Final Results
Irish Continental Group PLC
08 March 2004
Preliminary Statement
12 Months To 31 December 2003
Highlights
• Turnover €304.3m (+4%)
• Car carryings 407,000 cars (+2%)
• RoRo units 201,000 units (+9%)
• Cashflow from operating activities €54.4m (-21%)
• Operating Profit* €28.9m (-17%)
• Adjusted EPS* 91.4c (+8%)
• Redemption of redeemable shares at 15c per redeemable share.
• Total redemption of redeemable shares for the year of 22.5c, a 14%
increase on the 2002 total dividend of 19.665c.
• Net debt €125m (-21%)
• Share buyback of 5% of share capital at a cost of €9.8m (2002: €14.5m)
• Board Changes
*before exceptional items and goodwill amortisation
Comment
In comment, Chairman, Tom Toner stated
'This is my last report to you as Chairman and I am pleased to announce these
results which are resilient in the context of challenging conditions for both
the tourism and trade sectors. We achieved volume growth in difficult markets,
although pricing in both the freight and passenger markets was extremely
competitive. Tourism is recovering from the consequences of the Iraqi crisis
while the recovery in the world economy is leading to improved trade flows. Our
strong cash flow has enabled us to substantially reduce debt and buy back
shares. It is imperative that we are successful in achieving cost reductions
appropriate to the current competitive environment.'
Eamonn Rothwell, Managing Director, added
'I would like to pay tribute to Tom Toner who has chaired Irish Continental
Group for over 16 years during which time the evolution of the Group has been
remarkable. Tom's role in our development has been immense. We wish him well in
his retirement.'
Preliminary Announcement Of Results
12 Months To 31 December 2003
Results For Year
2003 was a challenging year for your Group. Nevertheless adjusted EPS was up 8%
to 91.4 cent.
Turnover for the year was €304.3 million (2002: €293.6 million restated for FRS
5) with volume growth in both cars and freight, offset by currency effects
resulting from the stronger Euro and a competitive pricing environment.
Operating profit before depreciation, amortisation and exceptional items for the
year was €53.4 million (2002: €63.2 million). Operating profit before
exceptional items for the year was €28.9 million (2002: €34.8 million). The
interest charge was down to €6.4 million (€9.0 million the previous year),
reflecting reduced debt levels arising from our strong cash flow as well as
lower interest rates. Profit before tax (before an exceptional charge of €4.8m
for restructuring costs) for the year amounted to €22.5 million compared with
€25.8 million the previous year. There was a tax charge of €0.3 million compared
with €3.1 million the previous year, reflecting the election into tonnage tax.
Adjusted earnings per share, i.e. EPS before exceptional items and goodwill
charges, was 91.4c, up 8%. Basic earnings per share was 71.6c.
Second Half Results
In the seasonally more significant second half of the year, sales were €167.4
million (€166.0 million the previous year). Operating profit before
depreciation, amortisation and exceptional items was €35.2 million (€43.0
million) and profit before tax and restructuring charges was €20.6 million
compared with €20.8 million last year
Share Buyback And Net Debt
During the year we acquired 1.23 million shares (5%) of the issued capital, at a
cost of approximately €9.8 million, an average price of €7.97 per share.
We also reduced net debt by €32.4 million.
Dividend/ Redemption Of Redeemable Shares
The Board has decided to redeem one redeemable share per ICG unit for a cash
consideration of 15.0 cent per redeemable share. This will be paid on 21 May
2004 to shareholders on the register on 23 April 2004. The consideration per
redeemable share compares with a final dividend of 12.825 cent per share in
respect of 2002 (up 17%).
Total redemption of redeemable shares amounted to 22.5cent per ICG unit compared
with total dividend of 19.665 per share in respect of 2002, an increase of 14%.
Ferries Division
The Ferries Division includes the activities of Irish Ferries, the ferry
chartering business and the travel services activities. Operating profit before
depreciation, amortisation and exceptional items in the division was €47.2
million (2002: €55.5 million) while profit before interest in the division was
€25.3 million (2002: €31.2 million) on turnover of €170.2 million (2002: €172.3
million, restated for FRS 5). The core Irish Ferries operation contributed
profit before financing and restructuring charges of €21.0 million, down from
€25.0 million the previous year.
Irish Ferries Passenger revenue was €100.9 million (2002: €99.9 million
restated) while freight revenue amounted to €56.0 million (€54 million). During
the year we operated a total of 5004 sailings, 4% more than the previous year's
4,821 sailings.
