Sunday Business Post – Property Section Cover Story – 24 Feb 2008
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A slower property market and better availability of tradesmen should boost the home improvement market this year, writes Dermot Corrigan.
If the past few years have seen many Irish people trading up and purchasing a newer, roomier and more comfortable property, then 2008 looks set to a see a trend towards home owners improving their current homes.
The market for remodelling, maintenance and improvement (RMI) of Irish homes is expected to grow considerably in 2008, according to Lisney economist John McCartney. ‘‘The RMI industry will take a huge upturn,” he said.
‘‘Currently RMI, including extensions, attic conversions and more minor repairs, makes up approximately 13 per cent of construction output. We estimate that between 2006 and 2008 we will see a 30 per cent growth in that side of the industry.”
McCartney said all the data points to a major increase in the number of Irish people extending or renovating their homes this year.
‘‘Central Statistics Office figures statistics show that the number of planning permissions granted for extensions was up by 12 per cent in the first three quarters of 2007 compared to the same period one year earlier,” he said. ‘‘Also, the vast majority of housing extensions are smaller than 40 square metres and therefore do not require planning consent.”
Ted Laverty, managing director of onlinetradesmen.com, agreed with McCartney’s analysis. ‘‘We expect the RMI sector to grow in 2008,” he said. ‘‘Early indicators show a 27 per cent increase, up to more than 4,000, in the home improvement projects being submitted through Onlinetradesmen.com from the same period in January 2007.”
McCartney said many people who had held onto their SSIA cash would splash it this year. ‘‘The SSIA money has been a big factor,” he said.
‘‘A survey by the Irish Financial Services Regulatory Authority in October 2005 found that 13 per cent of SSIA holders planned to spend their maturing lump sums on home improvements. Some of it has been spent already, but it is clear that a lot of it is still to be discharged into the economy.”
For the last few years it has been difficult to find workmen to take on smaller renovation projects, as construction professionals were attracted to more lucrative work building new homes. But such skilled labour should be easier to source in 2008.
With new house completions expected to drop from approximately 88,000 in 2006 to less than 50,000 this year, a wave of construction personnel should be available to fit that kitchen or convert that attic, according to McCartney.
‘‘There is likely to be a loss of between 60,000 and 70,000 jobs in new home building,” he said.
‘‘Part of the problem over the last few years is that people who wanted to do projects at home have just not been able to get the workers, because they have been tied up building new homes. Small contractors who would build an extension for you were like gold dust, so projects were put on hold due to the lack of available labour. Now people who have been laid off from the big building sites are going to be flooding into the market for RMI-type work.”
This means the cost of getting the workmen in will inevitably come down, according to McCartney.
‘‘There is a supply and demand effect here, and the availability of all this extra labour will bring down the price of work,” he said. ‘‘It will be more affordable and customers will not have to wait as long to get builders. The level of service you will get will probably improve as well.”
Laverty said the average total cost of an RMI project organised via his website had fallen over the past 18 months. ‘‘The averages spend for home improvement projects through Onlinetradesmen.com so far for 2008 is €13,747,” he said. ‘‘This represents a drop of seven per cent from the 2006 figure of €14,752.”
McCartney said further competition between contractors battling for RMI projects would see costs fall further as 2008 progresses. ‘‘Anecdotally, some of the figures people were getting quoted were quite high,” he said.
‘‘I think we will see the return of a bit of sanity to the market this year. Data from August 2007 showed employment in small construction firms had grown quite significantly, that will make it a more competitive market.”
Laverty warned against employing non-specialists for complex projects. ‘‘Low-cost operators will often sacrifice the quality of their work and the materials they use in the interest of winning jobs,” he said.
Elaine McHale, an interior design consultant at homeinteriors.ie, said many of her clients were looking at rearranging the internal layout of their properties to give a cleaner, more spacious feel.
‘‘There is an increase in the number of refurbishments and a move towards open-plan designs, rather than new builds,” she said. ‘‘People are knocking rooms together, creating more space and bringing in more light. They are going for a more sophisticated look with less clutter.”
