Smurfit rumour mill keeps turning

Dublin’s corporate rumour mill is sometimes akin to Meerkat Manor – bits of gossip pop their heads up, then quickly disappear underground. Turn your back, and they pop up again.

This week it was the turn of a hardy annual rumour – is Smurfit Kappa chief executive Gary McGann thinking of stepping aside?

The latest incarnation has it that McGann, who has been at the packaging manufacturer's helm since 2002, is contemplating slinking into the background in favour of chief operating officer Tony Smurfit Jr, a scion of the family whose name adorns the company.

Its basis, according to market watchers, is that Smurfit has recently moved his homestead back to Dublin from Paris.

McGann has heard it all before. He told The Irish Times yesterday that having overseen a strategy turnaround in recent years to pay down a mountain of its corporate debt he has no intention of going anywhere soon.

“I’d like to see some more of the strategy implemented before I hang up my boots,” he said.

There is also the question of whether the company will re-enter the US market in a meaningful way following the $340 million acquisition of Orange County, which looks a perfect springboard should the mood ever take McGann. His answer yesterday is best summed up as: don't hold your breath.

Fitch keeps an eye on the mortgage ball
Fitch Ratings has tweaked its model for Irish mortgage-backed debt ever so slightly to reflect the introduction of legislation to reverse the so-called Dunne judgment preventing summary repossession by banks.

However, the agency added in its note to that effect yesterday that the true impact of the move will not become apparent until there is some clarity about the outcome of the process that must be gone through by banks before they can move to repossess.

The two main legs of the process, the voluntary mortgage arrears process and the Personal Insolvency Arrangements (PIAs), remain untested. In Fitch’s view the banks are going to have to take losses; it is just a question of how much and by what route. Once those questions are answered it may be possible to start reviewing the ratings of mortgage-backed debt and by inference the banks themselves.

They could be waiting a while longer if another piece of research by Davy is proved correct. Banks currently view the roll-out of the sort of sustainable mortgage solutions envisioned under the mortgage arrears process and PIAs as incompatible with capital preservation, says Davy.

That will change in time, but it looks like it will be hard way. Only when the Central Bank starts to make good on its threat to force banks to make specific provisions for unresolved non-performing mortgages will the capital preservation argument flip in favour of trying to resolve them as far as the banks are concerned.

The devil they know will then become better than the one they don’t.

If there is a lesson for the banks in what Fitch is saying, it is that there may already be downside to putting off the evil day. The lack of clarity about how and when the inevitable balance sheet pain from non-performing mortgages is going to be felt is now starting to be a drag on the banks' improving credit worthiness and thus cost of capital.

Ryanair profits rise but O'Leary's pay doesn't
Ryanair chief executive Michael O'Leary received no pay rise last year, despite delivering a 13 per cent increase in after-tax profits for the airline.

According to the company’s just published annual report, Mr O’Leary received a salary of € 768,000 in the year to March 31st 2013, plus a bonus of €504,000, indicating a total compensation package of about €1.27 million.

He received the same package last year, leading him to complain that he was the “most underpaid and under- appreciated airline boss in Europe” in an interview with Management Today.

Mr O’Leary is eligible for a bonus of up to 100 per cent of salary, plus other bonuses “dependent upon the achievement of certain financial targets”.

However, his wealth increased significantly during the year thanks to his shareholding in the airline.

While the number of shares he owns remained steady, at just over 51 million, the stock performed strongly over the period, rising by more than 70 per cent to bring the total value of his holding to about €356 million.

Salaries among the wider executive team rose to €7.1 million, up from €5 million last year and €6.5 million in 2011. Board members, who include former minister of finance Charlie McCreevy and Paypal’s Irish chief Louise Phelan, received fees of €35,000 plus expenses, no change on last year.

Flight crew members received a pay rise of 2 per cent during the year.

Ryanair’s auditors, KPMG, also got a boost during the year, as the airline spent an additional €100,000 in the year to March 31st, with total audit fees of €500,000 up from €400,000 in the previous year.

The airline however did incur a lower fee for tax advisory services from KPMG of €300,000 down from €400,000 the previous year.