FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of August, 1999
CENARGO INTERNATIONAL PLC
(Translation of registrant's name into English)
Puttenham Priory
Puttenham
Surey GU3 1AR
United Kingdom
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will
file annual reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
Indicate by check mark whether the registrant by furnishing
the information contained in this Form is also thereby furnishing
the information to the commission pursuant to Rule 12g3-2(b)
under the Securities Exchange Act of 1934.
Yes No X
INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Set forth herein is the quarterly report of Cenargo
International Plc ("Cenargo" or the "Company") for the quarter
ended June 30, 1999, consisting of a Management's Discussion and
Analysis of Financial Condition and Results of Operations and
Unaudited Consolidated Financial Statements for the three month
period ended June 30, 1999.
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CENARGO INTERNATIONAL PLC
THIRD QUARTER RESULTS
Cenargo International Plc (the "Company") today announced third
quarter EBITDA of US$1.6 million on revenues of US$27.5 million,
compared to EBITDA of US$3.7 million on revenues of US$27.2
million for the same quarter last year.
OPERATING REVENUES
Operating revenues increased in the third quarter ended June 30,
1999 (the "1999 quarter") by $0.3 million to $27.5 million
compared to $27.2 million in the third quarter ended June 30,
1998 (the "1998 quarter"). The increase results from a $5.6
million decrease in charter hire revenues, a $4.6 million
increase in ferry service revenues and a $1.3 million increase in
logistics and other revenues. The increase in ferry service
revenues was due to the inclusion of Merchant Ferries' new
Liverpool - Dublin RoPax service which commenced operation in
February 1999. The decrease in charter hire revenue represents
the loss of charter hire previously generated by three of the
Company's deep sea vessels sold in the first quarter of 1999.
The increase in logistics and other revenue was due to the
inclusion of revenue from Duncan International Limited ("Duncan")
acquired in May 1998, and Freightwatch Limited ("Freightwatch"),
acquired on March 2, 1999.
OPERATING EXPENSES
Vessel and other operating costs increased in the 1999 quarter by
$3.1 million to $22.6 million compared to $19.5 million in the
1998 quarter, primarily as a result of the inclusion of Duncan
and Freightwatch results and the operating costs of the Liverpool
- - Dublin RoPax service in the 1999 quarter off set by decreased
deep sea operating costs as a result of the sales of the three
deepsea vessels.
Depreciation for the 1999 quarter has decreased by $0.3 million
to $2.5 million compared to $2.8 million in the 1998 quarter,
representing a reduction of depreciation on vessels sold offset
by the inclusion of depreciation on the two RoPax vessels
delivered to the Company in September 1998 and January 1999.
Amortisation of dry docking and special survey costs for the 1999
quarter increased by $0.3 million to $0.7 million compared to
$0.4 million in the 1998 quarter due to costs associated with the
Company's Ferrimaroc service.
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General administrative expenses for the 1999 quarter decreased by
$0.6 million to $2.8 million compared to $3.4 million in the 1998
quarter due to reductions in head office costs in the 1999
quarter partially offset by the inclusion of Freightwatch and
Duncan costs in the 1999 quarter.
Foreign exchange loss for the 1999 quarter decreased by $0.2
million to $0.5 million compared to $0.7 million in the 1998
quarter. The majority of the losses represents unrealised non-
cash losses on re-translation of monetary sterling based assets
and liabilities within US Dollar reporting subsidiary companies.
Primarily as a result of these developments total operating
expenses increased by $2.4 million to $29.2 million for the 1999
quarter compared to $26.8 million for the 1998 quarter.
NET OPERATING INCOME (LOSS)
As a result of the foregoing factors, net operating income
decreased by $2.1 million to a net loss of $1.7 million for the
1999 quarter compared to net operating income of $0.4 million for
the 1998 quarter.
OTHER INCOME/EXPENSES
Interest income increased by $0.6 million to $0.9 million for the
1999 quarter compared to $0.3 million for the 1998 quarter due to
increased interest income mainly attributable to cash deposits
from the proceeds of the sale of vessels.
Interest expense increased by $2.2 million to $5.0 million for
the 1999 quarter compared to $2.8 million for the 1998 quarter.
The increase was due to the increased interest costs as a result
of the issue of the Company's 9 3/4% First Priority Ship Mortgage
Notes ("Notes") in June 1998.
The exceptional charge of $4.6 million in the 1998 quarter
represents a non recurring non cash charge based on the mark to
market value of certain interest rate swap contracts relating to
floating rate facilities repaid from the proceeds of the issuance
of the Notes.
NET INCOME (LOSS)
As a result of the foregoing net loss decreased by $0.8 million
to $3.7 million for the 1999 quarter compared to $4.5 million for
the 1998 quarter. EBITDA generated was $1.6 million for the 1999
quarter compared to $3.7 million for the 1998 quarter.
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IRISH SEA
The Company started its new Liverpool/Dublin service on February
19, 1999. The results of the Company's Irish Sea operations, and
therefore the Company as a whole, are distorted by the start up
costs relating to this new service amounting to $1.8 million
being offset against the trading results of the Company's Irish
Sea services over Quarters 2, 3 and 4 of fiscal 1999.
