Strike takes toll on ICG’s sales and profits

IRISH FERRIES operator Irish Continental Group yesterday reported a fall in sales and profits.

Turnover at ICG fell to €293.3m in 2004, from €304.3m after a 10-day strike in December hit sales and operating margins.

Operating profit before tax was down by 8% to €26.5 million (2003 €28.9 million). Strong cash flow helped reduce net debt to €117.9m at the end of 2004, from €125m a year earlier.

Goodbody Stockbrokers transport analyst Joe Gill said the full-year results released yesterday by ICG show an in-line fall in profit.

“Results for 2004 show a 48% decline in pre-tax profits, after exceptional charges of €11.9m and an 8% reduction in EBIT (earnings before interest and taxes). Higher fuel costs, weak underlying passenger demand and a strike all combined to generate a fall in earnings.

“Cashflow though remained resilient and helped finance a share buyback while allowing a 14% advance in dividends. Entering 2005, the group will have to combat increased competition from air services and some uncertainty ahead of the conclusion of Labour Court negotiations with its unions. “Freight business should be better as the Irish economy continues to prosper amid a more orderly market. Assuming a modest recovery in passenger volumes and yields, and the absence of a strike, we expect a doubling in reported earnings (with the absence of exceptionals allowing a large bounce) despite EBIT staying relatively flat,” Mr Gill told clients yesterday, as he maintained Goodbody’s ‘reduce’ recommendation on the share.

Merrion Securities John Mattimoe is more upbeat about the shares and said that although the lacklustre earnings outlook may weigh against the share’s rating in the near term, the current valuation is attractive relative to the cash flow profile. “On that basis, we maintain our buy recommendation,” he said.

ICG chairman John B. McGuckian said the company has had a resilient performance in 2004 in the face of extremely difficult competitive conditions. “We have taken resolute action to reduce our costs in this increasingly competitive market place. We are committed to addressing our cost base going forward. This has cost us both in terms of exceptional charges and income lost through industrial action. Nevertheless we see this as a start in reducing our future cost base to give us the ability to compete effectively in 2005 and beyond,” he added.

The company has decided not to pay a dividend but is to redeem one redeemable share per ICG unit on 20 May 2005, to shareholders on the register at 22 April 2005, for a cash consideration of €17.25 cent per redeemable share. The shares closed at €11.02 yesterday, down 10 cents a 0.90% fall on the day.