Irish Ferries - Passenger Revenue
In a tourism market influenced by world political and economic uncertainties our
overall passenger numbers amounted to 1.72 million (2002 1.76 million), in line
with the overall sea passenger market to and from the Republic of Ireland.
However, within this, car passengers increased by 3%, offsetting an 11% decline
in the lower yield foot passenger volumes. On the Dublin/Holyhead and Rosslare/
Pembroke routes, passenger numbers were 1.51 million (2002 1.53 million). On the
Ireland/France route, passenger numbers were down from 0.23 million to 0.21
million.
Across our route network car carryings increased by just under 2% to 407,000
(2002: 400,000 cars). On the Dublin/Holyhead route, car carryings were up 4.5%
while the Rosslare/ Pembroke route saw unchanged volumes. Car volumes on the
Ireland/France route were down 6% on the previous year due to greater sea and
air competition.
Overall average car yields were 4% lower, influenced by a weaker Sterling.
As noted in our Interim Statement in September 2003, we are in consultation with
our workforce with the intention of restoring our cost competitiveness which has
been eroded in recent years by the rate of wage inflation in Ireland (compared
with the industry across Europe) and the adverse affects of the appreciating
Euro on our cost base. Our intention is to achieve a reduction in our on-going
cost-base through changes in work practices.
€4.8 million has been charged as an exceptional item in the results to 31
December 2003 in respect of the expected costs of the Group's cost reduction
programme.
Irish Ferries Roll-on Roll-off Freight Revenue
After a difficult first half for RoRo freight when our volumes grew 5% in a flat
market, the second half showed a return to market growth. Our total carryings
for the year rose 9% to 201,000 trucks. This compares with estimated growth in
the Republic of Ireland market of around 5%. The market to and from the island
as a whole is estimated to have grown 3%. On Dublin/Holyhead route there was an
increase of 11% in freight units to 138,100 trucks. Developments in road
infrastructure, e.g. the M1 motorway from Dundalk to Dublin, continues to
enhance the attractiveness of Dublin Port as a gateway for the country's
exporters and importers. On the Rosslare/Pembroke route freight carryings rose
4% to 60,100 units. On the Ireland/France route, 2,400 trucks were carried, in
line with the previous year. Freight yields fell by 4% in the year, indicating
the highly competitive nature of the trade.
Chartering
The 2,400 bed cruiseferry, m.v. 'Pride of Bilbao', and the combination car and
freight ferry 'Pride of Cherbourg' continued on bareboat charter to P&O Ferries.
Both vessels operate from Portsmouth in the UK to Spain and France respectively.
The Charters are denominated in US$ and £Sterling and consequently earnings in
Euro terms were down on the previous year.
Travel Services
Due to the changing trading environment for the traditional High Street travel
agent we continued to consolidate our travel agency business and we have now
combined the activities into 4 branches (3 in London and 1 newly relocated
outlet in Birmingham).
Container And Terminal Division
Our Container and Terminal Division comprises our lift on lift off freight
network operated by Eucon, Eurofeeders and Feederlink together with our
Container Terminal in Dublin (DFT). Turnover was €134.8 million (€122.0 million
the previous year). EBITDA was €6.2 million (€7.7 million in 2002) while an
operating profit of €3.6 million was generated, compared with €3.7 million in
2002. This result was achieved despite some continued capacity constraints and
additional operating costs due to the ongoing redevelopment of our Dublin
Container Terminal in a competitive pricing environment.
Container Lift-on Lift-off Freight
Total container freight volumes carried on our own services rose 9% to 485,000
twenty-foot equivalent units as we incorporated HKCIL (acquired in July 2002)
into our operations. On a like for like basis, the underlying increase in volume
was 3%, the growth principally in feeder traffic. The pricing environment,
particularly for export cargo from Ireland, remains difficult exacerbated by an
increasing imbalance between the volume of imports into Ireland and the lower
volume of exports. We have entered a strategic vessel sharing agreement with BG
Freight Line bv, a subsidiary of Mersey Docks & Harbour Company, in order to
streamline our costs and enhance customer service. This started in October of
2003 and the vessel sharing partners are working together to integrate their
respective services to achieve their shared objectives of lower costs and
improved service standards.
Dublin Container Terminal
During the year we commenced the third phase of our redevelopment of the
terminal. Three additional mobile gantries and one additional Liebherr built
ship-to-shore crane have been commissioned. The development will not be complete
until mid-2004 and in the meantime our capacity to grow volume will be somewhat
restricted. Container units lifted at DFT rose from 128,000 to 131,000 in the
year. When the terminal extension is complete, however, it will copper-fasten
DFT as the premier container terminal in the country. During the year, we were
successful in introducing one new shipping line to the terminal and we hope to
build on this by attracting additional lines in 2004. The prospects for the
terminal will be enhanced further when the Dublin Port Tunnel, which will be
located only 1 km from our facility, opens in 2005, allowing rapid access to and
from the port, via the M1 and M50 motorways, and bypassing the congested city
centre.
