Toll operator sees profits rise despite fall in revenue

The operator of the tolled €295m M8 Rathcormac-Fermoy bypass in Co Cork last year marginally increased its pre-tax profits in spite of the cost of using the road going down.

Accounts filed by Direct Route (Fermoy) Ltd to the Companies Office show the firm increased its pre-tax profits from €961,228 to €964,909 in the 12 months to the end of December last.

The company increased its pre-tax profits despite revenues falling 4.7%, from €16.59m to €15.8m.

According to the directors’ report, “traffic levels continued to increase in 2011 as motorists appreciate the benefits of a continuous motorway from Cork to Dublin in terms of convenience and improved journey times”.

It continues: “However, revenues in 2011 were lower than the prior years due to reduced toll rates. The largest expense remains the project funding, mainly in the form of bank loans and hedging arrangements.”

The road was constructed by Direct Route Fermoy as part of a Public Private Partnership and opened in Oct 2006, eliminating one of the country’s worst bottlenecks in Fermoy town.

The bypass removed some 17,000 vehicles each day from Fermoy town centre.

The figures show that Direct Route sustained a dip in its operating profits, from €7.7m to €7.2m. Profit takes account of non-cash depreciation costs of €7m.

The company has bank loans totalling €88.3m and the figures show that net interest charges of €6.2m reduced the toll operator’s profits to €964,909.

The directors state: “The project has been funded to a large extent by bank loans, which [lead] to a particular exposure to credit and interest rate risk. This is managed in a non-speculative manner by appropriate hedging arrangements with a view to maximising shareholder value.”

Direct Route is to operate the Rathcormac-Fermoy bypass for 30 years, to 2034, before it is handed back to the National Roads Authority.

The profit recorded last year reduced the company’s accumulated losses to €11.8m. Direct Route had €1.1m in shareholder funds after a capital contribution reserve of €12.9m was taken into account.

After a depreciation charge of €7m last year, the net book amount of the road was €159.2m.