The Company earns its revenue through levying vessel dues on ship arrivals, the collection of trade volume-based charges, the provision of towage and pilotage services, rent and ancillary income from facilities such as the Port’s service station.
Dublin Port handles almost 50% of the Republic’s trade and two thirds of all containerised trade and is the largest of three base ports on the island of Ireland, the others being Belfast and Cork. Base ports offer multi-modal services with connections to transhipment ports such as Rotterdam and are important strategic trading hubs.
Not only does Dublin Port Company compete with other ports on the island of Ireland but, perhaps more importantly, it also operates a competitive business model within the Port itself where eight terminals compete for business in the unitised sector. Unitised trade is comprised of Lo-Lo and Ro-Ro and accounts for almost 80% of our trade. The business of ports internationally is that they are characterised by relatively low turnover and relatively high investment that requires relatively high profit margins. Dublin Port Company is no different and has a target operating margin of 37% to 40%.
Trade & Tourism
As is to be expected trade levels fell in 2009, however, the pace of decline has not been as significant as in other areas of the economy. Total trade in 2009 was just 10.4% lower than the previous year and only 14% off the record highs of 2007. It was encouraging to see a stabilisation of trade levels at the start of the second quarter of the year and there was a moderate increase in December.
The reduction in trade levels has impacted on turnover but I am pleased to report that the rigorous cost management at Dublin Port Company has meant that Operating Profit has fallen by just 4.9% on total revenues which declined by some 11%.
While trade is almost always talked about in abstract terms such as tonnes, units, containers and trucks, there is nothing abstract about the relevance of their contents. The goods in these units are the lifeblood of our economy and include the food we eat, the clothes we wear and the other consumer goods that fill department stores, retail parks and shopping centres. In addition the Port facilitates the movement of cars, construction materials and consumables that provide the lifestyle we take for granted.
The Company also has an important role to play in tourism and in the last decade the Port Company has added a revenue stream that has benefited the Company and the City it serves. While the additional revenue generated by the cruise liner business is a welcome addition to the Company’s turnover, the real benefit is the estimated €350 million in direct and indirect spend it has brought to the Capital over the past decade. This adds to the ferry passenger business bringing total passenger numbers through the Port to the 1.5 million mark for the first time.
Future of Dublin Port
As a country we are more dependent on trade for growth in GDP, than any other European country, save the Benelux countries, which puts into stark focus the importance of ports, particularly since we are an island nation. Dublin Port Company’s €300 million investment in port infrastructure and its competitive model provide a strong platform to facilitate the export led recovery that experts are now saying is needed.
Fortunately, now there is a greater consciousness that real sustainable economies are built on trade. After some years of public speculation on the future of Dublin Port it was encouraging to note the conclusions of the Indecon study commissioned by the Department of Transport under the National Development Plan. This study, after a detailed cost/benefit analysis of seven different scenarios, found that the retention of Dublin Port in its current location, together with on-site expansion, would deliver the highest net present value in cost/benefit terms.
I am pleased to report that the Company’s Board formally endorsed the key conclusions. We embrace its challenges and remain committed to delivering and securing the economic (net present value) return for the State and all our stakeholders.
This brings me to one of the most strategic focuses of the Company in recent years – our proposal to expand Dublin Port by way of a modest 21 hectare reclamation project. The Company has recently completed a rigorous review of its application under the Strategic Infrastructure Act by An Bord Pleanála. The Dublin Gateway proposal, as it is known, was planned by the Company to address longer-term capacity shortfalls, as well as providing deeper berths that will enable Ireland’s principal port to cater for the trend towards larger, deeper drafted, vessels. We await the planning authority’s decision.
Contributing to our Shareholder
The Board and management of the Company have set as an objective to pay between 20% to 30% of Profits after Tax as a dividend to our shareholder, the Minister for Transport. In June 2009 the Company paid a dividend of €5.3 million based on the financial outturn for 2008. This dividend represented a 3.8% increase on the dividend of €5.1 million paid the previous year.
