Thursday, August 30, 2012

RoRo Ferry and Cargo Handling Results as Container Shipping Company Sold

Irish Continental Sells off Subsidiary and Announce First Half Results
Shipping News Feature

IRELAND – EUROPE – Irish Continental Group (ICG), owners of Irish Ferries have released first half figures and they show mixed results. The most notable part of their press release is the revelation that yesterday ICG announced an agreement to sell off subsidiary Feederlink Shipping and Trading b.v. for a consideration of up to €29 million. Overall to 30th June revenue was up 0.4% to €127.1 million against the same period in 2011. Whilst passenger numbers increased by under 1% all other sectors fell; RoRo freight down 4.7%, container shipping (by TEU) 7% and port (cargo) lifts by 5%. Car traffic also fell 1.9% and operating profit was down 21.5% to €5.1 million.

The group includes the cargo handling facilities of Dublin Ferryport Terminal, and Belfast Container Terminal and although at first sight this seems a gloomy set of results it must be measured against the recent slump in the Irish economy and ICG Chairman John B. McGuckian was upbeat summing up the group performance by saying:

“I am pleased to report a robust performance in the first six months of the financial year. Turnover grew, albeit moderately while EBITDA was €14.3 million in the first six months of the year, down only €1.8 million despite an increase of €4.5 million in our fuel bill in the period. With regard to current trading, while freight remains weak due to the economic background our tourism and car business has benefited from reduced competitor capacity although fuel costs remain a headwind. With our strong cash flow and balance sheet we propose an unchanged interim dividend of 33 cent per ICG Unit and due to the strength of our capital position propose a return to shareholders of up to €111.5 million via a tender offer buy-back, which is subject to shareholder approval.”

The fact that the group was able to generate revenues of €127.1 million, up half a million euros during the quieter half of its year is impressive and factors such as the fuel costs were bound to impinge on all shipping company profits to a greater or lesser extent. The Board is proposing to effect a return of up to €111.5 million of cash to its shareholders, by means of the tender offer buy-back of ICG Units. The reason given for this is to enhance shareholder value in the light of perceived capital expenditure liabilities, possible acquisition opportunities, asset disposals etc.

Looking at how the short sea RoRo ferry market has evolved over the past couple of decades and the fact the Board statement mentions possible route expansion it will be no surprise if ICG, having disposed of Feederlink, have plans for the acquisition of new ferry routes or to extend facilities such as it has in New Zealand where it charters to P&O. The six million plus shares ICG is looking to purchase from shareholders will be financed by a new €110 million term loan which the company says its financiers have agreed to as well as committing to a new €40 million revolving credit facility to replace the Group’s existing facility.

Whilst disposing of Feederlink it appears ICG will retain its other container service, Eucon, and may well be expected to extend that company’s service schedules. Feederlink operates container feeding services for various ocean carriers from Rotterdam, Felixstowe, Immingham, Teesport, South-shields and Grangemouth. Eucon currently operates a fleet of sub 1000 TEU container ships between Rotterdam, Antwerp, Le Havre, Rouen, Dublin, Cork and Belfast.

The full half year results, together with the Directors’ statement of conclusions is viewable HERE and confirms the risk to the group from other factors such as pension liabilities including a pro rata portion of the multi-employer Merchant Navy Officer Pension Fund (MNOPF) which in March 2011 was in deficit to the tune of €331 million. The statement also confirms the High Court judgement in July this year cancelling €46.7 million of the Company’s share premium account making the resulting reserve available as distributable profits.

Photo: mv Cimbria a 500+ TEU Feederlink vessel.