McHale said people who had enjoyed home improvement and makeover television shows wanted to take greater control of their home improvement projects.
‘‘People want to be more involved in the whole design process,” she said. ‘‘There are so many TV programmes out there now about interior design that people have a firm idea of what they want. They are going out and buying the materials themselves, but they still want to be guided.”
The kitchen is the number one target for improvement, according to McHale. ‘‘Kitchens are now competing with living rooms in terms of being the focal point of the house,” she said. ‘‘It is often the most important room in the home.”
Rosie Shortt, managing director of Houseworks, said her customers were choosing top of the range modern kitchens.
‘‘The Shaker style will always be popular, but people are going for the modern, streamlined contemporary kitchens which offer a cleaner look,” she said.
‘‘They like the sense of space and when they come home from work they want to be in a clean, spacious area. We are now selling what we call a new classic kitchen in the Siematic Beaux Arts range; it’s an eclectic mix of stainless steel, timber, granite and lacquer doors.”
‘‘People are spending from €40,000 up on their kitchen, including appliances and worktops, and it’s quite common for them to sp end ove r €80,000.The average spend is going up, and people are buying quality. . . “
Bedrooms are also a popular focus for RMI investment according to Richard Fagan, retail sales manager with McNally Living.
‘‘People are spending a huge amount of money now on their bedrooms,” said Fagan. ‘‘The market has moved towards a very streamlined, sleek-look. People are investing a lot in lighting, flooring and specific storage systems for different clothes such as shirts, ties and shoes. For an entire master bedroom you are looking at between €7,000 and €18,000.”
Incorporating a home office into the living space is an increasingly common aim for Irish home improvers, Fagan said. ‘‘People are putting home office pieces into their open plan living areas,” he said.
‘‘In our showroom we have set up a neat shelving system with a built-in desk within the living area, and a lot of people are falling in love with that. Customers are spending up to €20,000 on a home office fit-out.”
External RMI projects are also expected to be big this year. Award-winning gardener Paul Martin said many of his clients were now looking to match up the inside and outside of their homes.
‘‘People are looking to bring the inside out and are very conscious of wanting to move from indoor to outdoor living,” he said.
‘‘There is a trend for paving materials outside to match the inside. If there is a contemporary extension, maybe done in a light-colour porcelain or limestone, they will try and match a similar colour outside. If they have a small garden, the room inside can seem 30 per cent bigger. The price of a normal project would be around €50,000.”
Martin said demand for high-end conservatories was also increasing. ‘‘I know from Marston & Langinger, who would be one of the best conservatory firms around, that their sales are up,” he said.
‘‘There is a trend towards better quality – people are becoming smarter with their money.” A more prosaic reason for the increase in RMI projects this year is the incoming Building Energy Rating (BER) certification framework. New homes will be certified from July 1 this year, but secondhand properties going on the market will need a certificate from the start of 2009.
‘‘Many property owner are still unaware that all secondhand homes put up for sale or rental will need a BER certificate,” said Ted Laverty.
‘‘This will fuel the need for insulation services, double glazing and the updating of heating systems to more efficient solutions.”
McCartney said BER ratings would definitely affect property prices. ‘‘People who want to sell their properties and achieve a good price on the market will be put at a disadvantage by a sub-standard energy report,” he said. ‘‘We think there will be big business for RMI providers in that area this year.”
Enterprise Ireland – ebusinesslive.ie newsletter – Issue 204 26th February 2008
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Many workers now spend more time dealing with email than they do making phone calls, writing memos or even talking to colleagues or customers. Email is ubiquitous these days and is essential to the running of many businesses, but are you handling it as efficiently as possible?
A 2007 University of Glasgow study found that people working on a computer typically switched applications to check email between 30 and 40 times an hour, for anything from a few seconds to a minute. This came as a surprise, not least to the subjects themselves, half of whom had told the researchers they checked email only once an hour.
