By one way of looking at things, Irish business is dominated by a handful of giant companies: CRH, Flutter, Kerry, Ryanair, Kingspan, ICON, Smurfit Kappa, DCC, Aercap, United Drug. 

These ten companies are worth almost as much as the entire Irish stock exchange, combined. 

But those businesses are not representative of what’s going on in Ireland. They make a small slice of their revenue at home. They happen to be Irish companies, but they’re operating at a global scale. 

Below the giant multinationals, and the publicly traded companies, there’s a thriving ecosystem of privately owned Irish companies. These companies are growing, acquiring, innovating, and getting acquired at a furious rate. 

Because they’re privately owned, they get much less scrutiny than public companies. There is no market price for their shares.

Many of the names — Eircom, Musgraves — are familiar. But many aren’t. They’ve grown along with their industry, like engineering companies serving data centres and private hospitals. Others, like Cork’s Amarenco, look like future giants. 

Dublin dominates the list. Many companies — like Maxol, Sisk and Beauparc — were founded in provincial Ireland, only to later relocate their headquarters to Dublin. More than half of the 50 companies are based there. 

It’s possible to see what’s going on inside these companies, but only imperfectly. Those with limited liability are obliged to file accounts every year. They have to file accounts, but not like public companies have to file accounts. A company determined not to share its financial information can do so, by, for example, filing from the Isle of Man. 

Then there are the companies that choose to have unlimited liability. The owners of these companies are on the hook in the event of company bankruptcy. But because of this, they’re not obliged to share financial data.

The companies that choose this option are in the minority, but are some of the most valuable in the country. The Goodman family companies, Dunnes Stores, Ballymore and the Magnier companies are in this category. 

A list that included venture-funded companies would include the likes of Wayflyer, Intercom, Letsgetchecked, Workhuman, Tines, and Fenergo. In a more transparent world, these companies would no doubt be right up there with the biggest on this list. But without access to their accounts, I can merely note their absence and move on.

As well as big companies, four big industries dominate the list: utilities, engineering and construction, food processing and hospitals are worth more than the other 23 industries combined. 

This being a list of Ireland’s limited companies, with multi-year filing histories, it’s not surprising that it skews towards Ireland’s more traditional industries. 

The goal of this project was to value Ireland’s private businesses. But that begs further questions. What makes them valuable? Is it the stability of their earnings, their growth, their efficiency? And what might they be worth to different categories of buyers?

In answering these questions, four trends stood out.

Trend number one: squeezing suppliers harder

Working capital is about short-term assets and liabilities — basically the invoices you owe your suppliers, and the invoices your customers owe you. And net working capital is the two numbers summed together. 

Looking at the last three years, there’s a strange trend among these Irish companies. The average change in working capital has turned negative. This could have two potential causes: either they are paying their suppliers later or paying their customers sooner. 

In practice, it’s very unusual for healthy and growing companies to start paying their customers sooner. Much more commonly, they’re paying their suppliers later. 

Of the companies I valued, the average one is decreasing its working capital by about 20 per cent of its operating profits. This means it’s likely that suppliers to these companies are waiting longer to get paid. 

This trend is being driven by a relative handful of companies. The median, as opposed to the average, company is showing no change in net working capital. 

Trend two: high returns on capital

Return on capital is operating profits over the amount of capital that’s tied up generating those profits, both debt and equity. The average return on capital on US-listed companies, excluding banks is 6.0 per cent. Whereas the average return on capital across these 50 companies is 27.5 per cent. 

When return on capital is high, it’s a sign that the company should reinvest money into the business, where returns are high. 

And that’s exactly what we see. 

Trend three: high reinvestment

On average, Irish companies are investing heavily in capex. Their Capital expenditure rate is running 72 per cent higher than their depreciation rate, which indicates they’re growing fixed assets at a faster rate than they did previously. 

