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The board of Donegal Investment Group plc, which was spun out of Donegal Creameries, is proposing to return up to €47.5m to shareholders through a share buyback offer. The offer is a cash price of €9.25 for 53.7% of the ordinary shares held by shareholders on 17 May 2018. The proposal will be put to an EGM on 16 May.
This proposal comes after a number of disposals by the group which has created significant cash. The board believes that a return of the €47.5m of capital in cash represents the most effective use of company funds. It has noted that the balance sheet of the group is strong and its cashflow after the return of capital will be sufficient to pursue the group’s ongoing strategy.
The business saw an improvement of €62.5m in the past 12 months to a net cash position of €46.1m at the end of the first six months on 28 February 2018
The price of €9.25 per share represents a premium of 2.8% to the closing price of €9 per share on Wednesday.
If shareholders approve the offer, shareholders will start to receive the proceeds by the end of May.
Disposals
The proposal comes, following the disposal of a number of non-core assets including An Grianán Estate last year and the group’s interest in the Monaghan Middlebrook Mushrooms. These businesses generated low returns on capital and in the case of Monaghan Middlebrook Mushrooms, it was not within majority ownership of the group.
As a result, the net asset value per share increased by €2.22 to €8.24 at the end of February. The significant increase was mainly as a result of a €19.4m profit on the sale of the group’s 30% share in the Monaghan Middlebrook Mushrooms business.
The business saw an improvement of €62.5m in the past 12 months to a net cash position of €46.1m at the end of the first six months on 28 February 2018.
Group revenue
Also in the first six months of trading this year, group revenue decreased by €2.2m to €44.2m largely due to the reduction in the availability of seed potato following lower than expected yields across Europe during the 2017 seed crop harvest. Operating profit decreased by €0.7m for the six-month period to €2.8m. The group's seed potato business was affected by the availability of seed as well as continued difficult trading conditions in its South American markets.
The group said its speciality dairy business, Nomadic, continues to see “good volume growth”. It is currently reviewing this business to maximise shareholder value and is looking at options. This may suggest it is considering disposing of this in the future also.
Its seed potato business saw revenue decrease by €2.7m to €18.9m with profit decreasing by €0.7m to €1.8m compared with the same period last year.
Revenue from its food and agri and property division increased by €0.5m to €25.3m, with profits up €0.5m to €1.4m.
Its animal feeds business, Smyth’s, performed satisfactorily during the first half of the year, with tonnage sold marginally ahead of the same period in 2017.
The group also disposed of property located in Donegal during the period resulting in net sales proceeds of €1.1m.
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