According to Dr Karen Renaud, who compiled the Glasgow research, the act of repeatedly interrupting tasks to check email broke workers’ concentration levels and reduced their productivity. A growing level of ‘email anxiety’ was also discovered, with 34 percent of respondents stressed out by the volume of emails received daily, and 28 percent regarding email as a major source of pressure.
As well as being stressful and distracting, time spent checking email can also cost your business money. A 2007 survey by Waterford Technologies estimated that the average worker spends approximately 11 working weeks a year negotiating their email – a significant strain on any firm’s resources.
How often should I check email?
This question is about as easy to answer as the famous ‘how long is a piece of string?’ poser. Customer-facing staff, such as sales or support teams, may spend their whole day checking and responding to email. However, for other staff members it can help to have a small number of set times in the day when they put aside the rest of their work to go through and empty their inbox.
But just as email can be a disruption to the rest of your daily tasks, daily tasks can also threaten to interrupt email management. Many email messages require a decision. Good decisions require focus, and focus requires uninterrupted attention. So, when you do sit down to work through your incoming email, dedicate yourself to that task alone. Some people even go as far as writing ‘email’ into their diaries and keeping these times sacred. Others are more flexible, but during this time don’t answer the phone or allow interruptions: work only on processing your inbox.
This system can also help cut down on spurious email from colleagues, where something that could be cleared up in a 30 second phone-call may take four or five back-and-forth emails to confirm. For example, one person sends an email saying “let’s do lunch”. The recipient replies asking where and when. A third person is cc’ed to see if they want to go, and an extended flurry of email correspondence ensues. However, if colleagues know you are not always available via email, they are more likely to pick up the phone in instances like this, and the lunch date can be swiftly sorted without undue interruption to the work flow.
Which email should I answer first?
Staff should resist the temptation to move straight to the most interesting looking email. Jumping around through your inbox can lead to emails getting lost or mislaid. Begin by processing the first message and only move to the second one after this has been dealt with.
It can be difficult to determine whether to reply immediately or not to an email. The ‘GTD (get things done) two-minute rule’ is a rule of thumb coined by American business writer David Allan. It says that if you cannot fully answer the email in two minutes or less, it should be filed for later consideration.
The Four Ds
Sally McGhee, a US business consultant, has incorporated the GTD rule into her ‘Four Ds’ system, which many people find useful. The Four Ds refer to four different actions you can take with each email.
1. Delete it
Many emails are not that important. Maybe you have been BCC’ed on an email that is not your concern, or you are being informed that today is Sally from accounts’ birthday. Once you have read these emails, they can be deleted. (However, more and more companies are now asking staff to be wary of deleting messages, for legal and compliance reasons. It is advisable to put guidelines in place so all staff know which emails must not be deleted. See Issue 166 and 167 for more on internet and email usage policies for staff.)
2. Do it
Many emails simply require a quick yes or no decision, a short phone call to confirm something, or a quick search for the information requested. Doing these short tasks immediately is much more efficient than filing the message and having to come back to it later.
3. Delegate it
If the email references something you are not directly responsible for, or if it requests information that only a colleague has access to, then the message should be quickly forwarded on and then, in many cases, deleted.
4. Defer it
If a message cannot be deleted, done, or delegated in two minutes, then it should be deferred. McGhee suggests that only about 10 percent of business email messages should be deferred. Most email packages now include easy-to-use management features, which allow people to store their email in different folders and get at messages again easily as required. You might also make use of an email task manager to help organise action items.
Following these simple rules should help workers to waste less time on their email, and alleviate much of the stress that comes from worrying about an overloaded inbox.
Sunday Business Post – Property Expo 08 Supplement – Feb 10 2008
France’s Atlantic coast is proving as big a draw as many of the traditionally popular areas, writes Dermot Corrigan.
The Vendée region, on the Atlantic coast of France, offers value to Irish investors and holiday home buyers, according to Olivier Florence, managing director of The French Property Experts.
Florence said the region was attracting interest from Irish buyers, as it offered lower prices than traditionally popular locations such as Languedoc and the Mediterranean south-east.
