Cross-border trade and collaboration will be vital to economic recovery

Aidan Gough, Designated Officer of InterTradeIreland, discusses how the organisation has responded to the Covid-19 crisis and how being up to speed on Brexit is vital as we plan for the future

Since InterTradeIreland was set up over two decades ago, cross-border trade has been growing at 4% per annum on average. Before Covid-19 struck, crossborder trade was at its highest level ever, worth €7.4 billion per year. “Cross-border trade opportunities were a big factor in driving recovery for small businesses after the last economic downturn,” observes Designated Officer Aidan Gough. “It is a significant slice of the economy, and the opportunity to trade across the border certainly adds to the resilience of many firms.”

ADAPTING TO HELP SMEs GOING DIGITAL

Aidan Gough

InterTradeIreland is keenly aware of the changed economic landscape businesses are facing, and has responded with speed. The body has developed a new range of Covid-19 supports to help businesses trading across the border. According to Gough: “Just like in the medical field, as we learn more we see the need for more targeted and nuanced interventions. We have found that small and micro businesses are more likely to struggle with the technical capability and capacity that will allow them to work and sell remotely.”

InterTradeIreland’s supports are designed to help businesses get back on their feet and move into the crucial recovery phase. Its new Emergency Business Solutions programme offers firms €2,250/£2,000 worth of support to risk assess their current business position, assist with cashflow forecasting, HR issues and to help manage suppliers.

The organisation is also running a series of ‘Funding for the Future’ webinars from September to December 2020, which explore the full range of funding options open to businesses including government supports, bank supports, private equity and alternative funders.

Covid-19 has hastened the digitalisation of business processes, forcing change and adaptation in a time-frame that no one expected. As a result InterTradeIreland has reengineered many of its services, including its sales programmes, so that they can be accessed and implemented in the new environment created by the pandemic.

Giving SMEs the ability to embrace digital sales options is the central plank of InterTradeIreland’s new E-Merge programme, which provides €2,800/£2,500 worth of fully-funded consultancy support to help businesses develop online sales and e-commerce solutions. Advice is provided in a range of areas including e-marketing, website management, e-commerce, online payment systems, secure logistics, customer service and the legal and insurance implications of moving online.

CROSS-BORDER COLLABORATION

Before Covid-19, InterTradeIreland was looking at innovative new areas of opportunity for cross-border trade and business development. “Some of these will become even more important in light of the current crisis,” Gough explains. “These include Industry 4.0, and a raft of new technologies such as blockchain and AI that will change the way we do business. There are opportunities for early adapters of these game-changing technologies. Other areas where there are real opportunities for cross-border cooperation include adaptation to the low-carbon economy and co-operation to drive small firm productivity.”

The body is also involved with #RestartBizMap, an initiative with TechIreland that will be launching soon. The aim is to connect tech companies with SMEs that need solutions to operate effectively in the new reality.

CHALLENGES AND OPPORTUNITIES

Looking ahead, Gough notes that Brexit is another once-ina-generation issue that is looming on the horizon. “The pandemic has highlighted the importance of assessing risk and responding accordingly. We know that businesses have remarkable resilience, but it’s important not to be complacent around Brexit,” he advises. “If you’re a crossborder trader, keep in touch with InterTradeIreland and with our Brexit advisory service, and also with your trading representatives and sectoral bodies. Get the information as it emerges and there will be supports available.”

West Cork Distillers (WCD) was established by award nominee John O’Connell in 2007 along with cousins Dennis and Gerard McCarthy. The enterprise is now a major player in the indigenous drinks sector, exporting product to some 70 countries globally.

There are four strands to the fastgrowing business, O’Connell (45)

EJohn O’Connell (left), West Cork Distillers, with co-founders Denis and Gerard McCarthy

d Donovan (pictured) got the idea for Advanced Medical Services (AMS) while working in Blackrock Clinic in Dublin. He noticed the growing number of younger people coming into the clinic for cardiac procedures and decided to set up a business specialising in cardiac health screening. Donovan founded AMS in 2010 in Little Island in Cork, the county he hails from.

AMS initially delivered its ‘Heartaid’ cardiac-screening services to sports clubs and schools, helped by the increasing awareness of Sudden Adult Death Syndrome and the importance of health screening for athletes. By 2015, AMS had carried out more than 50,000 cardiac screenings and Donovan expanded the business to concussion assessment.

