Donegal Investment Group, formerly Donegal Creameries, has reported operating profits of just under €1m for 2015, a 63% increase compared with the previous year. Operating margins widened 40 basis points (bps) to a slender 1.2%, while group revenues increased 2.7% to just under €83m.

Pre-tax profits for Donegal were back almost 11% to €3.8m after a €1.1m drop in income earned from associate businesses, principally its stake in Monaghan Mushrooms.

Donegal reduced its net debt position by €4.6m at year end to just over €12.1m, mainly due to the sale of its Ballyraine Halls student accommodation in Letterkenny.

The Donegal board is recommending a total dividend of 16c per share for 2015, similar to that paid out the previous year.

Divisions

The improvement in overall group operating profit was driven by Donegal’s food-agri and property division, which recorded a 26% increase in earnings to €1.9m. Revenues for the division improved by €2.3m to €49.5m after strong sales growth from its speciality dairy segment, which includes the food-to-go Nomadic yoghurt brand.

Donegal’s animal feeds business (Smyth’s) is also accounted for within this division and recorded a “satisfactory” performance last year, with increased sales volumes offsetting reduced selling prices.

Where Donegal continues to struggle is with its produce (seed potato) business. The division, which is Donegal’s core operation, recorded an operating loss of €0.7m last year, similar to the €0.8m loss the previous year. Revenue was relatively flat at €33.4m.

The division struggled due to reduced demand for certified seed potato across Europe after excess potato production in 2014. In the second half of 2015, the company blamed conflicts in the Middle East and import regulation changes in North African markets making trading conditions very difficult.

The company said it is taking a number of actions to return the division to profitability.

Donegal received €0.6m in exceptional income last year. This arose from the decision by the Commercial Court to award legal costs totalling €2.6m in favour of Donegal.

It had taken a shareholder oppression claim in 2014 against Danbywiske, the holding company owned by the Wilson family that is the majority shareholder (65%) in Monaghan Mushrooms.