I am pleased to present the Annual Report of Bord na Móna plc for the year ended March 2015 and to report a strong financial performance for the year on the continued operations. The operating profit increased by €2.2 million to €52.4 million, however the operating profit from continuing businesses increased by €5.0 million to €55.6 million. During the year, the Board decided to cease the Environmental (trading as) Anua business operation due to ongoing losses; the business incurred a trading loss of €3.2 million and a further loss of €4.6 million on the termination of the operation, a total loss before tax of €7.8 million. The profit before tax and interest and after accounting for the loss incurred in the Anua business was €47.4 million, a reduction of €2.8 million on the prior year attributable to the exceptional loss incurred on the termination of operations in Anua.
Turnover earned in the year at €417.4 million is a reduction of €9.4 million on 2014. However turnover in 2014 included €23.7 million in respect of the Suttons Oil business which was disposed of in January 2014. Sales revenue was mixed across the Group with increases in the Powergen, Feedstock, Horticulture and Resource Recovery businesses; however the Fuels and Anua businesses experienced a reduction in sales activity. The Powergen business delivered a significant increase in turnover with the commencement of commercial operations at the Mount Lucas and Bruckana wind farms increasing the turnover by €15 million. Turnover also increased for the Edenderry Power station with plant availability up 13% on the prior year. The supply of milled peat by Feedstock increased on the previous year due to increased demand from the ESB in respect of the West Offaly Power station, increased demand for the Edenderry Power station but a reduced demand for the Lough Ree Power station as the plant was on an extended outage in the summer of 2014. The Resource Recovery business also experienced turnover growth in comparison to the prior year, with increased tonnage intake of 22% for the recycling business, with the majority of the growth attributable to the commercial sector. The residential sector was on a par with the prior year. Tonnage intake to the end treatment facilities located in Drehid in Co. Kildare was up 13% on the previous year although the turnover was down on the prior year due to a change in the waste stream mix.
The commencement of commercial operations at both the Mount Lucas and Bruckana wind farms.
Increased sales of milled peat for power generation at the West Offaly and Edenderry Power stations.
Improved trading performance of the Resource Recovery end treatment business with increased tonnage intake.
Offset by lower sales of residential fuels, increased regulatory costs, carbon taxes and better energy payments on residential fuels, lower margins on waste collections streams and the termination costs associated with the closure of Anua operations.
In the Consumer and Professional business (which comprises of Fuels and Horticulture), sales of fuels products were lower than the prior year by €11.0 million because of the warm summer and relatively mild winter season, with residential fuels sales volumes down 18%. The impact of carbon tax, increased competition from alternative fuels and from Northern Ireland based suppliers have also contributed to the reduced demand. The prior year’s turnover included €23.7 million in respect of oil sales by Suttons Oil which was sold in January 2014. The Consumer and Professional horticulture range of products experienced a 2% decline in volume demand, but turnover was up by €1.1 million due to a currency gain on sales into the U.K. Sales for the Anua business reduced in all three geographical regions, Ireland, U.K. and the U.S by €2.9 million in aggregate. The Board terminated its Anua operations in all three regions following the end of the financial year.
Earnings before interest, taxation, depreciation and amortisation, (EBITDA), before exceptional costs at €98.1 million were up €8 million on the prior year. In 2015, the Group incurred an exceptional charge of €4.6 million (pre tax) in respect of the termination of the Anua operations. In 2014, the Group achieved a very successful harvest with a final yield of 4.5 million tonnes, 0.5 million tonnes above the target for the year and we now have sufficient stocks of milled peat to meet demand for the next twelve months.
The Group recorded an operating profit of €52.4 million and a profit before taxation of €37.2 million. The operating profit was up 4.3% on 2014, driven in particular by;
The profit after tax in 2015 at €30.4 million compares with a profit after tax of €33.5 million in 2014 reduced by the exceptional cost incurred on the closure of the Anua business. Lower interest payable costs of €2.5 million were offset by lower interest receivable of €2.4 million and an increase in the tax charge of €0.3 million on higher taxable profits.
Gabriel d’Arcy, who was Managing Director for his term of seven years, resigned in October 2014 to take up another appointment. I would like to acknowledge the many contributions and innovations made by Gabriel during his period as Managing Director and to wish him success in his new career.
Following an extensive recruitment process, the Board selected Mike Quinn as our new Managing Director and he joined us on 2 January 2015. Mike brings a strong track record and relevant experience to the Group and he has started with great enthusiasm, vision and drive in his new role. The Board is confident that we have the right person to lead the Company through the difficult transition that the Company must take.
Notwithstanding the strong performance in 2015, changes in regulations, especially carbon tax regulations and the current economic environment continue to present difficult challenges to the Group’s businesses. The level of competition continues to increase across all of Bord na Móna’s activities making it essential to maximise efficiencies and control costs to enable the Group to continue to prosper and deliver an appropriate return to shareholders. We continue to implement a wide-ranging programme of business transformation initiatives, including both cost reduction programmes and initiatives to expand other non-peat related business areas. These strategies will require investment of some €40 million, over a three year period and will, when delivered, improve the sustainability of the Group in the future.
