prelim Results Announcement
Irish Continental Group PLC
08 March 2007
The following announcement has been re-released for clarity.
The tables in Note 4 have been reformatted. No material changes have been made.
PRELIMINARY STATEMENT OF RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2006
Highlights
2006 2005
As restated
Turnover €312.1m €298.5m
EBITDA* €59.7m €45.8m
Profit from operations* €32.2m €18.1m
Non recurring items (net) €0.7m €(31.6)m
Adjusted EPS** 108.5c 54.1c
Basic EPS / (loss) per share 137.4c (67.8)c
Equity €178.3m €140.4m
Net Debt €113.8m €105.9m
* Before non recurring items
**Before non recurring items and net expected return on defined benefit pension
assets less liabilities
Comment
In a comment, Chairman, John B. McGuckian stated,
'I am pleased to report on a successful 2006 for the Group. Our performance in
freight was positive, while in the car market we performed in line with the
market, which declined 3%. We have reduced our cost base to enable us to compete
more effectively in what is a demanding International marketplace'.
8th March 2007
PRELIMINARY STATEMENT OF RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2006
RESULTS
Irish Continental Group plc ('ICG' or the 'Group') today reports its results for
the year to 31 December 2006.
Turnover for the year grew 4.6% to €312.1 million (2005: 298.5 million). EBITDA,
before non recurring items, was up 30.3% to €59.7 million (2005 €45.8 million)
while trading profit before non recurring items amounted to €32.2 million (2005:
€18.1 million). The improvement in EBITDA and operating profit was due to the
absence of industrial action during the period (in comparison with 2005), an
increase in freight revenue and lower costs as a result of the restructuring in
2005, partially offset by higher fuel costs (up 12.3% to €32.8 million).
Adjusted EPS amounted to 108.5 cent (2005: 54.1 cent restated). There have been
two changes in accounting policy, details of which are set out in the Accounting
Policies paragraph below.
The net interest charge was €5.7 million (2005: €4.7 million) before a net
interest credit from our defined benefit pension schemes of €6.1m (2005: €3.2
million).
NON RECURRING ITEMS
There was a net non recurring credit of €0.7 million compared with a non
recurring charge of €31.6 million in 2005. This comprised exceptional
restructuring charges of €3.7 million (2005: €29.1 million) being the balance of
the severance cost in respect of the crews of the Irish Sea vessels who elected
to leave under the voluntary severance and outsourcing programme and other
voluntary severance ashore. This was offset by an exceptional credit of €4.4m in
respect of the refund of seafarers' PRSI. Part of this amount (€2.5 million) had
been previously provided against in 2005 as there had been a delay in enacting
the relevant legislation providing for the renewal of the scheme under which
seafarers' PRSI is refunded.
Adjusted EPS
Within finance charges there is a surplus of expected return on pension scheme
assets over interest on pension scheme liabilities of €6.1m (2005: €3.2 million)
which the Group considers an adjusting item in relation to EPS as this net
interest credit is for the benefit of the pension fund and is not available to
the Group. Adjusted EPS excludes this net interest credit and also the non
recurring items set out above.
Basic EPS was 137.4 cent (2005: loss of 67.8 cent).
A reconciliation of earnings for the purpose of basic and adjusted EPS is set
out below:
2006 *2005
€m €m
Earnings for the purposes of basic EPS 32.3 (15.8)
Non recurring items (0.7) 31.6
Expected return on pension assets less interest on pension
liabilities (6.1) (3.2)
Earnings for the purpose of adjusted EPS 25.5 12.6
* As restated
FERRIES DIVISION
The Ferries division comprises Irish Ferries, the leading ferry operator to and
from the Republic of Ireland, the Group's ship chartering activities, and
holiday services.
Turnover in the division was €170.0 million (2005: €162.5 million) while profit
from operations, before restructuring charges, was €28.6 million (2005: €13.9
million). Restructuring charges relating to voluntary severance amounted to €3.7
million. Despite an 8% reduction in sailings, fuel costs in the division rose
9.1% to €20.4 million (2005 €18.7 million). Part of this was due to the
implementation of EU Directive 2005/33/EC, with effect from 22 August 2006,
which requires the use of environmentally friendly, but more expensive, low
sulphur fuel on passenger ships.
Passenger Revenue
Overall passenger numbers were affected by competitive market conditions which
were the result of significant additional airline competition, including low
cost carriers, particularly to regional airports in Ireland. We estimate that
the overall car market into the Republic of Ireland declined by around 3%. We
reduced frequency of our fast ferry service from six departures a day to four,
resulting in a total of 4,221 ferry departures in the year versus 4,588 the
previous year. Our passenger numbers fell 6.4% to 1.39 million while car numbers
fell by 3.3% to 354,000.