The reinvestment rate is a broader term that includes both net capex as well as changes to working capital — and that number is admittedly negative. But I believe that’s less about Irish companies deciding not to invest in themselves, than a handful of companies holding out on paying their suppliers. 

Trend four: low debt

These firms don’t fund themselves with much debt. Since these firms aren’t public we can’t use market debt to equity ratio estimates. But we can see how comfortably they’re able to cover their interest payments out of operating income. The median company on the list’s operating income is 27 times greater than its interest payments – in other words, its interest payments are tiny.

What’s causing this? It might be that the list has a lot of construction companies, who avoid debt. It might be that Ireland’s businesspeople are scarred by 2008. Or it might be that Ireland’s businessmen are under-using debt to maximise their firms’ value. 

The companies, from 35 to 50

I’ve ranked these companies by my fundamental valuation, which is based on a discounted cash flow model. Click here to read how I did it, the choices I made, and the strengths and weaknesses of this method.

What’s shown here isn’t the value of the shares in the company – equivalent to a market cap for a public company. What’s shown is the value of all the shares and all the debt, ie the company’s enterprise value. It shows the value of all the claims against the operating business.

The key thing to remember is that the DCF values these companies from the perspective of a private buyer, and private buyers are willing to pay less than public ones. I go into it in more detail over on the methodology page.

Tomorrow, I'll go through numbers 34 to 20 on the list.

50. Campbell Bewleys: the custodian

Paddy Campbell's first trick was to build Campbell Catering, which employed 5,000 by the mid-2010s. Next he acquired Bewleys Cafes, which he built into a successful multinational tea and coffee supplier. Campbell Bewleys is custodian of the great Bewleys brand.

Then, in his 50s, he stepped back from it all to become a sculptor. His work has been exhibited across Europe and the US, and he was asked to sculpt President Mary McAleese during her presidency. 

Now Bewleys employs 1,050 people. It generated €1.6 million in operating profit in 2019, and I'm forecasting it'll make the same in 2021. A feature of the business in recent years is that it is capital-light, and it reinvests little, meaning a bigger slice of its cash flows go back to investors. 

It's still owned by the Campbell family, and headquartered in north Dublin.

I valued the business at €51 million. Based on an Ebitda industry multiple it's worth €116.1. The higher Ebitda multiple is likely down to Bewley's chunky €5.7 million depreciation and amortisation charge, which gets added back on to Ebitda. 

49. Amarenco: future giant

Amarenco is a global solar power company based in Cork City, with operations in France, Singapore, Taipei, Bangkok, Hanoi, Tokyo, Muscat, Vienna, Lagrave and Porto. It employs 90 people. 

It was founded by Olivier Carré, Nick Howard, John Mullins and Alain Desvigne, and is backed by private equity houses Tikehau Capital and IDIA Capital. It had 90 employees at the end of 2020. 

The company's most recent accounts are for the financial year 2020, when it earned €2 million in operating profit. Looking solely at the recent accounts, and based on the trajectory of recent earnings, you might expect Amarenco to make €2.5 million in operating profit next year. That would value it at €51 million.

But in 2020, Amarenco raised €150 million in equity funding and was seeking a total of €3 billion in debt and equity funding. It's using the money to fund a targeted 3 gigawatts worth of projects by 2023. 

€3 billion is a great deal of money. The average return on invested capital in the power industry, says, Damodoran (2021), is 6.8 per cent. 6.8 per cent of €3 billion is €204 million. At €204 million operating profit, my model values the business at €2.6 billion (though, NB, we know very little about the new investment and plan). 

Amarenco, then: worth somewhere between €50 and €2,648 million. 

48. Aerogen: the fight against Covid-19

Before Covid came and turbocharged its growth, Aerogen was a success story. It had developed technology to deliver medicines via aerosol, which helped with lung conditions. It had attracted funding from the Singapore Sovereign Wealth Fund and operated in over 70 companies.

Aerogen is based in Galway, Ireland's medical device capital. It was founded by John Power.

