In it for the long haul

In it for the long haul

Irish Ferries’ decision to invest in additional capacity is a solid signal that Ireland has turned the corner of its economic woes and comes at a time when the company has just celebrated its 40th anniversary.

Joining the successful and impressive Ulysses and the high-speed craft Jonathan Swift on the key Irish Sea route between Dublin and Holyhead, the Visentini-built Epsilon provides significant additional vehicle capacity along with modern facilities onboard, including cabins, bar/cafeteria and self-service restaurant.

In June 1973, the direct passenger car ferry service between Ireland and France (now operated by Irish Ferries) began operation, initially sailing between Rosslare and Le Havre. Managed by the then Irish Continental Line – subsequently joined by B&I Line under the Irish Ferries flag – the route was serviced by the ferry Saint Patrick which had been built in Bremerhaven, Germany.

The Irish Continental Group (ICG), Irish Ferries’ parent, turned B&I Line, a loss-making state-owned ferry company with barely enough tonnage to maintain its services, into what became and remains an impressive operation.

Before entering the ferry business, Eamonn Rothwell spent his early working life in financial journalism, followed by a spell with the Irish Tourist Board. He then went into investment management, specialising in the equity markets of the US, Japan, UK and Europe. He set up the equity desk for the emerging Irish firm NCB Stockbrokers and in 1987 he arranged the purchase of ICG. The following year Rothwell arranged the floatation of that organisation on the Irish Stock Exchange, followed in 1993 by a listing on the London Stock Exchange.

The acquisition of B&I Line was followed with deep interest across Irish society. Between 1965 and 1992 the government had invested a total of IR£142.5m in share capital in B&I. By the end of the 1970s, after a decade of losses, the company returned its first profit, but the figures thereafter told a very different story. Even with continuous injections of public funds the company performed dismally throughout the 1980s and, despite operating receipts increasing tenfold between 1965 and 1978, B&I Line yielded an annual loss or insignificant profit.

“The company was floundering because of its policy of putting greater focus on its own staff than on customers and prospects,” Rothwell explains. “Operating costs were too high and this was due in part to the size of its ships – smaller than those of its competitors, with a consequent higher unit cost per lane metre. In 1992 roughly 70% of the Republic of Ireland’s ro-ro freight imports and exports were going through ports in Northern Ireland. Our thinking was that this figure should be closer to 50%.

“Our belief was that with the right lane metres sailing at the right times, ICG would retrieve a lot of business – hence a new determination to build bigger ships, especially for the Irish Sea’s Central Corridor, even though it would be no easy task.”

Rothwell advised ICG on the purchase of B&I in 1992 and was installed as ICG’s CEO. This group broadened its activities to include the short sea links with the United Kingdom, Ireland’s largest trading partner, and also extended its operations into container transport and port operations.

Irish Ferries established itself as a major force on the Irish Sea, as well as on the routes to France. The company moved quickly to improve operations and services, while replacement tonnage and newbuilds firmly established the company as a leading operator. Since 1995 the group has invested over €500 million in new vessels, port infrastructure and acquisitions.

Much of the financial success of ICG was attributed to one ship, the Pride of Bilbao. Purchased in 1993, she represented a huge leap forward for the company; a ferry built to Baltic standards and generating regular income from a reputable charter. “Our initial interest in her was for our French operations, using one ship instead of two, but she was too expensive,” says Rothwell.

“The situation changed when the currency crisis hit and her Swedish owners went into receivership. We enquired again – not for use on the French routes but much more as a long-term investment for the company. Speedy negotiations with banks and liquidators ensued and in less than six weeks the vessel was purchased, having been committed to a charter to P&O Portsmouth for an initial three years with renewal options.

“In addition to helping to fund the building of the Isle of Innisfree in 1995, it provided the company with a regular income and was excellent security on dealings with banks.”

The Isle of Innisfree (today on charter to New Zealand’s Interislander as the Kaitaki) was followed soon after by the larger Isle of Inishmore and then by the high-speed craft Jonathan Swift. But it was the magnificent Ulysses of 2001 that truly turned heads. Ordered from Aker Finnyards of Rauma, Finland, at a cost of €100 million, this 12-deck vessel boasts themes inspired by the James Joyce novel Ulysses. In her first ten years of operation she had made around 14,000 crossings, a distance of 826,000 nautical miles and, remarkably, all the Irish Sea could throw at her never caused her to remain in port.

As for the French routes from Rosslare, the service eventually received its single ship to replace two older ones. The luxurious Oscar Wilde was purchased by ICG in February 2007 at a cost of €45 million and has earned a reputation as one of the finest ships to ever sail direct from Ireland to France.

Now, Rothwell – with his trademark mix of business sense and ability to predict when the time is right to make a change – has flagged that a delisting from the Irish Stock Exchange is under consideration.

He elaborates: “There isn’t an Irish plc that isn’t examining it. Because so many companies have moved [to London], it has come on the agenda. However, we have no immediate plans to change our listing. We’ll monitor developments.”

ICG saw its operating profits jump by over a tenth last year. Although its passenger numbers only increased slightly in 2013, Rothwell expects more positive results this year. “The economic backdrop is improving in Ireland and Britain,” he says. He expects an accompanying boost in passenger numbers. “The housing market is improving and unemployment is coming down. People should feel better about things and there should be an improvement.”

Rothwell describes ICG’s investment in the Epsilon as “a major vote of confidence in the Irish economy,” adding: “We have not added capacity on the Irish Sea since 2001.”

And the results are bearing fruit. Revenue rose by almost 6% to €76.7 million in the first four months of 2014 as services between Dublin and Holyhead were expanded and a new weekend Dublin-to-Cherbourg route was introduced, utilising the Epsilon. Total sailings were up by 17% across all ICG routes, but operating costs were also higher, increasing by 9% to €73.8 million, mainly due to additional port and operational costs. It should be noted that ICG’s business is significantly weighted towards the second half of the year when normally a higher proportion of the Group’s operating profit is generated than in the first six months.

Meanwhile, Rothwell says traffic on the company’s new Dublin-Cherbourg economy service “looks good for the summer”. Fares on the economy service are 10-15% cheaper than the group’s other ferries, but this can vary according to the time of year.

This article appeared in the Autumn/Winter 2014 edition of International Cruise & Ferry Review. To read other articles, you can subscribe to the magazine in printed or digital formats.

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Justin Merrigan
By Justin Merrigan
Monday, October 13, 2014