In June 2009 new Harbours legislation was enacted, updating the 1996 Harbours Act. The Board welcomes the revisions contained therein and in particular the elements that provide the legislative framework to enable port companies to invest outside their current harbour limits. The management and Board of the Company will explore where such investments could be beneficial to the Company.
Partnering with the community, working with the environment
Our statutory role is dispensed with environmental and social consciousness. A number of initiatives have been undertaken to mitigate our impact on the environment, in particular, reducing water consumption, improving water quality in Dublin Bay while also reducing waste and power consumption. I am pleased to report that further initiatives are ongoing and planned, which build on the improvements recognised through the attainment of ISO 14001 environmental accreditation in recent years.
Since my appointment as Chairperson I have been impressed by the CSR programme undertaken by the Company. There are a broad range of projects helping groups and individuals, young and old in local arts, education, sports and social inclusion initiatives. The Company has a close relationship with the local community and, through a Community Liaison Committee, delivers projects that will significantly benefit the community in the areas where it is most needed. I am committed to supporting this form of genuine partnership with the community during my tenure.
International outreach
Dublin Port Company has also entered into a successful partnership with the Department of Foreign Affairs to support the United Nations Conference on Trade and Development (UNCTAD) which helps developing nations improve their trading capability. Recognising the expertise in Dublin Port Company, it was a great honour that the Company was chosen to participate in training managers in ports identified in third-world countries as having development needs. Working with Ireland’s Department of Foreign Affairs which provides financial support to the initiative, Dublin Port Company has trained a total of 118 managers in five Asian and African countries under the pilot phase of UNCTAD’s Port Training Programme. We appreciate that economies are built on trade and developing nations need our help to foster sustainable growth in an increasingly globalised trading environment. We are proud of our role in this important initiative and look forward to building on its successes.
The future
Dublin Port Company is well positioned financially and operationally to build on its many successes to date. Resources are in place to fund further development of the Port’s expansion plans without recourse to Exchequer funding, a key tenet of the national ports policy. With trade levels beginning to show signs of recovery, Dublin Port will remain a hugely positive force driving competitiveness, facilitating trade and generating economic growth well into the future.
Acknowledgements
2009 saw a number of changes to the Company’s Board of Directors. In January the Port Company’s Chairman, Joe Burke, announced his resignation following seven years in the role. The Board acknowledges the contribution Joe made as Chairman between 2002 and 2009 and wishes him well with his future plans. Also, three directors, Councillors Paddy Bourke, Kevin Humphreys and Tom Stafford retired following the conclusion of their terms of office and Cathy Bryce resigned in October 2009. The Company is grateful to them for their work over many years. I would like to thank Brian Kerr for his role in chairing Board meetings throughout 2009.
We have also seen some changes within the Department of Transport following the retirement of the Secretary General Julie O’Neill, and also John Lumsden and Fintan O’Brien. We thank them for their contributions and wish them well with their plans for the future.
Dublin Port Company is admirably served by a superb management team and staff. I would like to thank them for their continued contribution in the smooth running of what is a vital national infrastructural asset.
Finally, December 2009 saw the Company’s long-serving Chief Executive announce his intention to retire following a career of almost 45 years. On behalf of the Board, management and staff I acknowledge the outstanding contribution Enda Connellan has made to Dublin Port Company and the Port itself in his 33 years’ service at Port Centre. In particular, Enda’s 16 year tenure as Chief Executive has seen the Company and its operations transformed, resulting in a modern, streamlined organisation that is highly efficient, environmentally responsible and profitable. We greatly appreciate his contribution and wish him the very best in his well-earned retirement. At the time of writing Enda continues to serve in the role of Chief Executive while the Board is finalising the selection of his successor whom we expect will be appointed shortly.
Lucy McCaffrey
Chairperson
25 March 2010