Aerogen made €4 million in operating income in 2019. But given demand for aerosol products as a result of Covid, by all accounts it's not unrealistic to forecast 2021 earnings as high as €16 million.

Based on that (speculative) figure for 2021 income, the DCF values Aerogen at €51 million; the industry multiple puts it at €229 million.

47. McLaughlin & Harvey: A Belfast institution 

McLaughlin & Harvey is a construction firm based in Belfast, first formed in 1853. It remains in control of the Cheevers family, as it has for generations. McLoughlin & Harvey have a big operation in Britain, where it has recently worked on high-profile projects like the renovation of St George's Square in Glasgow. In its time, McLaughlin & Harvey built major Irish projects, like the Guinness storehouse and the DeLorean car factory. 

In 2020, the firm's operating profit took a 66 per cent hit as a result of Covid, which is much higher than the Republic-focused builders on this list. It earned £2.4 million in operating profit. That would be expected to bounce back fairly quickly. I'm forecasting £5 million of operating profit in 2021. 

The DCF values McLaughlin & Harvey at €53 million; industry multiples at €106 million.

46. Arkphire: back on top

Arkphire is an IT company. It builds, installs and manages IT systems for telecoms, banks, hospitals and factories. It's based in Sandyford in Dublin, and it employs 100 people. 

The company was founded by Paschal Naylor, and is owned by Germany's AO Group.

After a rough time during the 2008-12 recession, AO Group pulled out of the Irish market and tried to sell Arkphire.

But in the years since, Arkphire has refocused on FDI companies. Last year it generated a healthy €5.3 million in profit, and based on recent years it would be projected to make the same next year. 

It's also quite efficient, in that it generates strong returns on capital, ie its profits are high relative to the amount of money its investors put into it. Arkphire's return on capital employed is 19.6 per cent. 

My discounted cash flow model values Arkphire at €53 million. But there's a big spread between this and the valuation using industry average Ebitda multiples, which values the business at €231 million. 

44. The Kirby Group: growing into the engineering boom

The Kirby Group is the first of several engineering companies to make the list. Founded by Tom and Michael Kirby in 1964, it is based in Limerick city. 

Kirby's breakthrough was its participation in a complex project for a UK power utility. It reinvested in this area, and was in a position to capitalise when the data centre boom started. 

Kirby employed 1000 people at the time of its most recent accounts in 2019, though that number is expected to hit 1,500 by 2021. 

The DCF values Kirby at €60.9 million, and the industry multiple at €81 million. 

A caveat though — the DCF I'm using here is designed for stable, middle-aged companies. It doesn't do a good job capturing growth, and Kirby is very much in growth mode. 

43. ATA Group: Ireland's Mittelstand business

ATA Group is based outside Cavan Town, where it manufactures carbide burrs and other precision cutting tools. Its tungsten carbide burs are the most widely used in the world.

It's not a very Irish-type company. Something you'd expect to find in Germany's Mittelstand.

Founded in 1963, it has quietly built itself into a global player. It has acquired five companies since 2005, based in the UK, Germany, and the US. It now employs 140 people.

In 2016, Peter Cosgrove and other managers bought out the business, backed by AIB and Bank of Ireland. 

ATA Group made €8.2 million in operating profit in 2019 and would be expected to make €9 million in 2020. Again, it's return on capital is notable here — 49 per cent. 

The DCF values ATA Group at €62.4 million, compared to €128.3 million using the Ebitda multiple. 

42. Chanelle Pharma: The Irish pharma company

There are plenty of pharma companies in Ireland. But there are few Irish pharma companies. Chanelle Pharma is one of them. 

It's based in Loughrea, Galway. It was founded in 1985 by Michael Burke, a vet. It manufactures generic drugs — ie, off-patent drugs — for markets in 94 countries. It has 2,000 licences to produce animal health products, and 2,000 to produce human health products. 

The business is owned by the Burke family. It employs 550 people, with 70 in R&D roles. 

