Wednesday 17 January 2018

The unforgiven captain

Despite his success at the helm of ferry group Irish Continental, he is still viewed as an outsider in business circles

Five years after he routed SIPTU, Irish Continental boss Eamonn Rothwell has once again defied the odds with the ferry company, delivering a stunning 19pc increase in profits for 2010.

Irish Continental had to overcome two enormous obstacles in 2010. Not alone did it have to deal with very poor conditions in the Irish economy, as a transport company it bore the full brunt of higher oil prices.

Despite having to cope with such difficulties, Irish Continental delivered a storming performance in 2010 with underlying operating (pre-interest) profits leaping by almost 19pc to €31.5m.

In fact the actual outcome was even better with the group also booking a €9.4m profit on the sale of its 'Pride of Bilbao' passenger ferry, to bring total operating profits to almost €41m, a massive increase on the €26.5m recorded in 2009.

The excellent performance recorded by Irish Continental in 2010 meant it has now largely eliminated its debts with borrowings falling from €21.7m to just €6.3m.


What was most remarkable about Irish Continental's 2010 results was that while passenger numbers rose by almost 8pc to 1.53 million, largely due to the disruption to air traffic caused by the Icelandic volcanic ash cloud in April and May of last year, the number of roll-on roll-off freight units carried was down by 9pc to 178,000, while the number of cars carried was down by 2.4pc to 367,000.

An indigenous Irish company operating in a difficult sector that still manages to crank out an excellent set of results, one would have thought that Mr Rothwell would be feted as a genuine business hero.

But no, despite the excellent 2010 numbers, he remains something of an outsider in business circles. This is partly of his own choosing.

With a spikey, sometimes pugnacious, manner Mr Rothwell just isn't into the glad-handing and media manipulation that is the stock-in-trade of many other business leaders.

He just prefers to get on with the job and leave his numbers to do the talking.

The Dubliner's desire to stay out of the limelight is somewhat ironic when one considers that he actually started his working life in journalism, being briefly employed as a researcher for the now-defunct 'Irish Business' magazine.

After 'Irish Business' he went on to AIlied Irish Investment Bank before joining Dermot Desmond's fledgling NCB as head of equities. Having been a non-executive director of Irish Continental since 1987, he became chief executive in 1992.

Quite clearly his early experience did nothing to warm his feelings towards the media.

However, the primary reason for Mr Rothwell's reticence is undoubtedly the events of late 2005. When Irish Continental announced in September that year, that it was "flagging out", replacing its Irish seafarers with cheaper eastern European crews, there was uproar.

SIPTU, the trade union which represented the Irish Continental ships' officers, conducted a long and bitter campaign seeking to force the company to reverse the decision.


More than five years later it is difficult to recapture the mood of outrage and indignation generated by Mr Rothwell's move. In September 2005 the Celtic Tiger still seemed as if it would roar forever. "Social partnership" appeared as if it were one of the laws of nature, with everything being presided over by the Great Conciliator himself, Bertie Ahern.

Mr Rothwell's move to flag out represented a painful slap in the face for this cosy consensus. The indignation of the chattering classes, suitably stoked by SIPTU, knew no bounds. As if this wasn't bad enough, Mr Rothwell, by carefully preparing the ground in advance, utterly routed SIPTU.

He was able to do this by offering an extremely generous redundancy package -- eight weeks for every year of service with no upper cap. This won him the tacit support of the Irish Continental rank-and-file crewmen, who were members of another trade union, the Seamen's Union of Ireland.

The latest Irish Continental results demonstrate just how necessary the radical surgery performed by Mr Rothwell in 2005 really was. In 2004, the last full year before the company flagged out its crews, Irish Continental's staff costs amounted to almost €68m. This had fallen to just €24m by 2010, a reduction of almost €44m.

While its labour costs are now much lower than they were in 2005, Irish Continental's fuel costs have risen, climbing by a further €10m to €41.4m last year.

All of which means that doing nothing was not an option for Irish Continental. If it had continued as before, last year's €31.5m operating profit would have been transformed into a €12.5m loss.

Unfortunately for those who upset the cosy consensus there is no forgiveness, even if subsequent events prove them to have been right -- indeed especially if they have been right all along. Such has been Mr Rothwell's fate since the flagging out controversy.

Even other businesspeople, who privately agreed with what he did, have been reluctant to offer public support. Given the fallout from the flagging out controversy and his deep aversion to personal publicity, it was hardly any surprise when Mr Rothwell and other senior executives attempted to take Irish Continental private and launched a €471m bid for the company in March 2007.

Unfortunately, the management buyout was thwarted when the Moonduster consortium consisting of Philip Lynch's One51 and the Cork-based Doyle Shipping Group gatecrashed the party, acquiring a 24pc stake and launching with its own, higher €561m bid later that year.

Moonduster was joined on the Irish Continental share register by property developer Liam Carroll who built up a 29pc shareholding.

This meant that, with Mr Rothwell's management group controlling over 16pc of the company, and none of the three main blocs prepared to cut a deal with one of the others, Irish Continental was deadlocked.

Eventually the Carroll shareholding was sold after the developer went bust in late 2009.

There was also a temporary rapprochement between the management group and Moonduster, with the two groups unsuccessfully seeking to raise finance for a joint bid in early 2009. Following the failure to raise the cash for a joint bid normal hostilities seem to have resumed between the two sides, with Moonduster representatives being highly critical of Irish Continental management at the company's 2010 annual general meeting. Given the opprobrium he was forced to endure in 2005, it is hard not to suspect that Moonduster's criticism at the 2010 AGM was like water off a duck's back.

With the Irish Continental share price now down to €17.30 compared to the €22 per share it was prepared to pay for the company in 2007, any sale of the Moonduster stake would crystallise huge losses for the consortium. This means that, like a couple trapped in a loveless marriage, Moonduster and Mr Rothwell are stuck with one another for the foreseeable future.

But there are some consolations. With its operations now hyper-efficient, its debts largely paid off and a relatively modern, well-invested fleet, Irish Continental is set to throw off prodigious amounts of cash over the next few years. In 2010 it paid its shareholders €1 per share, a total of almost €25m in dividends.

This combination of strong cash flows and the continuing fallout from the 2005 controversy means that, as soon as credit becomes readily available once again, Mr Rothwell will probably seek to take Irish Continental private once again. No-one will be happier than he when his company finally escapes the limelight.

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