“The Atlantic coast, in particular the Vendée region, is becoming popular,” said Florence. “The prices in the south have gone up quite a bit in recent years. You can still get pretty good prices all along the Atlantic coast. The weather there is very good as well, it is very sunny and you have the sea, so people are starting to discover that it is a good region to buy in.”
Trisha Mason, managing director of VEF, agreed that Irish buyers were starting to focus more on the Vendée.
“Vendée is now showing an increase in interest and we have booked several clients into this area already this year,” said Mason.
Mason said regions off the beaten track were offering good value to Irish investors and buyers.
“Generally, the best investment potential is where it is not easy to get to at the moment,” she said. “Limousin is showing a growth in interest, and I think that will be followed by Auvergne. The advantage of Auvergne is year round rental with the ski season in winter and outdoor activities all year. Prices remain amongst the cheapest in the whole of France.”
Irish buyers are also increasingly drawn to Brittany and Normandy, according to Florence. Both Mason and Florence said the traditional areas still remained popular with Irish investors, however.
“The Languedoc is the most popular,” said Florence. ” That is in the south-west of France. The south east is popular as well, but that is more expensive, so you need a fairly good budget to be able to buy there.”
Mason said holiday home-buyers, who would previously have bought only in Spain or Portugal, were now looking at France as a viable alternative.
“During the last 18 months, we have seen more and more holiday home buyers enter the market,” she said. “This has been as a direct result of the increase in direct flights from Dublin and other airports in Ireland to various parts of France. We are also seeing a move to France of Irish people who originally bought in Spain but are now looking for the traditional lifestyle with a stable property market.”
Florence said that the majority of buyers were looking for properties that could be rented out and used as holiday homes.
“Nine out of ten would want to use it themselves,” he said. “Most people want to have a rental income, and to be able to use it themselves as well. They have been in France on holidays, and they fell in love with the place. They love the food, the markets, the countryside.”
“It is normally people’s first foreign property purchase, but we do get a few investors who have property here and there,” said Florence. “A lot of people are also thinking of their retirement, and they prepare by buying a property.”
Mason said the average price paid for a French property in 2007 was €230,000.
“This has doubled in six years,” she said. “It is still possible to buy a three bedroomed property in the Auvergne for €130,000. Capital growth for the area is not expected to be above average by the French.
“However, I believe that the increase in overseas buyers will see above average capital growth in 2009 onwards. The overseas buyer has huge influence on property values in an area, but is often ignored by the French in making their predictions of capital growth.”
Florence said the price of a typical three-bedroom holiday-home property varied considerably with its location.
“On the Atlantic coast you are probably looking at €160,000, and in the south-west it would be about €220,000 and maybe about €280,00 in the south-east,” he said.
France is an established market, not given to violent fluctuations in price or demand, according to Florence.
“Prices have appreciated a little more in the south over recent years, but it has started to slow down a bit as prices have gone up to quite a high level,” he said. ” The property market has firmed up a little bit this year, but there is no big changes.”
Mason advised anyone considering buying a property in France to seek professional advice.
“French law differs from Irish law,” she said. “It is not difficult for Irish buyers to become property owners in France, but they need to take good independent professional advice before setting out to do so.”
Mason said properties in France were usually advertised with the fees included in the price.
“All property for sale in France through French agents is advertised with the purchase price of the property and the French agent’s fees. These are usually six to eight per cent,” she said.
Florence said French banks welcomed business from Irish customers, and most purchasers opted to take out mortgages in France.
“People raise the finance mostly in France because the interest rates are lower,” he said. “Also the security on the property is in France. If they want to borrow in Ireland, they may have to do an equity release in their own home. Then if they are unable to repay it is their own home that is in danger.”
Irish buyers can be liable for local taxes, whether or not they rent the properties, Florence said.
“Local taxes are not based on the rent, not the property price,” he said. “For local tax we usually say to budget for one month’s rent per year. Once people look at the property they can tell roughly how much it is going to cost them.”
