Opinion: A nice sheen has been placed on the latest accounts of Bord na Móna, which owns 7 per cent of the peatlands in the State.

Its chairman, Fergus McArdle, talks about the 1.5 per cent increase in pretax profit, and a record turnover. Managing director, John Hourican, enthuses that the operating profit of €17.8 million in the year to March 30th, 2005, was €4.5 million ahead of budget.

A more analytical look puts a different hue on the results.The marginal increase in pretax profit was only achieved because substantial reorganisation and redundancy costs were incurred in the previous year. If these are excluded, which they should be, the operating profit shows a 34 per cent drop from €29.4 million to €19.4 million. That casts a different complexion on the company's trading performance and illustrates an adverse trend last year.

This negative trend occurred because the meagre rise in sales to €257.9 million was insufficient to absorb greater hikes in the costs of running the operation. The cost of sales, for example, increased by 4 per cent, distribution costs were up 24 per cent and administrative expenses were up 10 per cent.

So how do these results, and its plans, stand up to the suggestion that this group could be privatised? Also, is it a fit company for a listing, particularly as John Hourican is pressing the Government to honour a pledge to give 5 per cent of the company to an employee share trust, with an opportunity to acquire a further 9.9 per cent, in return for restructuring and changes in work practices?

For a start, it would have to be more forthcoming with relevant data about its results. It gives a sales breakdown of its four main trading areas - energy, fuels, horticulture and environmental - but does not give a profit breakdown.

Nevertheless, the chairman and managing director are full of enthusiasm and plans, which should not be dampened by a Government that is showing signs of jealousy and resentment of events that could lead to financial gains for the participants. Bord na Móna, and any other financially shackled semi-state companies, should be judged on their ability to move forward.

So how does it shape up? Over the past five years, it has only increased sales by less than 20 per cent. Operating profits did a little better and using its own key financial ratios, the operating profit as percentage of turnover at 7.5 per cent is less than the 8.7 per cent generated five years previously, and sharply down on the previous year's 11.6 per cent. Profit margins have been falling over the past three years, but are much improved on five years ago.

Crucially, from the Government's shareholder point of view, the gross return on net capital employed at 10 per cent is down on the 17.9 per cent in the previous year, and still lower than the 11.3 per cent generated in 2000/1.

By any yardstick it is not a growth company. However, it has not been a drain on the Exchequer. The balance of its business is changing and it has interesting development plans.

The group feels one growth area is to buy power stations - €500 million has been mentioned, which seems way out of its league. A more realistic area for development is waste management, aincreasingly lucrative sector. It has a 2,600-hectare site at Drehid, Co Kildare, and has planning permission for a waste licence, subject to approval from An Bord Pleanála.

On its own, and with borrowing restrictions, it is too small to pursue an immediately aggressive growth policy. Its borrowing restrictions of €127 million have been criticised by John Hourican, who described it as a "silly restriction" in the Sunday Independent. It is restrictive, but not silly.

Bord na Móna is too small for any worthwhile developments. Why not merge with one of its sister companies? Coillte, the State forestry company, could be an ideal fit.

So how would they fit? While Bord na Móna's €257.9 million sales are higher than Coillte's €185 million, it generates a lower operating profit of €19.4 million versus Coillte's €42.9 million. Bord na Móna has shareholders' funds of just €193.1 million, compared with Coillte's €1,269.4 million. Coillte has net current debt of some €4.7 million and longer term loans of some €104 million, but interest costs take less than 10 per cent of profits.

A merger should involve Coillte acquiring Bord na Móna. A reverse takeover could be accomplished, but Coillte's record - sales up from €123.3 million to €185 million, and operating profit increasing from €31.3 million to €42.9 million over the past five years - is impressive.

They would have a combined turnover of €445 million and an operating profit of over €60 million. On the negative side, both have pension fund deficits; Bord na Móna's is €35 million, while Coillte's is €50 million.

Bord na Móna comes under the wing of the Minister for Communications, Marine and Natural Resources, while Coillte reports to the Minister for Agriculture. One would have to cede power and that would demand a commercial maturity that has, up to now, been sadly lacking.