Freight Revenue
In the Roll On Roll Off freight market we achieved an increase of 12.6% to
237,000 freight vehicles carried. The freight market continues to grow
reflecting the positive economic backdrop, strong employment and population
growth, and buoyant consumer spending. There was however a marked increase in
competing freight capacity to both Liverpool and Holyhead in 2006 with further
competing capacity scheduled in 2007.
Restructuring of Crew Costs
During 2005 we reached agreement with our ships crews on a voluntary severance
programme and we recorded an exceptional charge of €29.1 million in 2005 based
on applications for severance at that time. Additional staff have subsequently
availed of the severance programme and this has resulted in a further charge of
€1.9 million in the 2006 financial year. In addition, we have offered voluntary
severance to shore based staff in Ireland and this has resulted in a further
charge of €1.8 million, of which €1.4 million is severance. Within the income
statement the cost of agency crew is included in Other Operating Expenses rather
than Employee Benefit Expense.
Replacement Vessel for Ireland France Route
In January we were pleased to announce the acquisition of a replacement vessel
(the Kronprins Harald) for our Ireland France route for an investment of
approximately €45 million including delivery costs. The vessel has been
chartered back to the vendors, Color Line of Norway, for the 2007 season, and
will transfer to Irish Ferries in late 2007, following which the current vessel
'Normandy' will be sold or chartered out.
Chartering
Both the Pride of Bilbao and Pride of Cherbourg remained on charter to P&O
during the year. P&O has sub-chartered the Pride of Cherbourg during the year
and the vessel is now named 'Challenger' and trading in New Zealand. P&O has
exercised its options to extend both charters to 2010 at the optional charter
rates which will result in approximately 20% reduction in charter income in
2008, the first full year at the renewed rates.
CONTAINER AND TERMINAL DIVISION
The division includes our intermodal freight services Eucon, Feederlink and
Eurofeeders as well as our strategically located container ports in Dublin (DFT)
and in Belfast (BCT).
Turnover in the division was up 4.5% at €142.1 million compared with €136.0
million in 2005 while profit from operations was €3.6 million (2005: €4.2
million). Fuel costs within the division were up 18.1% at €12.4 million (2005:
€10.5 million) while vessel charter costs also rose, by 7.2% to €32.8 million
(2005 €30.6 million).
Overall container volumes shipped on continuing routes reduced slightly to
458,000 teu (2005: 460,000 teu) while units handled at our owned terminal in
Dublin, DFT, rose 7.1% to 167,000 lifts (2005: 156,000 lifts.) The recently
opened Dublin Port Tunnel enhances access to DFT significantly, by linking
Dublin Port, which handles 55% of Ireland's imports and 80% of the country's
exports, to the M1 motorway to the North and the M50 orbital motorway around the
capital.
Two developments were announced during the year. In October we opened a new
50,000 container a year container handling terminal in the Port of Belfast,
while in December we announced that, in a €30m expansion of our facility in
Dublin Port, the investment in which we will share with Dublin Port Company, we
will be increasing capacity, from 2008, from 180,000 lifts to 270,000 lifts p.a.
FINANCE
EBITDA before non recurring items for the year was €59.7 million (2005: €45.8
million). Our net interest payments were €5.7 million and tax payments amounted
to €1.7 million. Capital expenditure was €12.0 million while restructuring
payments (including the charge provided for in 2005) totalled €35.4 million.
We returned €7.2 million to shareholders via redemption of redeemable shares
(2005: €6.3million).
Net debt at year end was €113.8 million (2005: €105.9 million).
Group return on average capital employed (before restructuring charges) was
12.6% for the year, compared with 7.1% in 2005.
PENSIONS
Of the Group's defined benefit plans, three were in surplus at year end (€29.9
million versus €8.0 million in 2005), while two were in deficit, (€10.1 million
versus €4.9 million in 2005) of which €4.3 million was included within Trade and
other payables. Some employees in the Group are members of the Merchant Navy
Officers Pension Fund (MNOPF), a defined benefit multi employer plan which was
accounted for as a defined contribution scheme in 2005. A liability amounting to
€4.3 million was recognised in the balance sheet at 31 December 2005. Sufficient
information is now available to account for the scheme as a defined benefit
scheme rather than as a defined contribution scheme. The estimated share of the
net deficit in the MNOPF, attributable to ICG, amounting to €10.0 million is
included in the deficit referred to above. In the year to 31 December 2005 there
was a defined contribution charge in relation to the MNOPF, to the Income
Statement, of €5.0 million, included in Employee benefit expense. In the current
year there is a credit to the Income Statement in relation to the MNOPF scheme
of €0.5 million comprising a service cost of €0.1 million included in Employee
benefit expense and a credit of €0.6 million included within Finance charges. A
charge of €6.0 million has been recognised in the Statement of Recognised Income
and Expenses in respect of this scheme in 2006.