It has never been easier for Irish people to visit France. Airlines with regular flights linking Ireland with most corners of France include Aer Lingus, Aer Arann and Ryanair, with flights departing from Dublin, Shannon, Cork, Galway and Waterford.
Popular destinations, such as Paris, Carcassonne (in Languedoc), Toulouse, Bordeaux, Marseilles, Paris, Nice, Lyon are served year-round. Flights to other destinations, including Rodez, Brest, Nantes, Biarritz, Lorient, La Rochelle and Tours are seasonal, with the service commencing in early Spring and ending in Autumn.
The cost of the flights is dependent on the time of year and the airline’s pricing policies, however low cost flights (from approx €50 each way per person) are generally available if people book well in advance.
Sunday Business Post – Property Expo 2008 Supplement – Feb 10 2008
With interest rates on the way down, and the World Cup due in 2010, now may be the best time to buy in South Africa, writes Dermot Corrigan
Local economic conditions mean this year is an opportune time to invest in the South African property market, according to Kevin McManamon, managing director of Accolade Overseas Homes.
“The South African property market has been extremely buoyant in the last few years,” said McManamon. “However, for the last few months, prices have been a bit static. South African interest rates have risen and that has made it harder for locals to get mortgages.”
Prices are set to rise over the next twelve months or so, McManamon said.
“It is expected that interest rates have reached the peak of their cycle and will drop over the next year,” he said. “There is a huge new black middle-class coming onto the market, due to affirmative action policies introduced by the South African government. This will have a very positive affect on property prices in South Africa. Then, in 2010, you have the World Cup in South Africa. So at the moment I would view the South African market as an opportunity.”
The Cape Town area is the most popular location for Irish investors or holiday-home owners who buy in South Africa, said McManamon.
“The most popular beachfront areas within Cape Town would be Blaauwburg, Gordon’s Bay, Somerset West and Clifton, which would be a very exclusive area,” he said. “The wine areas are popular as well. The famous wine region of Stellenbosch, which is situated all around Cape Town, is only a ten minute drive away.”
McManamon said prices in the Cape Town region had appreciated by as much as 250 per cent in some cases in the past four years.
“Typical prices vary from area to area,” he said. “Close to the beach, with sea views, you would need to allow about €150,000 for a nice two bedroom apartment. However, they start at much less, about €70,000. I know people that picked up apartments for €20,000 about four years ago, but you will get nothing there at that price now.”
McManamon said that the majority of Irish people who bought in South Africa want to use the properties themselves, and tend to look close to Cape Town and its airport.
“Accessibility is a big factor,” he said. “You have a direct flight from Dublin to Cape Town, so people tend to stick around that area. For the vast majority it is sun, sand and beach.”
The Garden Route, about 300 kilometres east of Cape Town, is another option for investors.
“There is an absolutely gorgeous area all along the coastline east of the Garden Route, towards towns called Knysna and Plettenburg,” said McManamon. “You are virtually living with the sea to your front and the jungle at the back of your garden.”
“It is not as accessible as Cape Town; you are looking at a two to three hour drive from the airport. Along the garden route you are talking a minimum of €150,000. Ideally you would need around €200,000.”
McManamon said homes in South Africa were generally larger than those in Europe.
“In South Africa, the apartments tend to be quite generous,” he said. “In Spain or Portugal, a two bedroom apartment would typically be about 70 square metres, but in Cape Town they like open plan, large apartments, and around 90 to 100 square metres would be typical for a two bedroom apartment.”
Darren Fields, managing director of Foreign Property Ventures, said other regions within South Africa offered value to more intrepid Irish investors.
“In the Hoedspruit region, a conservative estimate of appreciation on residential property is 200 per cent over the next five years, or about 40 per cent growth per annum, which is a fantastic return for investors,” said Fields.
Fields said tourism was driving investment opportunities in developments around the world-famous Kruger National Park.
