ICG jumps 9% on buyback move

Irish Continental Group’s share price jumped by over 9% yesterday on the back of management proposing a return of up to €111.5m to shareholders via its latest share buyback move.

The increase — at one point the biggest daily upward move for ICG in three years — came despite the Dublin-headquartered ferries and freight services group reporting a 21.5% drop in first-half profits and a revenue increase of only 0.4%.

ICG management explained its latest share buy-back proposition — it paid out a combined €10m to buy back 700,000 shares in June — as being “the most effective use of shareholder funds”.

It said a return of surplus capital is in the best interests of shareholders. The decision will require shareholder approval and follows a board review of how best to enhance shareholder value, with options such as asset disposal, route expansion, and acquisitions examined.

ICG — which owns the Irish Ferries and Eucon Freight brands among others — also announced the sale of its Feederlink freight business to the Danish logistics company Unifeeder A/S for a maximum consideration of €29m.

The group’s board is offering to buy back another 6m shares at €18.50 per share — which represents a 15.6% premium to Wednesday’s closing share price of €16.

The offer will be funded by proceeds from a new €110m term loan.

Its share price closed at €17.50 yesterday, up by 9.38% on Wednesday’s close. In earlier trading yesterday, ICG’s stock rose by as much as 13% on news of the share buy-back plan.

ICG also reported a “robust” performance for the first six months of this year — with group revenue increasing from €126.6m to €127.1m.

Operating profits were down 21.5%, year-on-year, to €5.1m, with pre-tax profit falling from €6.2m to €3.9m. Basic earnings per share were down by over 40% to 14.5c and the interim dividend is unchanged at 33c. Net debt levels increased by €6.4m to €20.8m; while EBITDA fell from €16.1m in the first half of 2011 to €14.3m for the same period this year.

Fuel cost increases — with oil prices at historically high levels — were one reason for the profit fall, with ICG’s fuel bill increasing by €4.5m during the period.

But the six months also saw weak demand both for freight and ferry services. That said, Irish Ferries’ tourism and car business has benefited from reduced competitor capacity, management noted.