ACCOUNTING POLICIES
The restatement of the prior year figures is in respect of the following items:
A change in the accounting policy in relation to expired tickets to take account
of change in terms and conditions of sale and this gives rise to a cumulative
increase in reserves of €1.7 million at 1 January 2005. The impact on profit for
the year is a reduction of €0.3 million (2005: €0.2 million).
There is also an accounting policy change in relation to employee benefits. The
presentation in the current year is for the Expected return on pension scheme
assets to be included under Investment Revenue and the Interest on pension
scheme liabilities to be included under Finance Costs. In the prior year, the
net of these two amounts (€3.2 million) was offset against Employee Benefits
Expense. This has now been reclassified to take account of the new accounting
policy. This had no impact on reported profit before tax.
Reclassification of non recurring items: A €2.5 million provision against the
receipt of a PRSI refund in the prior year was included under Other Operating
Expenses in the Income Statement but has been reclassified in the current year
as non recurring and the adjusted EPS for 2005 has been restated accordingly.
The basis for the calculation of the adjusted earnings per share has been
changed in the current year to exclude expected return on pension scheme assets
and interest cost on pension scheme liabilities. Adjusted EPS for 2005 has been
restated accordingly.
CURRENT TRADING
The markets in which we operate, passenger and freight transport, remain
extremely competitive. Following the 2004 and 2005 restructuring we now have a
restructured cost base with which to complete vigorously.
While trading in the seasonally weaker early months of the year is not
significant in the context of performance of the year as a whole, trading in the
first eight weeks of the year has been in line with expectations.
POTENTIAL OFFER
It has been announced today that the Board has received an approach from Mr.
Eamonn Rothwell and other senior members of management of the Company (the
'Management Team'), that may or may not lead to an offer being made for the
Company at €18.50 per ICG unit.
Following the approach from the Management Team the Company constituted an
independent committee of the board of directors comprising Mr. Peter Crowley,
Mr. Bernard Somers and myself (the 'Independent Directors') and who are being
advised by NCB Corporate Finance.
Should an announcement of a firm intention to make an offer be made pursuant to
Rule 2.5 of the Irish Takeover Panel Act, 1997, the proposed offer price of
€18.50, per ICG unit is at a level which the Independent Directors would intend
to recommend to shareholders to accept.
A further announcement will be made when appropriate.
Under the circumstances, the Directors do not propose to declare a further
redemption of Redeemable Shares or payment of an ordinary dividend for the year
ended 31 December 2006. In the event an offer is not forthcoming from the
management team it is the intention of the Directors to appropriately review
this decision in due course.