“We could be looking at the same thing happening in Kruger as has already happened in Cape Town, because of the amount of tourists that visit there each year,” said Fields. “Around the Kruger National Park, you have several private estates and game reserves, such as the Moditlo development. You also have residential property regions.”
“This is true, natural wildlife conservation land. The region surrounding Moditlo and Kruger contain four of the ‘Big Five’ (lions, elephant, leopards and rhinos) that visitors to South Africa come to see and rarely leave without glimpsing.”
Buying in South Africa
Fields said the tax system in South Africa was relatively straightforward.
“When you buy a property there is no stamp duty or annual property tax,” he said. “The VAT is 14 per cent when purchasing property from a VAT registered vendor.”
McManamon said the legal aspects of property purchases in South Africa were typically handled by one notary.
“In South Africa it is not the solicitor that looks after the conveyancing, there is a specialised conveyancing professional,” he said. “Usually the developer’s expert will look after the conveyancing for the purchaser.”
Investors should keep an eye on legislation currently making its way through the South African parliament, McManamon said.
“At present there is a 20 per cent capital gains tax on the profit from a property sale,” he said. “However, there is possibly new legislation coming in this year on repatriating profits from South Africa.”
McManamon said about half of Irish purchasers raised the money needed to buy a property locally.
“It is easy to get finance in South Africa, there are lots of mortgage brokers and it is a good system to use, but interest rates there are very high at the moment,” he said.
Sunday Business Post – New to the Market supplement – Feb 10 2008
Entrepreneurs on the hunt for a viable market must be prepared to knock on a lot of doors, according to Dr. Steven Collins, recent co-winner of the Trinity College Dublin Innovation Award for 2007.
Collins and Hugh Reynolds were recognised in December for their work establishing Havok, a games industry software company that was sold last September to Intel for €76m.
Havok is a world leader in the development and sale of real-time physics and animation software to the games industry, but in 1999, when Collins and Reynolds traveled to the US with just a laptop showcasing their technology, nobody in the global industry knew who they were or what the company, then called Telekinesys Research, could offer.
“In my opinion, there is no point hiring marketing consultants who will compile reports or whatever, you have to get out there,” said Collins. “You, the people who have the passion for the idea, need to communicate that passion to the market. Identify the customers who are most likely to take the product on and just beat their doors down.”
“Myself and Hugh spent quite a bit of time on planes, going to visit people, in the US particularly, and in Europe as well. The biggest first event for us was attending the Game Developer Conference in San Jose in 1999. We had a laptop with the technology on display, and we just talked to any developer who would listen to us.”
Collins said some entrepreneurs shy away from this hard leg and brass-neck work.
“It is easier to create a business plan, and do up an Excel spreadsheet with an interesting hockey stick sales curve, but fundamentally you have to get out and talk to people and find out if they will buy it, and if not, why not.”
The award is part of a growing awareness of the importance of commercialisation to academic research in Ireland, Collins said.
“Commercialisation is something that Trinity has always been interested in,” he said. “In general, in Ireland now, there is a lot more focus on commercial output, and not just academic output. I think that is great, you need a bit of both.”
Enterprise Ireland provided support for Collins and Reynolds from day one, Collins said.
“In 1996, Hugh and myself made an application to Enterprise Ireland and that eventually grew into Havok in 1998 and 1999,” he said. “At the time we were very naive academics. It was as much about blind optimism, as it was about being in the right place at the right time.”
At that time the revolutionary Sony PlayStation 2 was about to be released, and games developers needed new technologies to take advantage of its huge processing power.
“The whole Havok story was premised on getting our new technology into the hands of the game developers in time for the launch of Playstation 2, which represented a big watershed moment in gaming history,” Collins said.
Trinity Venture Capital (TVC Holdings), helped fund Havok’s development, along with ICC Venture Capital, now part of Bank of Scotland (Ireland). Its technology has been used in more than 160 computer games for PlayStation, Xbox and other games consoles, including Tomb Raider and Halo. It has also been used to create special effects for films, such as Troy and The Matrix.
Collins left the company in 2005 and returned to Trinity to pursue new research.
