Delisting works well for Clondalkin

CURRENT ACCOUNT: Former publicly quoted packaging group Clondalkin proves that there is life after the stock exchange.

Three years after being taken private by its 44-strong management team, Clondalkin appears to be making steady progress in reducing its debt while continuing to deliver a solid performance.

Moody's has just upgraded the company's debt rating, citing the company's track record to date and its ability to generate strong cashflow to pay down its debt.

The MBO, the first of an Irish plc, was backed by British private equity group and cost around €475 million when Clondalkin's existing debt was taken into account. Around 75 per cent of this was debt finance.

By end-June, Clondalkin - which has remained an acquirer, purchasing European packaging group EPH in April 2001 - had knocked its net debt level back to €332.8 million from €350 million at end-December, according to Moody's.

The company's packaging business also looks in reasonable shape despite the downturn with Moody's expecting annual growth rates for the business as a whole to be in the low single digits.

In the 12 months to June 30th, the packaging group reported total revenues of €716.9 million and earnings before interest, tax, depreciation and amortisation (EBITA) of €89.6 million. This compares to sales of €711 million and EBITA of €81.7 million in the 12 months to end-December.

Moody's warns that Clondalkin remains exposed to foreign exchange movements and price fluctuations in raw materials costs, particularly in polymer prices which are tied to oil levels.

But it also points to the company's "strong product and customer diversification" which it believes will offset the negative impact of a weaker economic environment.

In the current climate, with many plcs suffering pressure on profits, Clondalkin's solid performance might prompt a rueful sigh from some investors.