John B. McGuckian,
Chairman,
March 8th 2007
Enquiries:
Eamonn Rothwell Managing Director +353 1 607 5628
Garry O'Dea Finance Director +353 1 607 5628
Consolidated Income Statement for the year ended 31 December 2006
As restated
Notes Year ended Year ended
31 December 2006 31 December 2005
Continuing operations €m €m
Revenue 312.1 298.5
Depreciation and amortisation (27.5) (27.7)
Employee benefit expense (32.9) (60.4)
Other operating expenses (219.5) (192.3)
Trading profit 32.2 18.1
Non recurring credit / (charge) 2 0.7 (31.6)
Profit / (loss) from operations 32.9 (13.5)
Investment revenue 18.3 14.1
Finance costs (17.9) (15.6)
Profit / (loss) before tax 33.3 (15.0)
Income tax expense (1.0) (0.8)
Profit / (loss) for the year: all
attributable to equity holders of
the parent 32.3 (15.8)
Earnings / (loss) per share: all
from continuing operations 3
Basic 137.4 cents (67.8) cents
Diluted 136.9 cents -
Consolidated Balance Sheet at 31 December 2006
As restated
31 December 2006 31 December 2005
€m €m
Assets
Non current assets
Property, plant and equipment 271.0 287.8
Intangible assets 2.8 3.3
Long term receivable 4.5 4.9
Retirement benefit surplus 29.9 8.0
308.2 304.0
Current assets
Inventories 0.6 0.6
Trade and other receivables 53.5 37.6
Derivative financial instruments 0.5 -
Cash and cash equivalents 11.0 14.0
65.6 52.2
Total assets 373.8 356.2
Equity and liabilities
Capital and reserves
Share capital 15.9 15.8
Share premium 40.6 39.6
Other reserves 5.9 5.8
Retained earnings 115.9 79.2
Equity attributable to equity holders of
the parent 178.3 140.4
Non-current liabilities
Bank loans 105.3 99.4
Obligations under finance leases 5.0 5.3
Trade and other payables - 3.7
Retirement benefit obligation 10.1 0.6
Deferred tax liabilities 5.6 4.9
Long term provisions 1.8 2.1
Derivative financial instruments - 0.1
127.8 116.1
Current liabilities
Bank overdrafts and loans 11.9 11.7
Obligations under finance leases 2.6 3.5
Trade and other payables 47.8 46.0
Current tax liabilities 3.6 4.8
Short term provisions 1.8 33.7
67.7 99.7
Total liabilities 195.5 215.8
Total equity and liabilities 373.8 356.2
Consolidated Statement of Recognised Income and Expense for the year ended 31
December 2006
As restated
Year ended Year ended
31 December 2006 31 December 2005
€m €m
Gains / (losses) on cash flow hedges 0.6 (0.1)
Exchange differences on translation of
foreign operations (0.9) 5.8
Actuarial gain on retirement obligations 12.1 3.9
Deferred Tax on Group defined benefit
pension schemes (0.5) -
Profit / (loss) for the year 32.3 (15.8)
Total recognised income and expense for
the year: all attributable to equity
holders of the parent - increase /
(decrease) in retained earnings 43.6 (6.2)
Effect of change in accounting policy 1.5 -
Total recognised income and expense for
the year as restated 45.1 (6.2)
Consolidated Cashflow Statement for the year ended 31 December 2006
As restated
Year ended Year ended
31 December 2006 31 December 2005
€m €m
Operating activities
Profit / (loss) for the year 32.3 (15.8)
Adjustments for:
Finance costs (net) (0.4) 1.5
Income tax expense 1.0 0.8
Retirement benefit obligations - service
cost 3.2 5.2
Retirement benefit obligations -
payments (1.7) (2.0)
Depreciation of property, plant and
equipment 26.5 27.0
Amortisation of intangible assets 1.1 0.8
Amortisation of deferred income (0.1) (0.1)
Share-based payment charge 0.4 0.1
Gain on disposal of property, plant and
equipment (0.2) (0.5)
Restructuring programme - payments (35.4) (5.9)
Restructuring programme - increase in
provision 3.7 34.4
Decrease in other provisions (0.5) (1.1)
Operating cash flows before movements 29.9 44.4
in working capital
Increase in receivables (15.9) (2.4)
Increase / (decrease) in payables 2.4 (2.7)
Cash generated from operations 16.4 39.3
Income taxes paid (1.7) (1.7)
Interest paid (6.0) (5.9)
Net cash from operating activities 8.7 31.7
Investing activities
Interest received 0.3 1.0
Proceeds on disposal of property, plant
and equipment 0.2 0.6
Purchases of property, plant and
equipment (11.4) (11.9)
Purchases of intangible assets (0.6) (1.6)
Net cash used in investing activities (11.5) (11.9)
Financing activities
Proceeds on issue of ordinary share
capital 1.1 -
Redemption of redeemable shares (7.2) (6.3)
Repayments of borrowings (11.8) (77.9)
Repayments of obligations under finance
leases (4.0) (4.3)
New bank loans raised 19.6 71.8
New finance leases raised 2.4 0.2
Decrease in bank overdrafts - (0.2)