“It gets to the point where there is a stable company, and the original founders, who are perhaps a bit more fanciful, want to do new things,” he said. “The games industry is growing rapidly, and the technology is changing day by day. I find that very exciting.”
Collins is currently heavily involved in the TCD Research and Innovation Entrepreneurship Programme.
“Right now, I am focusing on a number of projects that have secured funding from Science Foundation Ireland and Enterprise Ireland,” he said. “For example we are working on a version of a virtual Dublin, looking at technologies like Second Life and trying to anticipate what might be required by corporations in the future, when technologies like Second Life become part of everyday life, just like email and text messages are now.”
Sunday Business Post – New to the Market supplement – Feb 10 2008
Enterprise Ireland’s venture capital scheme aims to inject activity into the market after a quiet period, writes Dermot Corrigan
The Seed and Venture Capital Scheme launched by Enterprise Ireland (EI) has made an estimated €1 billion available to Irish entrepreneurs, according to Willie O’Brien, manager of the organisation’s venture capital department.
“Over the last year or so, a lot of the funds have been fundraising,” said O’Brien. “They have had approval from us for about €175 million. Then it was up to them to go and seek additional funding. Ninety per cent of them have completed that fund raising exercise and the overall pot now is around €1 billion.”
Maurice Roche, partner with Delta Partners, said the venture capital market, which has been relatively quiet for the last 18 months, was about to see a lot of action again.
“The market will go through a new phase as funds will be getting capital over the next six months and there will be more money to invest in the market,” said Roche. “Late 2006 and early 2007 was very quiet as a lot of the funds had come to the end of their investment cycle.”
Two EI-supported venture capital funds were announced in late 2007. In October, Delta Partners announced a new €100 million fund, called Delta Equity Fund III. In November the establishment of the €70m Bank of Ireland Kernel Capital Partners Fund II, with investment funds of €110m, was announced. A total of eight funds incorporated in the EI scheme are expected to be actively seeking investment ideas in 2008.
O’Brien said this third EI-lead venture capital cycle would be more careful than its predecessors.
“There is money available, but the investors are being cautious,” he said. “The returns have not been fantastic and a lot of investors are seeking companies to have some sort of traction in the market – sales, profitability, orders or a product developed – and looking to invest on a phased basis. They will be seeking evidence of some sort of progress before they invest.”
Under the legislation setting up the EI scheme, funding is targeted at manufacturing and internationally traded services businesses.
“The definitions of manufacturing and internationally traded services are very broad,” said O’Brien. “They cover software, technical services, architectural services et cetera. It is for anything using gray matter that can be exported. We can not look at, for example, estate agents or retail shops.”
Roche said Delta was already investing its new cycle of funds.
“We are looking at a lot of deals,” he said. “We have done one and are close to a couple of others. We are seeing some decent projects. We would like to see a lot more, but it is only now that people are realising that there is capital out there again, and people are trying to put together good projects that can get funded.”
Niall Olden, founder and managing director, Kernel Capital Partners, said it was also actively seeking investment opportunities.
“Now, with our new fund, we are targeting investments in the region of €2 million to €10 million,” said Olden. “We look at all sectors excluding property and invest in areas where we have strong market knowledge. Our team has strong ICT (information and communications technology) and life science expertise, but these are broad areas and we look on each opportunity on a case-by-case basis. If we believe the opportunity is good and that we can add value then we are interested.”
Roche said Delta was primarily looking for projects in the technology and medical devices areas.
“Within technology, it is as broad as possible, we have semi-conductors, clean tech, telecoms and software,” he said. “Business services – people who are trying to offer outsourced services to companies – is an area we would know quite well and we see as a growth area in Ireland.”
“Medical devices is another area we see as a growth area,” said Roche. “There is a good hub now in the west of Ireland, and there are some decent projects coming out of there. We have scaled up our focus in that area.”
Olden said VCs liked to see approaches from entrepreneurs with well thought-out ideas.
