Monday 20 November 2017

A blot on the record

Roche pulled off three massive coups with Jurys Doyle, Westlink and Airtricity but has he lost his Midas touch at NTR?

This week's announcement of losses of €280m at NTR represents a rare blot on the record of its chairman Tom Roche, one of the few Irish entrepreneurs to call the Irish property crash correctly.

With the benefit of hindsight there are many who claimed to have seen the Irish property crash coming all along. How strange then that so few of them seem to have acted on their claimed foresight.

One of the few who did was Tom Roche, the chairman of renewable energy and waste management company NTR.

Not once but twice Mr Roche had the courage of his convictions and sold major property investments at the height of the boom for prices that will probably never be seen again in most of our lifetimes.

Married to Anne Doyle, son of the legendary hotelier PV Doyle, Mr Roche represented his wife on the board of quoted hotel group Jurys Doyle. In the mad, mad summer of 2005 a bidding war broke out for the company with various property developers reckoning that the Jurys Doyle hotels were worth more as property plays than as hotels.

The Jurys Doyle board, including Mr Roche, played its hand to perfection. The company sold its flagship Ballsbridge hotel and the adjoining Berkeley Court Hotel to Sean Dunne for a total of €280m. It then sold its Burlington Hotel to another developer, Bernard McNamara, for €288m and the Montrose was also sold, also to Mr McNamara, for a further €50m.

However, the big one was the sale of its budget Jurys Inn chain to financier Derek Quinlan for a truly remarkable €1.16bn.

Even after buying out the non-family shareholders in Jurys Doyle for €875m that still left Mrs Roche and her sisters Bernie Gallagher and Eileen Monaghan with the remaining Jurys Doyle hotels and gross cash of more than €900m.

They say that lightening never strikes twice. It does if your name is Tom Roche. As well as the Jurys Doyle coup, he hit the jackpot twice at NTR, the renewable energy and waste management company he has chaired since the death of his father in 1999.

Founded in 1978 by his father Tom Roche Senior, the founder of both the Roadstone building materials company and later of CRH, NTR was originally known as National Toll Roads.

Its first toll franchise was the Eastlink toll bridge at the mouth of the Liffey, which first opened for business in 1984, with the Westlink on Dublin's M50 orbital motorway following six years later.

Tom Roche Senior founded NTR after losing virtually all of the money he accumulated during a lifetime with Roadstone and CRH on his disastrous investment in the Bula lead and zinc deposit in Co Meath.

Soon after the Westlink toll bridge first opened in 1990 it became clear that the traffic projections upon which the project had been based were hopelessly conservative. As the Celtic Tiger boomed the number of cars and trucks passing through the Westlink toll barriers soared to more than 100,000.

Even the addition of a second Westlink bridge in 2003 failed to ease the resulting congestion with rush-hour tailbacks often stretching back several miles.

As the queues at the Westlink grew steadily longer the pressure on the government to buy out the NTR toll franchise and lift the barriers steadily intensified.

Eventually in 2007 the government bowed to the mounting public pressure and agreed to pay NTR €600m, payable in 12 annual instalments of €50m each. NTR then turned round and sold the payments to a group of London financiers for €488m.

It proved to be a shrewd piece of business. As the recession has worsened traffic volumes passing through the M50 have collapsed while the purchasers of government's M50 IOU must be more than a little nervous as to whether they will receive all of the money which has been promised.

A year later NTR and Mr Roche struck the jackpot once again when it received over €1bn for its 51pc stake in renewable energy firm Airtricity.

This allowed NTR to return €275m to its shareholders with Mr Roche, whose family control 43pc of the company, receiving an estimated €118m. However, he spent €70m of this money on NTR shares that are now worth a fraction of what he paid for them.

Jurys Doyle, Westlink and Airtricity. To have pulled off any one of these deals would have been a major achievement. To successfully complete all three just before the markets headed south was by any yardstick pretty amazing.

Of course no one gets it right all of the time and NTR's record since the Airtricity sale has been decidedly mixed. Having sold most of its remaining toll road operations last year for €50m, NTR's main businesses now consist primarily of waste management firm Greenstar's Irish and US operations and Celtic Anglian water which operates the Waterford waste water treatment plant as well as its 31pc stake in US renewable energy firm Green Plains.

Following last year's write-down of its solar energy assets these have been transferred into to a joint venture with US private equity firm BlackRock.

NTR recorded losses of €66m in the year to March 2009 and a further €110m of losses for the year to the end of March 2010. The results for the year ended March 2011, which were published this week revealed a further €280m of losses.

This brings NTR's total losses over the past three years to a thumping €456m. Has Tom Roche, the darling of the property crash, lost his Midas touch?

Most of these losses were due to NTR's decision to write down the value of its assets. In the year just ended it took a €132m write-down. Meanwhile at the operating level NTR continues to perform strongly with sales for the year just ended up 35pc to €325m and net cash of €112m on its balance sheet.

In recent years One51, the investment group formerly headed up by Philip Lynch had the temerity to challenge Tom Roche's iron grip on NTR. Bad mistake.

With NTR no longer paying a dividend, a situation that does not greatly impinge on the fortunes of the Roche family, the company's grey market share price has slumped to just 55 cent.

One51 has been forced to take a major hit on its 24pc NTR stake. The revelation that One51 had taken a €132m write-down on its NTR stake in its 2010 results, which were published last month, was one of the main factors precipitating the departure of Lynch from the company. Meanwhile Tom Roche's position at NTR remains unassailable.

Don't be too surprised if Mr Roche takes advantage of One51's discomfiture to pick up its NTR shareholding on the cheap. At the current grey market price, and with no other obvious buyers in sight, the One51 stake could be purchased for as little as €27m, less than a quarter of NTR's cash balances.

Such a move would increase the Roche family shareholding in NTR from a merely unassailable 43pc to a completely bullet-proof 67pc. Having sold out at the top of the market will Mr Roche now decide to buy back at the bottom?

Irish Independent

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