The computerised service, called Impact, was delivered to rugby club and schools players at a cost of €50 per test. It records a player’s baseline brain function — including memory

explains. “We manufacture, market and sell our own brands — West Cork Irish Whiskey and Garnish Island Gin. We also contract manufacture Irish whiskey for global spirits companies and some of the largest retailers in the world, and we manufacture, market and sell bulk alcoholic ingredients for spirits producers.” and reaction times — and then uses this to compare subsequent tests for evidence of concussion. Donovan secured IRFU endorsement for his concussion test, which helped increase AMS’s growth, as did a deal to become a screening partner with Laya Healthcare.

These days, AMS delivers a range of health screening programmes beyond cardiac and concussion monitoring to corporates, sports organisations and primary-care

In 2018, annual turnover grew by 36% to c.€27m and the company booked a profit of €5.3m. Net worth at year-end was €12.2m. “Our whole business model is to create diverse income streams that are immediate in terms of delivery or do not draw on marketing expenditure, so they can support the growth of the branded Irish whiskey business activity and allow us to mature the whiskey for as long as possible,” says O’Connell.

In 2015, WCD teamed up with The Pogues to launch a whiskey branded with the band’s name, and the following year a 50% stake in the brand was sold to UK drink distributor Halewood International. WCD then acquired Halewood in 2019, with funding for the €18m deal largely sourced from the state through the Ireland Strategic Investment Fund.

WCD has attracted a variety of high-profile investors, including Setanta Sports trio Mark O’Meara, Leonard Ryan and Michael O’Rourke. And former Kerry Group executive and Ornua chairman Denis Cregan invested €500,000 in the company in August 2020. The business employs 110 staff and its three Cork facilities operate 24 hours a day.

centres. Clients include Munster Rugby, Novartis, the Defence Forces and the FAI, and c.250,000 people have availed of its services.

Operating company ED Advanced Medical Services Ltd booked a profit of €314,000 in 2019 and had year-end net worth of €583,000. Including three directors, 35 people were on the payroll and Donovan (39) is the sole shareholder.

This year Donovan added Covid-19 testing services to his company’s services. Aside from Donovan, AMS directors are Edmond Donovan; former IBM senior executive Kieran Moynihan; and Dr Alan Byrne, medical director of the Football Association of Ireland.

AMS recently secured the contract to test players and officials for Covid19 at League of Ireland clubs, which raised the hackles of Fianna Fáil TD Marc MacSharry. The FAI clarified that Alan Byrne was not involved in the procurement process that saw AMS awarded the contract.

The fallout from the Covid-19 pandemic has undeniably had a radical impact on the economic and business landscape. As the multifaceted nature of the coronavirus crisis continues to present extreme challenges, how can business owners and managers implement innovative and practical strategies to ensure their businesses get back on track?

The important thing to avoid here is mismanagement. Failure to take the correct advice often sets in motion a chain of trends that lead to deterioration of the business.

The Seven Cs aims to provide a practical framework for those who are working hard to position their business on the road to recovery.

As many business leaders find themselves implementing cost-cutting measures, it’s important not to make arbitrary or general cuts that may adversely impact long-term goals. Key areas for potential savings in any business lie in eliminating waste, seeking out and demanding the best prices for supplies and services, and carrying out certain tasks inhouse that previously were contracted out to other companies.

6) Cash

A swift recovery often boils down to one thing: cash flow. Cash control means releasing the ‘lockup’ of your business i.e. the latent profit that is locked up in your stock, work-inprogress and debtors. Remember, even profitable businesses will fail if they run out of cash.

What was already an uncertain economic outlook, due to external factors such as a hard Brexit and changes to internal taxation and trade, has been further complicated by the ongoing Covid-19 crisis. Amid such uncertainty, what is certain is that more businesses will now be looking at restructuring debt than may have been predicted at the start of the year.

At the time of writing, up to 30,000 Irish businesses will be coming off payment breaks, following the sixmonth debt holiday put in place to manage the fallout for businesses due to Covid-19, after the European Banking Authority confirmed its opposition to an extension to the payment breaks.

SURVIVAL OF THE FITTEST

Indeed, the Governor of the Central Bank of Ireland, Gabriel Makhlouf, has written to the finance minister suggesting a Darwinian approach, with future support targeted at those businesses with the greatest chance of surviving – making it now a case of survival of the fittest.

For many, the only option may be to look at restructuring. There are currently a number of options out there:

€200m has been made available through Enterprise Ireland for viable but vulnerable firms that need to restructure or transfer their business.

Microfinance Ireland is offering loans to any business with fewer than 10 employees and an annual turnover of up to €2m, that is not in a position to avail of finance from banks and other commercial lending providers.

The Strategic Banking Corporation of Ireland has a Covid-19 Working Capital Loan Scheme whereby, if approved, a bank is invited to lend on terms that are effectively guaranteed.

