soon after. Staff numbers have since increased fourfold, and our international business has increased exponentially.”

Since 2000, the Iseq has also developed a strong asset-backed securities business, and remains committed to its traditional areas of operation.

“Our core business is the running of the equity market for investors, it is fundamental to what we do and to our reputation. We are the central point of liquidity for Irish shares and the provider of market information to the Irish stockbroking community.”

A consistent advocate for market transparency, Somers spoke at a 2008 conference on the theme of Challenge and Change in the post-credit crunch regulatory environment. Noting that it seemed “perception, conjecture, rumour and momentum have replaced fundamental analysis as the key driving force on the markets”, she said the most suitable counterbalance is effective communication and transparency, both through individual company and industry initiatives.

“Gaps in transparency have certainly been a contributory factor in the current market turmoil and credit crunch,” she added.

The external perception of the Irish economy, its laws, regulatory standards and compliance all impact directly on the overall perception to international investors, she believed. “Those standards must be world-class, be perceived to be world-class and be implemented in a manner which meets best international standards.”

Getting to know Deirdre Somersb

* Age: 45.

* Education: Cork. St Angela’s, Cork. UCC BComm. Institute of Chartered Accountants.

* Career: KMPG — seven years as tax advisor/ international tax consultant.

1995: Joined Irish Stock Exchange on secondment from KPMG — head of listing policy. 2000-2007: Director, Listing, ISE. 2007: Succeeded Tom Healy as chief executive.

* Family: Marriedto Enda O’Sullivan; two children.

* Residence: Dublin.

* Leisure: “Children”, and reading.

* Other: Member of Irish Company Law Reform Group. Chair of the group overseeing implementation of the transparency directive; Member of the Irish Clearing House Group; Chairperson of the Irish Securitisation Forum.