Accounting Policies
FRS 5
These financial statements reflect the requirements of the amendment to
Financial Reporting Standard 5 which, in summary, requires turnover earned as an
agent to be shown on a net (i.e. commission only) basis. Prior year turnover and
operating costs have been restated accordingly. However, there is no impact on
reported profits.
Finance
Due partly to currency translation effects, our year-end capital employed fell
from €343.3 million to €308.5 million. Return on average capital employed was
8.9% compared with 9.6% the previous year.
With regard to cash generation, net cash flow from operating activities amounted
to €54.4 million for the year (2002: €68.5 million). Total investment in the
year amounted to €8.9 million. Year-end net debt amounted to €125 million, down
from €157.4 million the previous year-end, giving a comfortable gearing level of
68% (85% in 2002). Interest cover was 3.7 times (2002: 3.7 times). Year-end cash
balances amounted to €12.2 million. Shareholders' funds at year-end amounted to
€183.5 million.
Board
In September 2003 we announced the appointment of Peter Crowley to the Board as
a non-Executive Director.
I am pleased to make the following further announcement regarding the Board. It
is my intention to retire as Chairman of the company on April 30th the date of
our Annual General Meeting, having served over 16 years in the role. I will be
succeeded as Chairman by John McGuckian, who is currently the Senior Independent
non-Executive Director. Liam Booth, with whom I have served as Director of the
company since 1987, will also retire from the Board on April 30th. On behalf of
my fellow Directors and on the company's behalf I would like to pay tribute to
Liam and thank him for his valuable contribution since joining the Board almost
17 years ago, during which time the company has developed enormously.
In addition, I am delighted to announce the co-option to the Board of Mr.
Bernard Somers with effect from March 8th 2004. Bernard Somers is a
non-Executive Director of a number of public companies, Independent News & Media
plc, Ardagh plc and DCC plc, and founded Somers and Associates, a professional
practice which specialises in corporate restructuring. He brings a wealth of
business experience to the Board. In accordance with the Articles of Association
of the Company, both Peter Crowley and Bernard Somers will seek re-election at
the AGM on April 30th.
Current Trading And Outlook
Our second half performance has encouraged us as we start the year 2004. Trading
to date is broadly in line with 2003. The world economy appears to be in
recovery which augurs well for trade movements. On the tourism side, the market
remains extremely competitive with the evolution of low cost air travel becoming
more broad-based than heretofore.
Arising from this very competitive pricing environment, we continue to focus on
generating cost savings from our operations. The fall in the value of the US$ is
favourable to us, although this is partially offset by continued high oil prices
and the strength of the Euro versus Sterling where the bulk of our passenger
revenue is generated. The reduction in Ireland's rate of inflation is a welcome
development in terms of cost curtailment. The success of our current cost saving
programme will be critical to the success of the Group going forward. With our
quality asset base and continued strong cash flow we are well positioned for the
future.
Tom Toner
Chairman
March 8th 2004
Enquiries:
Eamonn Rothwell, Managing Director, +353.1.6075628
Garry O'Dea, Finance Director +353.1.6075628
Consolidated Profit And Loss Account
for the year ended 31 December 2003
Note 2003 2003 2003 2002 2002 2002*
Before Exceptional Total Before Exceptional Total
exceptional item exceptional item
€m €m €m €m €m €m
Turnover 1 304.3 - 304.3 293.6 - 293.6
Operating costs 2 (275.4) (4.8) (280.2) (258.8) (1.7) (260.5)
______ ______ ______ ______ ______ ______
Operating profit 28.9 (4.8) 24.1 34.8 (1.7) 33.1
Net interest payable (6.4) - (6.4) (9.0) - (9.0)
______ ______ ______ ______ ______ ______
Profit on ordinary activities before 22.5 (4.8) 17.7 25.8 (1.7) 24.1
taxation
Taxation 3 (0.3) - (0.3) (3.1) - (3.1)
______ ______ ______ ______ ______ ______
Profit attributable to shareholders
of
Irish Continental Group plc. 22.2 (4.8) 17.4 22.7 (1.7) 21.0
Dividends 4 - - - (5.1) - (5.1)
______ ______ ______ ______ ______ ______
Profit retained for the period 22.2 (4.8) 17.4 17.6 (1.7) 15.9
______ ______ ______ ______ ______ ______
Basic earnings per share 5 71.6c 78.3c
Diluted earnings per share 5 71.3c 78.0c
Adjusted earnings per share 5 91.4c 85.0c
*restated following the adoption of
FRS5
Statement Of Total Recognised Gains And Losses
for the year ended 31 December 2003
2003 2002
Notes €m €m
Profit attributable to shareholders of Irish Continental Group 17.4 21.0
plc.