In view of the ongoing significant challenges faced by our businesses, the Board has decided that general increases in basic pay rates for employees would be inappropriate.
In addition, the Group is continuing to evaluate the potential of its land bank for further renewable energy projects, including wind farms, solar and biomass to serve the Irish market and contribute to fulfilling Ireland’s medium term needs for renewable energy in line with Government policy.
The Group paid a dividend of €11.2 million during the year, of which €10.6 million was paid to the State and €0.6 million was paid to the Employee Share Ownership Plan (ESOP).
In the year 2015, the Group continued to focus on implementing its strategic growth and development initiatives across all of its business areas. A number of the key significant steps taken to progress our vision for the Group were:
The Group participated with NewERA and Coillte in the implementation of the Government decision that certain activities of both companies be operated via joint venture. Areas being addressed under this process include Wind Energy, Bioenergy, Shared Services and Tourism and Recreation.
During the year, the Group continued to engage with the trustees of the General Employee Superannuation Scheme in relation to a proposal to resolve the scheme’s funding deficit. I can confirm that a solution balancing the interests of the Company, the employees and the pensioners was approved by the Pensions Authority and subsequently the Minister for Communications, Energy and Natural Resources with the consent of the Minister for Public Expenditure and Reform. The Trustees implemented the funding proposal in June 2015. This long-running issue has now been successfully resolved and I wish to convey the Board’s appreciation to all involved. All of Bord na Móna’s Defined Benefit schemes now have appropriate funding arrangements in place.
The Board continues to focus on corporate governance, based on best practice, emerging regulation and trends. Developments during the year included the further implementation of a comprehensive process for considering and reporting on the risks faced by the Group. The Board assesses all significant investments using rigorous methodologies to ensure we meet our responsibility to safeguard the Group’s assets. The Board is satisfied that the Group has an appropriate and responsive system of internal controls to mitigate significant risks, keep exposures at an acceptable level and ensure that Bord na Móna continues its effective approach to corporate governance. The Board completed a process to evaluate its own performance and recommendations for improvements are now being implemented via a special Committee of the Board. Since my appointment, I have attempted to improve the culture of the Company towards a more open and transparent approach to business and while I have made some progress in this regard, I am determined that this will become a characteristic of Bord na Móna.
In line with our approach to strategy development, the Board again carried out a detailed review of the Group’s strategy during the year, with the participation of representatives from the Departments of Communications, Energy and Natural Resources, Public Expenditure and Reform and NewERA. A detailed five year plan to implement the strategy is being prepared for consideration by the Board. It is our intention to launch our approved strategy publicly later in 2015. The Board is confident that the strategy will continue to build on our many core strengths. The Board is determined to ensure a successful, vibrant and long term future for the Group which will enhance the interests of all our stakeholders and continue Bord na Móna’s significant economic, social and environmental contribution to Ireland.
The Board’s role is to provide the environment and resources which will enable the achievement of the strategy thereby delivering excellent returns to shareholders. I am happy to confirm that the Directors are fully committed to fulfilling this role.
I would like to thank my Board colleagues for their commitment and support during the year. There were a number of changes to the membership of the Board during the year due to the expiry of terms of office. Paudge Bennett, Paddy Fox, Pat McEvoy, Paschal Maher and David Taylor stepped down as Directors during the year. I want to acknowledge the valuable contributions to the work of the Board by them during their terms. An election in accordance with the Worker Participation (State Enterprises) Acts 1977 and 1988 was held in November 2014 and as a result the Minister for Communications, Energy and Natural Resources, Mr. Alex White T.D. appointed Philip Casey, Kevin Healy, Seamus Maguire to the Board and Colm O’Gógáin was reappointed. I welcome them to the Board, along with John Farrelly and Denis Leonard who were appointed as Directors during 2014.
I would like to thank the Minister for Communications, Energy and Natural Resources, Mr Alex White T.D. and his predecessor Mr Pat Rabbitte T.D. for their ongoing support for Bord na Móna.
I also express my appreciation to Mr Mark Griffin, Secretary General of the Department, Mr Ken Spratt, Assistant Secretary General and the other officers of the Department for their interest and advice.
During the year, the Company interacted on a regular basis on governance, policy and measurement matters with the NewERA Division of the National Treasury Management Agency (NTMA) and the Department of Public Expenditure and Reform. I would like to thank Ms Eileen Fitzpatrick and her colleagues in NewERA and the various officials in the Department for their support during the year.
I would also like to take this opportunity to express my congratulations and sincere thanks to Mr Mike Quinn, the Group’s Managing Director, and to the management team he leads. I thank all our employees for their dedication and hard work in delivering another year of progress for the Group, despite the challenges which emerged.
25 June 2015