“The better prepared and more research done the more likely you are to secure investment,” he said. “Not only should the investment proposal be well thought out and validated, it is important also to research your target investors.”
Roche said Delta’s process was very informal.
“Our business is about getting out and meeting people and networking,” he said. “We do not sit in an ivory tower waiting on someone to walk in the door with a 50-page business plan. We like to see people as early as possible. We will tell them very quickly if it is of interest to us or not. Even if it is not of interest to us we will still try to be helpful and point them in the right direction.”
“We would be very upfront with people,” said Roche. “We are interested in companies that are in growth markets, have high margins, accelerated growth potential, and an exit within five to seven year time horizon, either through a public offering or a trade sale. Certain businesses might be good businesses, but are not for us.”
Roche said experience in a sector was often a prerequisite for securing funding.
“We like to see a couple of people coming together, either in an existing business, or to form a new idea,” he said. “Typically they either have potential customers or they now their market already.”
O’Brien said the types of ideas that venture capitalists were interested in were constantly evolving.
“The sectors come and go,” he said. “For example, years ago we had a lot of companies that were developing payroll packages, but that is now a commodity product. The mobile phone area is seeing great demand now. Ireland would be seen as in a strong position to compete internationally in that sector.”
The limited size of the Irish market means VCs are usually only interested in ideas that can be sold internationally, according to Roche.
“We look at it on a global basis,” he said. “For most Irish companies the home market is not enough. They need to sell outside of Ireland very quickly.”
Olden said some potential start-ups focused too much on the product and not enough on who would buy it.
“A frequent occurrence is over emphasis on how the product or service will be created, combined with an under emphasis on what exactly the revenue model to generate wealth from this product or service is going to be,” he said.
Entrepreneurs drawing up funding applications had a tendency to underestimate the funding required, said O’Brien.
“The general understanding is that it will take twice as long as you anticipate to develop a software product,” he said. “It follows on from that, that it will take twice as much money to develop.”
The weakness of the US dollar was a challenge for tech start-ups, according to Roche.
“Most of their pricing would be in dollars, but their costs are in euro,” he said. “Some companies may have to put development centres outside of Ireland.”
Sunday Business Post – Done Deal Page – Feb 3 2008
Aer Arann has concluded the first phase of its planned expansion into the British market, with the completion of a €1 million advertising campaign to raise awareness of its services among British customers.
Aer Arann managing director Garry Cullen said that, prior to the roll-out of the campaign last year, Aer Arann was not a well-known brand in Britain.
“There was probably next to zero recognition for us in the UK,” he said. “We are not a major carrier and national advertising spend is not within our budget, so we concentrated on particular areas with radio, metro newspapers and a lot of PR stuff. It is building, but it is still an area we have to do more work in.”
Last week, Aer Arann announced passenger numbers for 2007 in excess of 1.15 million – a 10 per cent increase over 2006. The company’s turnover also jumped by 6.5 per cent last year, to total €100 million.
“We were very happy as we reached our targets in what was a fairly difficult year,” said Cullen. “The Ireland – Britain market was not as buoyant as 2005 and 2006, which was the experience of all the operators, including Ryanair and Aer Lingus.”
Aer-Arann’s Galway-London and Waterford – London routes both carry over 9,000 passengers each month.
“Last year, we concentrated a lot of effort on the Waterford and Galway routes,” said Cullen. “We also added new routes to Birmingham and Manchester out of Waterford. We are very happy with the developments and our services are doing very well.”
Established in 1970, and bought by current owner Padraig O’Ceidigh in 1994, Aer Arann now operate over 600 flights per week, across 40 routes in Ireland, Britain and Europe. The company opened new corporate headquarters in Santry in Dublin last year and a new hangar at Galway. It employs 400 staff in both facilities and additional operations in Dublin, Galway and Waterford.
Last year, Aer Arann signed a €180 million contract with French manufacturer ATR, to add ten new ATR 72-500 turboprop aircraft to the Aer Arann fleet in the next two years.
“They are brand new aircraft and offer better economics and a better customer experience,” said Cullen.