Earnings (EBITDA) at plastics and environmental company One51 plc doubled from €13.3m to €27.2m for the first six months this year.

The main driver of growth was the addition of IPL, the American plastics business in which it acquired a majority stake (67%) in July 2015. IPL added €15.6m to profits during the period and now accounts for almost half of the business and 57% of profits. Revenues increased 51% to €214.2m and profit before tax and exceptional items increased 37% to €11.3m.

The addition of IPL is seen as transformative for the group, extending its international reach and expanding full-year revenues to over €450m. One51 provided $90m in equity and raised a further $110m in debt to gain a 67% majority shareholding in IPL. It was agreed that the two Canadian equity partners who own the balance would exchange their shares in IPL for shares in One51.

This would have involved One51, seeking a stock market flotation and issuing more shares, with the Canadians taking a 20% share of One51. However, cracks started to appear in the deal when some shareholders had difficulty with their shareholding being diluted.

It is understood that Dermot Desmond’s investment company, IIU, now owns about 25% of One51, having spent €60m buying up shares over the past 12 months. If the deal to transfer 20% of the business to the Canadian investors had gone ahead, Desmond’s stake in One51 would have fallen to below 15%.

The co-ops, including Dairygold, Kerry, Glanbia and Lakelands, who own around 30%, valued at close to €100m, would also see their shareholding fall to around 15%. But being listed on a stock exchange would have provided much greater liquidity and allowed the shares to be traded. It was expected that many of the co-ops would have unwound their positions over time.

With the IPO and funding round postponed, One51 now must find a way to buy out the Canadian partners in IPL by 2021. With rapid growth forecast for IPL, One51 shareholders would welcome this transaction taking place sooner rather than later.

Debt levels, while still manageable at around 2.7 times yearend earnings, are likely to remain higher than would be the case if One51 was listed, meaning all expansion will be funded through debt and cashflow generated by the business.

The business has big plans for expansion, and is understood to be in the process of closing deals (one understood to be in the US and other in Europe) worth €100m in the coming months, which will be funded through existing bank facilities.

Setback

The decision to defer the IPO has been a setback for the company’s growth plans as it has lost the opportunities to swap up the Canadians and raise institutional equity for long term growth.

It has also been a setback for shares in the company as they remain only traded on the relatively illiquid grey market.

This comes as a setback for chief executive Alan Walsh, who has turned the group around over the past number of years, offloading non-core property investments, returning the group to profitability and establishing the group as a leading global plastics manufacturer.

Where he turns next depends on a number of factors. Firstly, as IPL is now core to the business, accounting for more than half of profits, he will need to concentrate on bedding in the acquisition. This high-margin business (16%) is a key building block for One51’s growth into the future. No doubt he would like to buy out the rest of IPL as soon as possible but will need to win the support of all shareholders before a move can be made here.

The fact that the shares would be traded on a regulated stock exchange would have created institutional investor interest, shares would be much more liquid for all shareholders and the money raised could have accelerated growth across the group.

While the business will still grow, it may just be at a much slower pace than originally anticipated had the IPO progressed in April. That said, for shareholders, the business remains solid, with One51 controlling the majority of IPL. After all, co-ops have seen their investment increase over the past 12 months.

The company is also strengthening its board. Former CEO of Morrison’s Dalton Philips, who left the company last year will join the board as an independent non-executive director in September. It is understood he will bring international plc and consulting experience to the board.

Desmond’s investment arm has appointed Pat Gilroy to the board as a non-independent, non-executive director representing IIU Nominees Limited.