Bord na Móna takes €14m hit on newly acquired UK business
Irish company discovers compliance issues at UK subsidiary months after acquisition
Electrical sales from Bord na Móna’s Mountlucas and Bruckana wind farms fell by €5.2 million for the 12 months to the end of March. Photograph: Dara Mac Dónaill
Bord na Móna has taken a €14 million hit on the purchase of a UK horticulture business, which was found to be in breach of the environmental regulations only months after being sold to the Irish company.
Details of the controversy, which is now the subject of a legal case between Bord na Móna and the former owners, were disclosed alongside the Irish firm’s latest annual results, which show another steep decline in profits.
Bord na Móna acquired White Moss Horticulture Limited, which sells compost using recycled green waste mixed with peat, for €12.1 million in December.
The acquisition was intended to strengthen the company’s position in the UK retail sector and mitigate the risk posed by Brexit.
However, it soon discovered a series of regulatory breaches at White Moss’s two Liverpool plants.
Bord na Móna said the non-compliance issues resulted in inventory write-offs, incremental professional fees and goodwill impairment totalling €14 million.
“Following the acquisition of White Moss, we discovered regulatory compliance issues at the company’s Liverpool sites, which were not evident prior to completion of the transaction,” managing director Mike Quinn said in the company’s annual report.
“All new product is now fully compliant and we are in an agreed process with the environment authority to address historic non-compliances,” he said.
“While we are still working on resolving the operational issues identified, I remain confident of ultimately achieving a positive outcome which will validate our strategic intent in acquiring the business.”
The unexpected costs attached to its White Moss acquisition contributed to a 45 per cent decline in pretax profit to €12.2 million for the 12 months to the end of March.
The company, which employs up to 2,000 people in the midlands, also saw group revenue fall by 6 per cent to €406 million, which Mr Quinn blamed on its Edenderry power station exiting the public-service obligation, a period of very low electricity prices and a mild winter which had an adverse impact on fuel sales.
“Some of our businesses experienced a challenging year with external factors having a significant impact on their profitability, such as another mild winter impacting fuel sales,” he said.
Mr Quinn is leaving in October after less than three years in charge to take over at the gas and water utility Ervia.
In its report, Bord na Móna said reduced coal and briquette sales amounted to €13.1 million while electrical sales from its Mountlucas and Bruckana wind farms fell by €5.2 million as the company struggled with the second-lowest wind yield in the last 10 years.
On the upside, its other renewable unit, Powergen, a resource recovery and biomass businesses, experienced strong growth.
The company also announced details of a green energy programme which will see it invest €1.2 billion in developing major infrastructural projects in wind, biomass and other renewable energy sources over the next 13 years.
Bord na Móna paid a dividend, mainly to the Government, of €4.5 million, down from €10.1 million the previous year. The group said it had a net cash outflow of €53.2 million in 2017 compared with €2.5 million in the prior year – largely due to the debt repayments of €76.3 million in 2017. At year end, Bord na Móna had net debt of €170.5 million, a decrease of €2.2 million in the year.