Exchange translation adjustment (8.9) (9.1)
______ ______
Total recognised gains related to the period 8.5 11.9
Prior period adjustment - (4.0)
______ ______
Total losses recognised since the last annual report 8.5 7.9
______ ______
Consolidated Balance Sheet
at 31 December 2003
2003 2002
Fixed Assets Notes €m €m
Intangible assets - -
Tangible assets 334.5 367.9
______ ______
334.5 367.9
Current Assets
Stocks 0.7 0.8
Debtors 51.6 50.2
Cash at bank and in hand 12.2 14.6
______ ______
64.5 65.6
______ ______
Creditors
(Amounts falling due within one year)
Bank loans and overdrafts 25.5 28.4
Trade and other creditors 61.2 60.8
Proposed dividend - 3.2
Obligations under finance leases 3.4 2.3
Taxation and social welfare 5.5 3.4
______ ______
95.6 98.1
Net current liabilities (31.1) (32.5)
______ ______
303.4 335.4
______ ______
Total assets less current liabilities
Creditors
(Amounts falling due after more than one year)
Bank loans 98.1 130.1
Obligations under finance leases 10.2 11.2
Provision for liabilities and charges 11.6 8.2
______ ______
119.9 149.5
______ ______
Capital and reserves
Called up share capital 15.7 16.3
Share premium account 38.9 38.3
Capital reserves 0.1 0.1
Capital redemption reserve 2.1 1.4
Profit and loss account 126.7 129.8
______ ______
Shareholders' funds (all equity) 183.5 185.9
______ ______
303.4 335.4
______ ______
Consolidated Cash Flow Statement
for the year ended 31 December 2003
Notes 2003 2002
Operating activities €m €m
Net cash inflow from operating activities 6 54.4 68.5
Servicing of finance
Net interest paid (6.0) (10.1)
______ ______
Net cash outflow from servicing of finance (6.0) (10.1)
______ ______
Taxation
Net corporation tax paid (0.3) (0.9)
______ ______
Capital expenditure
Purchase of fixed assets (8.9) (15.4)
Sale of fixed assets 0.1 0.2
______ ______
Net cash outflow from investing activities (8.8) (15.2)
______ ______
Acquisitions
Purchase of subsidiary undertakings - (3.8)
______ ______
Net cash outflow from acquisitions - (3.8)
______ ______
Equity dividends paid (3.2) (5.0)
______ ______
Net cash inflow before financing 36.1 33.5
______ ______
Financing
Issue of ordinary share capital 0.7 1.0
Repurchase of ordinary share capital (9.8) (14.5)
Redemption of redeemable shares (1.8) -
Inception of finance leases 2.8 5.9
Repayment of amounts borrowed (25.4) (26.2)
Capital element of finance lease payments (2.5) (2.2)
______ ______
Net cash outflow from financing (36.0) (36.0)
______ ______
Increase / (decrease in cash) 7 0.1 (2.5)
______ ______
Notes Forming Part Of The Financial Statements
1. Segmental information
Analysis by class of business Turnover Profit Before Tax Net Assets
2003 2002 2003 2002 2003 2002
€m €m €m €m €m €m
Ferries and Travel 170.2 172.3 25.3 31.2 290.0 319.6
Container and Terminal 134.8 122.0 3.6 3.7 30.5 26.2
Intersegment turnover (0.7) (0.7) - - - -
______ ______ ______ ______ ______ ______
304.3 293.6 28.9 34.9 320.5 345.8
Exceptional items & goodwill - - (4.8) (1.8) - -
Net interest - - (6.4) (9.0) - -
Debt - - - - (125.0) (157.4)
Unallocated liabilities - - - - (12.0) (11.1)
Construction in progress - - - - - 8.6
_____ _____ _____ _____ _____ _____
304.3 293.6 17.7 24.1 183.5 185.9
_____ _____ _____ _____ _____ _____
Analysis by origin 2003 2002
€m €m
Ireland 123.8 121.3
United Kingdom 101.9 93.4
Continental Europe 78.6 78.9
______ ______
304.3 293.6
______ ______
It is not practicable to analyse trading profit and net assets by geographical
area. All turnover arises from continuing activities and excludes intra Group
transactions and value added tax.