Set out below is a restatement of EBITDA on the basis that the
full amount of the $1.8 million start up costs relating to the
Liverpool/Dublin service were charged against Quarter 2 results
only.
This restatement shows the improvement from Quarter 2 to Quarter
3 as the new service's trading results improve.
Restated EBITDA in $ millions
Q1 Q2 Q3 TOTAL
IRISH SEA
As reported 4.2 0.9 0.4 5.5
Restated 4.2 (0.9) 1.3 4.6
COMPANY
As reported 5.7 3.0 1.6 10.3
Restated 5.7 1.2 2.5 9.4
The Company continues to pursue the outstanding penalties of
approximately $800,000 due from the shipyard as a result of the
delay in the delivery of the BRAVE MERCHANT. No credit has been
taken in the results to date in relation to this outstanding
amount.
LIVERPOOL/ DUBLIN SERVICE
The freight volumes on the new Liverpool/ Dublin service have
continued to rise steadily. Month by month to the end of July
1999 they have been as follows:
Units
February 1999 (month of start up) 993
March 4,050
April 5,069
May 5,686 (plus additional 1,422
units to a fifth week in
May)
June 6,045
July 6,328
The Company has now established a regular and reliable service
between Dublin and Liverpool. Westbound night time sailings are
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now regularly full on mid-week sailings. Day time sailings are
operating at about 50% of capacity and the Company is now
concentrating on increasing the volumes on these day time
sailings. Freight rates are higher than budgeted, due, in part,
to a more favourable freight mix. This is attributable to a
higher percentage of the better paying driver accompanied
trailers than anticipated.
Volumes in July 1999 equate to over 82,000 units on an annualised
basis. The Company's target is an annualized rate of 92,000
units by the end of September 1999.
After a very slow start, tourist passenger numbers are now
beginning to increase. This follows an intensive advertising
campaign. Passenger carryings in July 1999 were approximately
2,100. The Company expects to carry over 3500 passengers in
August 1999.
HEYSHAM/ DUBLIN SERVICE
As the Company stated in its report for the Second Quarter of
1998, it was not able to secure additional berthing slots in
Dublin at the time that the new Liverpool/Dublin service started.
This was despite promises from the Dublin Port Authority to
provide additional facilities. As a result the Company was not
able to offer prime arrival and sailing times to and from Dublin
on the Heysham/Dublin service. The Company is pleased to
announce that the Port of Dublin has agreed to build a further
linkspan. This is adjacent to the Company's existing terminal
and is scheduled to be completed by the end of November 1999.
This new facility will enable the Company to offer prime slots
again and win back the freight that it had lost. More
importantly, it will enable the Company to reintroduce higher 'A'
tariff rates, rather than the lower 'B' tariff rates which the
Company was forced to charge through not being able to offer a
prime time service.
Largely as a result of the berthing difficulties, unit carryings
in Quarter 3 were only 14,269 units, compared to 21,488 unit
carryings in Quarter 2.
HEYSHAM/ BELFAST SERVICE
During Quarter 3, this service carried 31,317 equivalent freight
units. Historically, July in Belfast has been marked by civil
unrest during the so-called "marching" season. This year the
marching season has passed with relatively little disturbance.
This service continues to operate satisfactorily.
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LIVERPOOL/ BELFAST SERVICE
The Company has recently announced that it has reached an
agreement to acquire Norse Irish Ferries ("NIF") which operates
an established RoPax service between Liverpool and Belfast.
During calendar 1998, NIF carried approximately 116,000
equivalent trailer units. The Company has commenced a Consent
Solicitation of the holders of its Notes relating to this
proposed acquisition.
It has been the Company's stated intention to operate a
Liverpool/Belfast route, thereby completing its strategic plan
for a matrix of services cross linking four major Irish Sea
ports. This final route should enable the Company to achieve
significant cost benefits and synergies.
DUTY FREE
Duty Free shopping on Irish Sea ferry services was abolished in
the European Union at the end of June 1999. The impact on the
Company is minimal as the Company is predominantly a freight
carrier and has not relied on duty free sales. The impact on
other Irish Sea ferry operators has, however, been significant.
The Company believes that passenger numbers overall have dropped
by 20% in July as a result of the withdrawal of Duty Free.
This, together with the loss of profitability following the
cessation of duty free, should lead to a need to raise passenger
fares and freight rates in order to compensate for the loss of
revenue and profitability. The Company believes it would benefit
from such increase.
FERRIMAROC
As previously reported, Ferrimaroc is a seasonal business. The
summer season is now under way and the business has seen strong
July passenger carryings which have continued in August 1999.
The service is being covered this year by two vessels, the
MISTRAL and SCIROCCO, compared to only the MISTRAL last year.
There has been increased competition, with the Moroccan line,
Limadet, operating with two ships, compared to one last year.
The increase in capacity has, however, been offset by a
significant increase in passengers and cars transiting the port
of Almeria. Based on Almeria Port statistics, passenger and car
carryings to Morocco transiting the port of Almeria have
increased by 22% and 27%, respectively, in the period June 15,
1999 to August 2, 1999 compared to the same period last year.
