‘Cost cutting a big factor in profit turnaround’

Irish Continental Group founder and chief executive Eamon Rothwell said failure to generate top line growth was the key reason management want to take the company private.

Cynics could be forgiven for thinking that having dumped more than 500 loyal Irish workers from the ferries business, through a loophole in maritime law, it is set to make good profits in the future.

Mr Rothwell said at a press conference in Dublin yesterday he expected to make profits and that the cost cutting was a huge factor in the profit turnaround in 2006.

“Do I think we can make money out of this? I would say ‘yes’,” he said.

He dismissed allegations of slight of hand.

In the case of the redundant workers he said he had a clear conscience.

“I have to say on a staff level there never was an issue.

“The issue became an issue because it didn’t suit one union. I would question at what point they crossed the line from representing their own interest and the interests of staff.

“I have no qualms in relation to what I did. I think it was fair by the staff, it was fair for the company and I think it was fair by the shareholders.”

In the case of the MBO he could have made the offer earlier when the business was in the doldrums and the shares were well below current levels. The reality of the business is there is no top line growth, he said.

Ferries are declining and freight is growing. “If you talk to shareholders they say we want top line growth and I’m saying I can’t get that.

“The trade-off then is to buy businesses that are totally different. I wasn’t comfortable with that. And to be honest with you most of our shareholders wouldn’t be comfortable with it either.

“They don’t like companies with diversified portfolios,” he said.

When he looked at buying Aer Lingus when it was really in the doldrums, a substantial fund manager phoned him and said “even if you buy it for a pound, it would be bad value”, he recalled.

That’s not to dismiss the significant turnaround management has achieved since then, he said.

Finally investors said if the company could not find suitable acquisitions management should buy out the business and give them back some cash.

In the meantime a number of circumstances “coalesced” to make that move possible.

Stuart Draper, head of research, Dolmen Stockbrokers, said that the deal was good value for shareholders.

At this stage, capacity has risen 20% in the last two years on the Irish Sea while the cost of fuel bills have risen at the group from €20 million to €33m.

“Management have grasped an opportunity that serves the interests of the company and the shareholders and the deal makes sense,” he said.

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