In accordance with the amendment to FRS5 turnover earned by the Group while
acting in the capacity of agent is now presented on a net basis. As a result of
this restatement the previously reported turnover and operating costs for 2002
have been reduced by €32.2 million. There is no effect on the gross or net
profit figures.
2. Operating costs
Operating costs include exceptional items as follows: 2003 2002
€m €m
Restructuring provision 4.8 -
Goodwill written off - 1.7
______ ______
4.8 1.7
______ ______
Prior to December 2003 the Group had announced a process of consultation with
its employees with the intention of generating savings in payroll costs. The
restructuring provision of €4.8 million represents the estimated cost of
compensation payments as at the date of this report.
The write off of goodwill in 2002 relates to an acquisition made by the
container division during the year that was merged with the existing business to
the extent that the value of goodwill would not be capable of objective
measurement in future years. The directors considered it appropriate to write
goodwill off, particularly in the light of the competitive nature of the
container freight market.
3. Taxation 2003 2002
Current Tax Charge: €m €m
Corporation tax on profits for the year:
Irish Corporation tax - -
Overseas corporation tax at 35% 1.0 0.5
Deferred tax charge:
Origination and reversal of timing differences (0.7) 2.6
______ ______
0.3 3.1
______ ______
4. Dividends and redemption of redeemable shares
2003 2002
(a) Dividends €m €m
Interim dividend of nil per share (2002: 6.84c per share) - 1.9
Proposed dividend of nil per share (2002: 12.825c per share) - 3.2
______ ______
- 5.1
______ ______
(b) Redemption of redeemable shares
Redemption of one redeemable share for 7.5c per redeemable share 1.8 -
______ ______
(c) proposed redemption of redeemable shares
The Board has decided to redeem one redeemable share per ICG unit for a
consideration of 15cent per share. This will be paid in May 2004 and is
chargeable to reserves in 2004.
5. Earnings Per Share
The calculation of earnings per share is based on the weighted average number of
shares in issue of 24.3m (2002: 26.8m) and profits attributable to shareholders
of €17.4m (2002: €21.0m).
Diluted earnings per share is computed in accordance with FRS14 and is based on
weighted average shares in issue, including options exercisable as of the date
of this report of 24.4m shares (2002: 26.9m).
Adjusted earnings per share is based on the weighted average number of shares in
issue of 24.3 million (2002: 26.8 million) and profit attributable to
shareholders, before goodwill and exceptional item, of €22.2m (2002: €22.8m).
6. Reconciliation of operating profit to cash inflow from operating activities
2003 2002
€m €m
Operating profit 24.1 33.1
Depreciation charges 24.8 28.7
Amortisation and write-off of goodwill - 1.8
Establishment of restructuring provision 4.8 -
Grant amortisation (0.3) (0.4)
Loss of sale of assets/write-off of investment 0.1 0.3
Increase/(decrease) in prepayment of pension contributions (1.6) 10.0
Movement in working capital 2.5 (5.0)
_____ _____
Net cash inflow from operating activities 54.4 68.5
==== ====
7. Reconciliation of net cash flow to movement in net debt
2003 2002
€m €m
Decrease in cash/overdraft 0.1 (2.5)
Decrease/(increase) in debt 25.1 22.5
_____ _____
Change in net debt resulting from cash flows 25.2 20.0
Translation adjustment 7.2 9.6
_____ _____
Net movement 32.4 29.6
Opening net debt (157.4) (187.0)
_____ _____
Closing net debt (125.0) (157.4)
===== =====
8. Analysis of net debt
Cash Overdrafts Bank loans Leases Total
€m €m €m €m €m
At 1 January 2003
Current assets 14.6 - - - 14.6
Creditors due within one year - (2.2) (26.2) (2.3) (30.7)
Creditors due after one year - - (130.1) (11.2) (141.3)
Cash inflow/(outflow) from
financing (1.4) 1.5 25.4 (0.3) 25.2
Foreign exchange rate changes (1.0) 8.0 0.2 7.2
______ ______ ______ ______ ______
At 31 December 2003 12.2 (0.7) (122.9) (13.6) (125.0)
______ ______ ______ ______ ______
Analysed as:
Current assets 12.2 - - - 12.2
Creditors due within one year - (0.7) (24.8) (3.4) (28.9)
Creditors due after one year - - (98.1) (10.2) (108.3)
______ ______ ______ ______ ______
At 31 December 2003 12.2 (0.7) (122.9) (13.6) (125.0)
______ ______ ______ ______ ______
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