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Roundup-CIE finances questioned

Wednesday, November 14 08:18:19

The rail section of CIE recorded a deficit of E22 million after receiving a subvention for current spending of E149 million Auditors to State transport company CIE have warned about the health of the company's finances and its ability to remain in business. Auditors PwC stopped short of qualifying CIE overdue 2011 accounts but said there exists a "material uncertainty which may cast significant doubt" about its "ability to continue as a going concern". The accounts are due to be released later this week.

PwC's warning is stark given that CIE enjoys the implicit backing of the exchequer as a State-owned company. This warning comes as CIE has exhausted its E121 million borrowing facilities and had to seek an early drawdown in the summer of its State subvention for the fourth quarter of this year. In July, the Government made an additional E36 million available to CIE to plug its finances this year.

However, the company was put on notice that it would have to introduce a package of measures to resolve the shortfall in its finances. According to Government sources, CIE recorded a deficit, or loss, in 2011 of E6 million in spite of receiving E540 million in State support for current and capital spending. This was an improvement than 2010 when the deficit was E53 million. The Irish Times

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The German word Verschlimmbesserung could well be applied to what Ireland and the rest of the euro zone is going through right now. The noun means a supposed improvement that, in fact, makes a situation worse. The austerity being imposed across Europe is intended to resolve the crisis; instead it is exacerbating it. Economic growth is required to lift countries out of this crisis, yet the measures designed to save us are killing off prospects of growth.

The very public disagreement between IMF managing director Christine Lagarde and the head of the euro's political power group, Luxembourg's prime minister Jean-Claude Juncker, over how best to tackle the latest risk of a Greek default is a depressing illustration that there is still no unity on how to resolve this crisis. The massive shrinking of the Irish banking sector required as a condition of the State's financial resurrection is a perfect example of Verschlimmbesserung. The Irish Times

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Irish-owned pharmaceutical wholesaler Uniphar is to acquire rival Cahill May Roberts for E50 million subject to regulatory clearance. Details of the deal will be announced today by Celesio, the listed German parent company of Cahill May Roberts. The deal is being financed by a consortium of Irish banks.

There are three "full-line" pharmaceuticals wholesalers in Ireland, authorised by the Irish Medicines Board. They typically carry a range of about 12,500 drugs and deliver twice daily to pharmacies. A combined Uniphar-Cahill May Roberts business would have a share of about 37 per cent of the wholesale market here, placing it second to listed company United Drug.

The combined businesses would have revenue of more than E900 million and earnings before interest, tax, depreciation and amortisation (Ebitda) of about E25 million. Uniphar is is acquiring the wholesale and pre-wholesale businesses of Cahill May Roberts but the Doc Morris retail pharmacy chain - previously known as Unicare - is not part of the deal. Cost synergies of about E10 million a year are expected from the transaction, mostly from reduced overheads and distribution costs. The Irish Times

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Interest rates set in Frankfurt are no longer reliably transmitted to business borrowers and consumers across the euro area, the governor of the Central Bank has admitted. Fears that one or more countries could drop out of the euro has damaged the transition mechanism by making markets more volatile and less predictable, he said. "The emergence of redenomination risk in market perceptions and its disruptive influence have generated undesired and damaging yield volatility," Patrick Honohan said in speech to the David Hume Institute in Edinburgh last night.

"Additional corrective action, as recently announced, is clearly necessary." Before the euro crisis "there was no great difficulty" in ensuring that the interest rate levels could be transmitted by market forces across the the euro area. "That can no longer be taken for granted," he said.

In his prepared speech, Mr Honohan also warned that there were conflicting expectations of what might be achieved by the planned European Banking Union. The plan should lead to more peace of mind for ordinary people about the safety of their bank deposits, but could not completely end the risk banks could be hit by "runs" - especially by larger customers pulling out their cash, he admitted. The Irish Independent

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The National Treasury Management Agency (NTMA) said it plans to borrow E500m in three -month debt known as "treasury bills." The cash will be raised from investors through an auction tomorrow. The transaction marks a continuation, and normalisation, of Ireland's return to borrowing on the markets.

Investors who backed an earlier issuance of E500m of government "bills" in July were able to secure a yield, or interest rate of 1.8pc. They got a premium over similar deals for other euro countries because it was the first Irish bill auction since before the 2010 bailout. It was followed by the more ambitious deal later the same month when the NTMA successfully raised E5.2bn in much longer term bonds. The interest rate fell to 0.7pc at a follow-up auction of bills in September, and remained at the same level when a third E500m tranche of borrowing was raised last month.

Last night the yield on three- month Irish bills was unchanged at 0.7pc, indicating that investors will get around the same interest on the new debt deal. "Bills" are regarded as an extremely low-risk investment, which is why the interest paid is below 1pc. The Irish Independent