ICG results surpass brokers’ expectations

FERRY operator Irish Continental Group should be able to generate free cash flow of close to €40m a year in the short term, results published by the company yesterday indicate.

ICG’s results for the 12 months to the end of December surpassed brokers’ expectations and puts the company in a very strong position to reduce year-end net of €157.4m which put it on a gearing of 85% but interest cover was 3.7 times.

The company’s free cash flow (pre-dividend) to market capitalisation at over 23% is the highest in the Irish market.

Broker reaction was positive with Merrion Stockbrokers reiterating their strong buy recommendation, NCB a buy, but Dolmen kept ICG as a hold.

Dolmen analyst Anthony Morrissey, explained: “In the absence of an improved macroeconomic backdrop, or a pick-up in tourist numbers, our view is that further significant upside potential for the share price from current levels is limited.”

ICG chairman Tom Toner in comment accompanying the results stated: “We have regained momentum following the adverse impact of foot and mouth disease on our passenger market in 2001. We continued to invest in the future of the business with the acquisition of HKCIL and the expansion of our terminal in Dublin, a total investment of €19 million.

“We have reduced net debt by almost €30 million while at the same time acquiring over 14 million of our shares via our buyback programme. This underlines the resilience of our business model in a time of economic uncertainty. We look forward to the future with confidence.”

Dolmen’s Anthony Morrissey noted ICG’s freight market is reflecting the slowdown in the general macro economy, with overall carryings unchanged at 185,000 trucks.

“Irish Continental does not hedge its fuel exposure. It uses heavy fuel oil which has a strong price relationship with crude prices,” he said.

“ The current tensions in the Middle East coupled with US oil inventories at historically low levels has seen oil reach almost $40 a barrel.

“Earnings are likely to be damaged should prices stay at this level for a protracted period,” he added.

ICG also benefited from a refund of €10m from the pension fund and favourable currency movements cut debt by €9.6m.

Commenting on the results NCB’s John Sheehan said: “This was a strong performance in a tougher environment for freight than seen in years.

“Rate improvements and tight cost control led the group to exceed our forecasts, despite higher tax and depreciation charges and a lower pension credit.

“The group fleet is fully modernised and the developments at the container terminal should position the business for further growth.”