THE EIRCOM employee share ownership trust (Esot) took a write down of €193.8 million on its 35 per cent stake in the Irish telecoms company in its results for the year to the end of June 2009, The Irish Timeshas learned.
This was largely behind a 64 per cent fall in the value of the Esot’s net assets last year, which declined to €154.27 million from €432 million in the previous reporting period.
The Esot’s writedown was the result of a €720 million impairment charge taken by Eircom in its accounts for the year to the end of June 2009.
“The impairment charge reflected both the impact of the Eircom pension deficit and changed economic circumstances in the wake of the global financial crisis,” according to a four-page members’ update circulated in recent days.
The other factors were a tax-free distribution of €69.7 million to members in the 12-month period and movements in the Vodafone share price and the sterling-euro exchange rate.
The Esot, whose board is chaired by former union official Jerome Barrett, holds 2.25 million Vodafone shares in the approved profit sharing scheme on behalf of 1,896 beneficiaries.
The members’ update states that the Esot’s borrowings declined by €13 million during the period while its dividend income fell by 46 per cent to €7.7 million.
Its expenditure declined by 1.4 per cent to €3.9 million. These expenses include professional and legal fees, payments to personal representatives of deceased beneficiaries, and interest costs on borrowings.
The administration costs of the Esot are borne by the company.
The members’ update includes a long commentary on the potential for further investment by the employee share plan in Eircom once a new business plan has been drafted by its management team, which is led by chief executive Paul Donovan.
But it does not put a timeline on when its next distribution of tax-free cash might be made to members other than to say that “some decision” would be made during the course of the year.
In relation to investing more money in Eircom, the update stated: “Foremost in that regard is the company’s business plan. We expect this plan, which is currently under preparation by the company, will lead to a determination of new capital requirements of Eircom going forward.
“The Esot board intends to conduct an assessment of the implications that arise from the business plan when that is completed.”
The first page of the members’ document succinctly sums up the challenges facing Eircom, which is now majority owned by Singapore-based STT.
“Eircom faces a challenging future in uncertain economic times. The company has significant debt, and there is a need to invest in technologies for the future in the fixed, broadband and mobile markets.’’