Ferrimaroc's market share over this same period has been
approximately 50%.
On July 30, 1999 the Company purchased the MISTRAL for US$16
million using funds on deposit with the trustee for the holders
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of the Notes. The MISTRAL had previously been on an operating
lease. The Company expects the benefit to EBITDA to be
approximately US$3.2 million in a full year.
There have been reports that the border between Algeria and
Morocco is about to be opened. The Company believes this should
lead to a further significant increase in the number of cars and
passengers through Nador and Almeria.
LOGISTICS
Draft contracts have now been agreed for the purchase of
Eaglescliffe with the present owners, the UK Ministry of Defence.
Contracts are expected to be exchanged during the first week of
September 1999. The Company intends then to be able to market
the use of the site to customers seeking long term logistic
arrangements at Eaglescliffe.
DEEP SEA
The Company has sold the last of its deep sea vessels. The
Merchant Premier and Merchant Principal were delivered to their
buyers on August 12, 1999. The selling price was $1.1 million
per vessel. The book loss on the sale is approximately US$ 3.1
million.
CASH AND CASH EQUIVALENTS
The Company's free cash at June 30, 1999, was US$19.5 million.
This was after taking into account the semi-annual interest
payment on the Notes of US$8.5 million in June 1999. Cash held
in escrow or blocked deposits amounted to US$55 million, which
included US$53.8 million relating to the sale proceeds of vessels
serving as collateral for the Notes sold since the date of the
issuance of the Notes. As stated above, on July 30, 1999, US$16
million of these proceeds was used to purchase the MISTRAL.
Based on the Company's current performance, the Company currently
estimates that free cash at September 30, 1999, before taking
into account the purchase of NIF, will be at least US$25 million.
FORWARD LOOKING STATEMENTS
THIS RELEASE CONTAINS FORWARD LOOKING STATEMENTS (AS DEFINED IN
SECTION 21E OF THE SECURITIES ACT 1934, AS AMENDED) WHICH REFLECT
MANAGEMENT'S CURRENT VIEWS WITH RESPECT TO CERTAIN FUTURE EVENTS
AND PERFORMANCE, INCLUDING STATEMENTS RELATING TO IRISH SEA
FREIGHT FERRY VOLUMES AND RATES, LOGISTICS AND CASH. THE
FOLLOWING FACTORS ARE AMONG THOSE THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THE FORWARD LOOKING STATEMENTS, WHICH
INVOLVE RISKS AND UNCERTAINTIES, AND THAT SHOULD BE CONSIDERED IN
EVALUATING ANY SUCH STATEMENTS: CHANGES IN THE POLITICAL
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ENVIRONMENT IN NORTHERN IRELAND AND THE REPUBLIC OF IRELAND,
SPAIN AND MOROCCO, CHANGES IN THE ABILITY TO PROVIDE A REGULAR
SCHEDULED SERVICE ON THE IRISH SEA AND THE COMPANY'S
MEDITERRANEAN SERVICE.
CENARGO INTERNATIONAL PLC
THIRD QUARTER RESULTS
FINANCIAL SUMMARY
(US$ IN MILLIONS)
NINE MONTHS ENDING THREE MONTHS ENDING
JUNE 30, JUNE 30,
1999 1998 1999 1998
INCOME STATEMENTS
Revenue 79.9 78.6 27.5 27.2
Operating costs (79.5) (73.7) (29.2) (26.7)
Net interest
expenses (11.8) (7.6) (4.0) (2.4)
Exceptional Charge - (4.6) - (4.6)
Profit of sales
of assets 1.9 14.1 - -
Taxation 3.4 (2.2) 2.0 2.0
-------------------------------------
Net income (6.1) 4.6 (3.7) (4.5)
-------------------------------------
EBITDA 10.3 28.8 1.6 3.7
EBITDA to net
interest expense 0.9x 3.8x 0.4x 1.5x
Analysis of EBITDA
Deep sea 8.4 21.5 2.6 1.0
Irish Sea 5.5 9.1 0.4 3.5
Ferrimaroc (3.3) (2.6) (1.2) (1.0)
Logistics (0.3) 0.8 (0.2) 0.2
-------------------------------------
10.3 28.8 1.6 3.7
REVENUES
Deep sea 7.1 27.7 1.0 7.0
Irish Sea 51.5 33.2 18.1 13.5
Ferrimaroc 7.0 7.6 2.7 2.7
Logistics 14.3 10.1 5.7 4.0
-------------------------------------
79.9 78.6 27.5 27.2
-------------------------------------
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BALANCE SHEETS June 30,
1999 1998
Cash and cash equivalents 74.5 63.8
Net book value of
fixed assets 211.7 231.9
Total assets 336.9 335.0
Total debt 255.8 218.1
Shareholders equity 47.0 61.9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
CENARGO INTERNATIONAL PLC
(registrant)
Dated: August 23, 1999 By: /s/ Michael Hendry
___________________
Michael Hendry
Chairman
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