There are various consultancy supports and grants through Local

llllEdward Evans, Daniel Cashman and Barry Cahir from Beauchamps’ Restructuring team

Enterprise Offices, ranging from vouchers for €2,500, to assistance in preparing business continuity measures.

For some though, this will still not be enough and there will of course be insolvencies. For those that are proactive and want to deal with their finances before such a circumstance is forced on them, debt restructuring and an increased focus on turnarounds and informal arrangements with creditors will be key, especially for small and medium-sized enterprises.

RESTRUCTURING PREPARATION

We advise you take the following simple steps to start the process:

Gather and review all finance facility terms and conditions.

Identify all security/collateral given for such facilities.

Identify key covenants that will be breached/may not be met.

Understand your legal rights/options (force majeure, frustration, notification requirements).

Formulate a legal strategy to change or delay terms and to negotiate new terms.

Working with your legal and finance advisors, and armed with a clear legal strategy (and a finance one), engage with your current lenders to initiate a review and restructuring of your debt. Recent improvements to company law

lllllgenerally, coupled with recent and anticipated changes to insolvency law in particular, will help in this engagement.

For those that seek timely advice, which Beauchamps is of course happy to give, and are then willing to put that advice into action, they will be well placed to restructure a debtchallenged business before it is forced on them, with undoubtedly harsher terms.

‘It’s the right time to look at restructuring debt’

Edward Evans is Corporate and Commercial Partner Daniel Cashman is Banking and Finance Partner Barry Cahir is Partner in Insolvency & Corporate Restructuring, Litigation & Dispute Resolution

T: +353 1 418 0970 E: e.evans@beauchamps.ie W: www.beauchamps.ie

Responsible Investing Gathers Momentum

Embedding environmental, social and governance (ESG) factors into investment allocations is here to stay. Trustees of pension funds, the major buyers and sellers of equities, increasingly have to take ESG into account when assembling their portfolios. On the way in 2021 are new EU MiFID regulations that instruct financial advisers to be more proactive with customers in relation to ESG considerations.

Also branded as Responsible Investing, the ESG approach has three layers:

Exclusion: a subjective judgement that excludes companies engaged in activities such as tobacco, pornography, coal mining etc.

Engagement: working with companies to improve how they conduct their business.

Outcome: managers who market their fund as ethical should also report on the ESG performance of the companies the fund is invested in.

One of the longest established ESG

lllPension Fund Growth Depends On Risk

October is pension season when selfemployed people buy into pension products to avail of the tax relief. This year the mood music for financial advisors isn’t great, as savers examining fund performance note meagre gains this year.

In a note to brokers, Zurich Life commented: “How do you explain investing in 2020 to your clients? The

Amazon isn’t ESG-friendly but the stock performance is spectacular

funds in the Irish market is the Stewardship Ethical Fund, introduced by Friends First and then transferred to Aviva. The fund manager is BMO Global Asset Management, and as an example of its approach BMO cites engagement with Amazon over the past decade. Amazon used to be a top ten holding in Stewardship Ethical but now it’s not listed on the fund factsheet.

year began with all-time market highs, followed by a record breaking downturn – two events that undoubtedly highlighted to customers the double sided nature of investing. Both had the potential to elicit different reactions from your clients – from euphoria to despair.”

With pension products what matters is long-term performance, so the product selection focus should be on 3-year, 5-year and 10-year annualised performance. The other important

BMO comments: “Our engagement with the company has included cofiling a shareholder resolution to push for improvements in sustainability disclosure, and co-ordinating with other investors on urging the company to disclose its oversight and performance of ESG issues. Despite increased dialogue with the company, we remained concerned that its culture remains inward-looking and resistant to public disclosuret.”

The Stewardship Ethical current top ten holdings include Microsoft, Apple, Linde, Thermo Fisher Scientific, Mastercard, PayPal, Accenture and Roper Technologies. It’s an eclectic mix and fund performance has been encouraging. Before charges, the 5-year annualised performance has been 13.6%, and year-to-date at the end of September the fund had appreciated in value by 6.4%.

Fund performance would have been even better if BMO had increased its Amazon exposure instead of downweighting the stock. The Amazon share has appreciated by a factor of six in the past five years and year to date growth is 70%.

factor is risk appetite. The bottom line for pension savers is that the higher the risk rating the better the return. For instance, across Zurich’s Prisma range pre-charges annualised performance since launch varies from 1.3% for the cautious Prisma 2 fund to 9.4% for Prisma 5, which has a higher equities exposure.

As individuals approach retirement, de-risking by switching into low-risk funds is advisable, but when starting out it pays to go up the risk rating.