Toll roads company puts public plans on hold

National Toll Roads - or NTR as it prefers to be known now that it's involved in lots of new activities - has always hummed and hawed about going public.

Pension funds like hefty dividend payments and in recent years NTR has paid a very large chunk of after-tax profits to its shareholders.

Certainly, given its institutional shareholder base, there would be an appetite for taking the company public if only to give the shareholders an open market for their shares. NTR shares are traded on an over-the-counter market operated by Davy.

In the past, NTR has always said that it would wait to go public on the back of another major infrastructural project. Now, with a number of major projects in the pipeline, NTR chief executive Jim Barry has said it will be two or three years before the company considers a flotation, although he did concede that flotation is the "most probable option".

So why is NTR waiting to go public when it is involved in a €75 million windfarm project with Eddie O'Connor's Airtricity off the Wicklow coast, is building a second toll bridge beside the existing West-Link, is spending €42 million on two waste recycling plants in Cork, is part of a consortium bidding to build the Kilcock-Kinnegad motorway, and has plans to bid to build the Waterford and Dundalk bypasses?

Maybe the reason is that NTR has a lot of projects on its plate but that it is still only generating cash, admittedly a lot of cash, mainly from the toll roads and waste management businesses. It will be some years before new toll roads ventures and the offshore wind farm begin generating cash and earnings. At that stage, NTR will be an infinitely more marketable commodity than it is in its present shape, where a large chunk of its earnings lie well off in the future.

If one assumes that NTR gets at least some of its pending projects off the ground, then the company's strong defensive qualities - particularly its strong cashflow should make it an attractive investment - even though it will still be very much in the small/medium-cap section of the market, which many institutional investors now ignore as a matter of course.

NTR's band of institutional shareholders - mainly long-term investors like pension funds - have done well out of the company since it was set up in the early 1980s.

In years gone by, dividend cover was sometimes less than two times. But that has now changed with NTR retaining a much greater proportion of earnings to fund its expansion and diversification programme. Even with a 50 per cent cut in the dividend this year, NTR is still paying more of its earnings to its shareholders than most plcs - and that should keep the pension funds happy.

On NTR's toll road expansion ambitions, Current Accounts notes that one of the group's partners in the bid for the Kilcock-Kinnegad motorway, Spanish engineering giant Dragados, has recently shown just how deep its pockets are. Dragados has just agreed to pay €915 million for the Spanish toll roads group Iberpistas. Cash is king, and toll roads more than most ventures are the supreme cash generator.