Long-suffering shareholders of the Jones Group are in for a new-year windfall worth at least 90p a share, following the decision by the group to sell its shipping and manufacturing businesses and dispose the surplus cash to shareholders. The group is currently examining the most tax-efficient mechanism for distributing its surplus cash.
Jones took the first step towards this goal yesterday with the sale of two modern ships, the Rathrowan and Rathboyne to the international shipping company, Gearbulk for £20.6 million and announced that it intended to concentrate on its oil distribution business when the manufacturing business and its sole remaining ship, the Rathcarra, were sold.
Of the £20.6 million realised from the sale of the two ships, £6.2 million will be used to repay debt associated with the purchase of one of the ships while a further £3 million will go to clear Jones's overdraft.
This will leave about £11.5 million for distribution with the prospect of further cash to be generated from the sale of the Rathcarra and the five manufacturing businesses in Ireland and Britain. The decision to exit the shipping business came as a surprise as Jones only took delivery of a new tanker earlier this year at a cost of £11.2 million. Chief executive, Mr Pat Nevin said that, after a detailed review, the group had concluded that to expand into the high-heat liquid pitch tanker market - the only viable option - would have required a considerable fund-raising from shareholders and/or institutions.
"The directors believed the returns projected on the capital employed were inadequate for a publicly quoted company and the risk of dealing with a small number of customers was considered too high," said Mr Nevin.
One of Jones's major shareholders said, however, it would have been extremely difficult for the board to persuade shareholders to support any major fund-raising.
The remaining ship, the Rathcarra, has now been put on the market while discussions have already begun with interested parties on the sale of the manufacturing businesses - Runtalrad in Thomastown, Co Kilkenny; Tube Rollers in Callan, Co Kilkenny; Midwest Circuits in Shannon; and two companies in Portsmouth, Thermal Radiators and Keeling Radiators.
Mr Nevin said he was hopeful these businesses can be sold as going concerns but added that it would be the second quarter of next year before all the disposals were finalised.
After the sale of the assets and the distribution to shareholders, Jones will be left with a clean balance sheet and an Esso oil and Blugas LPG distribution business in Ireland and Britain. These businesses had sales of around £80 million last year, but are thought to have made only a small profit.
In a recent review, however, Davy Stockbrokers said that while the distribution division generated low margins, it was usually profitable, generated cash and had, in the past, produced a good return on capital.
Whether such a reduced business is appropriate for a public company remains to be seen, but some market sources said that Jones could be attractive to private companies seeking a clean vehicle for a stock market flotation.
The main shareholders who would decide Jones's future in such a situation are AIB Investment Managers with just under 23 per cent and the Swiss engineering group, Zehnder, with 21 per cent. Zehnder bought its 21 per cent stake in Jones at 275p each five years ago, more than double the current price in the market.
One of the longest-established companies on the Irish market, Jones has had a disastrous performance in recent years and its shares have fallen from a high of 550p eight years ago to their current level of 125p. This latter price values the company at just under £16 million.