Net cash used in financing activities 0.1 (16.7)
Net (decrease) / increase in cash and
cash equivalents (2.7) 3.1
Cash and cash equivalents at the
beginning of the year 14.0 9.2
Effect of foreign exchange rate changes (0.3) 1.7
Cash and cash equivalents at the end of
the year 11.0 14.0
Bank balances and cash
Notes to the consolidated financial statements for the year ended 31 December
2006
1. Segmental information
Turnover Profit Before Tax Net Assets (equity
attributable to equity
holders)
Analysis by
class of
business 2006 * 2005 2006 * 2005 2006 * 2005
€m €m €m €m €m €m
Ferries and
Travel 170.0 162.5 28.6 13.9 284.8 251.0
Container
and 142.6 136.4 3.6 4.2 11.7 32.3
Terminal
Intersegment
turnover (0.5) (0.4) - - - -
312.1 298.5 32.2 18.1 296.5 283.3
Non
recurring - - 0.7 (31.6) - -
items
Net
interest/ - - 0.4 (1.5) (113.8) (105.9)
debt
Unallocated
liabilities - - - - (4.4) (37.0)
312.1 298.5 33.3 (15.0) 178.3 140.4
Analysis by
origin 2006 2005
€m €m
Ireland 129.5 124.5
United 78.8 92.5
Kingdom
Continental
Europe 103.8 81.5
312.1 298.5
* As restated
2. Non recurring credit / (charge)
Year ended As restated
Year ended
31 December 31 December
2006 2005
€m €m
PRSI rebate credit / (charge) 4.4 (2.5)
Restructuring costs (3.7) (29.1)
0.7 31.6
PRSI rebate
The credit of €4.4 million represents rebates of Seafarers' PRSI under the
relevant scheme. In the prior year, as a result of a delay in enacting the
relevant legislation renewing the PRSI scheme, a charge of €2.5 million was
created against the PRSI rebate recorded as a debtor at 31 December 2004. This
€2.5 million was included in other operating expenses in the Income Statement in
2005 but has been reclassified as reported in the current years accounts.
Restructuring costs
The restructuring charge in the current year of €3.7 million, comprises of
redundancy costs in respect of applicants for the severance package announced in
2006 in addition to those that were provided for in the prior year. The €29.1
million in the prior year relates to the voluntary redundancy package offered to
all relevant staff members under the outsourcing programme.
3. Earnings / (loss) per share - all from continuing operations
The calculation of basic earnings per share of 137.4 cent (2005: loss per share
of 67.8 cent) is based on a profit after tax of €32.3 million (2005: loss of
€15.8 million) and 23.5 million shares (2005: 23.3 million) being the weighted
average number of shares in issue during the period.
Adjusted earnings per share of 108.5 cent (2005: 54.1 cent) is based on profit
attributable to shareholders before non recurring costs and before the expected
return on defined benefit pension scheme assets and the interest on defined
pension scheme liabilities.
4. Statement of changes in equity
2006
Share
Share Share Capital Options Hedging Translation Retained
Capital Premium Reserve Reserve Reserve Reserve Earnings Total
€m €m €m €m €m €m €m €m
Balance at 1 January 15.8 39.6 2.2 0.1 (0.1) 3.6 77.7 138.9
2006
Prior year adjustment
-
Deferred revenue - - - - - - 1.5 1.5
At beginning of year 15.8 39.6 2.2 0.1 (0.1) 3.6 79.2 140.4
as restated
Total recognised
income and
expense for the year - - - - 0.6 (0.9) 43.9 43.6
Share issue 0.1 - - - - - - 0.1
Exercise of share
options -
shares issued at - 1.0 - - - - - 1.0
premium
Employee share options
expense - - - 0.4 - - - 0.4
Redemption of
redeemable
share capital - - - - - - (7.2) (7.2)
0.1 1.0 - 0.4 0.6 (0.9) 36.7 37.9
Balance at 31 December 15.9 40.6 2.2 0.5 0.5 2.7 115.9 178.3
2006
Analysed as follows:
Share capital 15.9
Share premium 40.6
Other reserves 5.9
Retained earnings 115.9
178.3
4. Statement of changes in equity - continued
2005
Share
Share Share Capital Options Hedging Translation Retained
Capital Premium Reserve Reserve Reserve Reserve Earnings Total
€m €m €m €m €m €m €m €m
Balance at 1 January 15.8 39.6 2.2 - - (2.2) 95.7 151.1
2005
Prior year adjustment
Deferred revenue - - - - - - 1.7 1.7
At beginning of year 15.8 39.6 2.2 - - (2.2) 97.4 152.8
as restated
Total recognised
income and
expense for the year - - - - (0.1) 5.8 (11.9) (6.2)
Employee share options
expense - - - 0.1 - - - 0.1
Redemption of
redeemable
share capital - - - - - - (6.3) (6.3)
- - - 0.1 (0.1) 5.8 (18.2) (12.4)
Balance at 31 December 15.8 39.6 2.2 0.1 (0.1) 3.6 79.2 140.4
2005
Analysed as follows:
Share capital 15.8
Share premium 39.6
Other reserves 5.8
Retained earnings 79.2
140.4
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