Forecast operating profit for 2021 is €8.5 million. This gives a 39.7 per cent return on capital employed, which is exceptionally good. 

The DCF model values Chanelle at €62.4 million. Where the industry multiple values it at €327.8 million. 

40. The Irish Times: the rebound

The Irish Times, headquartered in Tara Street Dublin, is owned by The Irish Times trust. 

The newspaper industry's decline started in the early 2000s. First online ads drove down the price of classified ads, then circulation started falling. The fall has been quite uniform across the world, in both big and small newspapers.

The exception to this is the handful of quality titles that can command a national audience. The New York Times and Washington Post in the US are examples. Both papers have seen their subscriber numbers grow strongly in the last six years. 

There are signs that The Irish Times may be in that second category. Its revenues are up 50 per cent since 2017, to €110 million in 2020. Operating income moved from a €600,000 loss to a €3.8 million profit between 2016 and 2020. 

In that time the newspaper has added staff. 437 were employed at the paper in 2016, and by 2020 that number was up to 818. Though headcount has gone up, the paper has kept a lid on salaries by hiring younger staffers. The average salary has fallen from €84,000 in 2016 to €65,000 in 2020. 

I'm forecasting €4.5 million operating profit in 2021. Because the newspaper is not investing heavily in capex or working capital, most of that goes straight to the firm's investors, which amplifies its value.

The DCF values The Irish Times at €77.3 million, compared to €135 million using the industry multiple. 

38. Collen Construction: 121 years in a volatile industry

Collen Construction is a general building contractor headquartered in East Wall, Dublin. Collen has the distinction of being Ireland's oldest general contractor, with a 211-year history. Collen built iconic Irish buildings like the RDS in Dublin, Killarney house, the Barrow Street grain silo and the 1950s stands at Croke Park. 

Surviving in the construction industry is not easy. It's an industry that's about three times as volatile as the rest of the economy. Construction firms that get greedy and take on too much work in-house are usually the ones that don't survive. After 121 years, Collen is still owned by the Collen family, and Neil Collen serves as Chairman. It employs 320 people. 

Collen made €6.9 million in 2019. At its trajectory, it would be expected to make €9.5 million in 2021. It's worth €80.5 million by the DCF model, and €109 million by an industry multiple. 

36. Anord Mardix — right place, right time

Anord Control Systems was founded in Dundalk in 1969. It provided electrical control systems, and worked on major Irish projects like the Ringsend water treatment plant and the Luas.

What turbocharged the business was the arrival of the data centre industry. Electrical hardware for data centres, such as switchgear and busbars, are now its main focus.

In 2018 Anord attracted the interest of private equity, when it was sold to Bertram Capital. Shortly after, Bertram merged Anord with Mardix, a UK-based competitor. The firm now has 400,000 sq ft of factory space in six locations in Ireland, the UK and the US. 

The business made an operating profit of €12.9 million in 2019 and would be expected to make €16 million by 2021. It's a fairly capital-intensive business, with relatively high reinvestment rates. 

Another important issue in Anord Mardix's valuation is that company-specific risk is quite high in its industry. In other words, there's a big range of outcomes among telecom equipment companies. Some do very well, others crash spectacularly. 

That's an important factor when you're considering whether the potential buyer of the business is private or public. If the buyer is private, they're totally committed to Anord Mardix. Their risk is concentrated. 

If the buyer is public, they're only buying a slice of Anord Mardix as part of a diversified portfolio, so their risk is diversified. This means the public buyer doesn't have to worry about the risk of Anord Mardix in particular screwing up, since she has a portfolio of companies. Diversification gets rid of company-specific risk. In an industry like this, where company-specific risk is big, that drives down private valuations relative to public ones. 

The DCF, which is valuing the business for a private buyer, valued Anord Mardix at €94.9 million. The industry multiple (for a public buyer) values it at €205 million.

Tomorrow: Number 34 - 20