Directors’ Report

The Directors present their Annual Report together with the audited financial statements of the Company for the financial year ended 31 December 2019.

Directors’ Responsibility for Financial Statements

The Directors are responsible for preparing the Directors’ report and the financial statements in accordance with the Companies Act 2014.

Irish company law requires the Directors to prepare financial statements for each financial year. Under the law, the Directors have elected to prepare the financial statements in accordance FRS 102 the Financial Reporting Standard applicable in the UK and Republic of Ireland issued by the Financial Reporting Council (“relevant financial reporting framework”). Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position of the Company as at the financial year end date and of the profit or loss of the Company for the financial year and otherwise comply with the Companies Act 2014.

In preparing these financial statements, the Directors are required to:

• select suitable accounting policies for the Company Financial Statements and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether the financial statements have been prepared in accordance with the applicable accounting standards, identify those standards, and note the effect and the reasons for any material departures from those standards; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for ensuring that the Company keeps or causes to be kept adequate accounting records which correctly explain and record the transactions of the Company, enable at any time the assets, liabilities, financial position and profit or loss of the Company to be determined with reasonable accuracy, enable them to ensure that the financial statements and Directors’ report comply with the Companies Act 2014 and enable the financial statements to be audited. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Legislation in Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.

Legal Status

Dublin Port Company is a Designated Activity Company limited by shares established under statute pursuant to the Harbours Act, 1996 and incorporated in Ireland. On 3 March 1997 the Company became the successor entity to Dublin Port & Docks Board, the former statutory entity with responsibility for the Port of Dublin. On that date Dublin Port Company took over the functions and acquired the assets and liabilities of the predecessor organisation at valuations agreed with the then Minister for Communications, Marine and Natural Resources. In consideration for the assets and liabilities, the Company issued share capital in the amount of €7.648m to the then Minister for Communications, Marine and Natural Resources.

With effect from 26 July 1997 the Company became the pilotage authority for Dublin Bay.

Responsibility for the Commercial Port Sector was transferred from the Minister for Communications, Marine and Natural Resources to the Minister for Transport with effect from 1 January 2006.

On 12 July 2011 the Minister for Transport transferred the assets and liabilities of Dundalk Port Company to Dublin Port Company under SI No. 361 of 2011.

Principal Activities

The business purpose of Dublin Port Company is to facilitate the movement of goods and passengers, and attendant information flows through the Port.

The Company provides the infrastructure, facilities, services and hard standing to meet the needs of customers for the efficient transfer of goods and passengers between land and sea transport modes.

Revenue in connection with the provision of these facilities is generated from vessel dues, goods dues, rent and key services provided, such as towage and pilotage.

Accounting Records

The measures taken by the Directors to secure compliance with the requirements of section 281 to 285 of the Companies Act, 2014, to keep adequate accounting records are the use of appropriate systems and procedures and employment of competent persons. The accounting records are kept at the Company’s registered office, Port Centre, Alexandra Road, Dublin 1.

Business Review

Details of the profit for the year, together with comparative figures for 2018, are set out in the Profit and Loss Account and the related notes. The Key Financial Performance Indicators of the business are set out below and in the Chief Executive’s Review.

Throughput was ahead of 2018 by 0.4% at 38.1 million tonnes (2018: 38.0 million tonnes). Exports grew by 0.1% in the year to 15.3 million tonnes (2018: 15.3 million tonnes) while imports grew by 0.5% to 22.8 million tonnes (2018: 22.7 million tonnes).

Turnover for the year amounted to €92.7m, an increase of 2.6% on the previous year (2018: €90.4m).

Total Operating Costs at €48.5m in 2019 have increased by €4.9m (11.2%) on 2018 (2018: €43.6m). Payroll costs have increased by €0.5m (3.9%) arising from general salary increases. Other non-pay costs have increased by €4.4m mainly arising from re-organisation costs of €2.9m due to a voluntary staff redundancy scheme towards the end of the year, increased depreciation costs of €0.7m and increased security costs of €0.6m.

Operating Profit decreased to €44.2m in 2019 from €47.4m in 2018 resulting in an Operating Margin of 48% (2018: 52%).

Net financing income was €0.4m (2018: €0.5m). Finance income amounts to €1.1m (2018: €973k).

Net Interest charges (excluding net interest on pension schemes) were €0.7m (2018: €0.5m) and the Company’s interest cover is 65 times (2018: 94 times) based on Profit before Interest and Taxation over net interest charges. Net Debt increased from €91.6m in 2018 to Net Debt of €121.4m in 2019 and the Company is fully compliant with all covenants in respect of its borrowing facilities.

Profit for the financial year was €38.6m (2018: €41.5m).

The Profit and Loss Reserve increased from €425.1m at 31 December 2018 to €455.1m and Shareholders’ Funds increased from €440.4m to €470.4m during the same period.

Throughput of 38.1 million tonnes was achieved in 2019, which was 5.0% behind of the budgeted 40.1 million tonnes.

Principal Risks and Uncertainties

One of the principal uncertainties to be addressed relates to the Company’s ability to deliver capacity to the market. In June 2018 the Company published “Dublin Port Masterplan 2040 - Reviewed 2018”, updating the original Masterplan which had been adopted in 2012. The Masterplan, as reviewed, was published following an extensive public consultation process.

The purpose of the Masterplan is to indicate to all stakeholders how the Port will be developed to meet their needs in the years ahead. Following the review in 2018 a number of fundamental conclusions were identified as follows;

• Firstly, where the Masterplan had originally envisaged a return to an eastern expansion of Dublin Port into Dublin Bay, Dublin Port Company is no longer pursuing this as an option.
• Secondly, to meet anticipated capacity requirements Dublin Port needs to be developed on the basis of an average annual volume growth (AAGR) of 3.3% over the 30 years from 2010 to 2040 rather than the 2.5% originally assumed in 2012. As a result the capacity requirement for 2040 increases from 60m tonnes to 77m tonnes.

Masterplan 2040 sets out the framework under which essential projects will be brought forward for planning and other consents to ensure that facilities are constructed in time to meet demand.

The first major project to be brought forward under the Masterplan was the Alexandra Basin Redevelopment Project and construction on this project continued during 2019. A planning application in respect of the second major project, the MP2 Project, was lodged directly with An Bord Pleanála in 2019 in accordance with the Critical Infrastructure legislation. An oral hearing in respect of the application was conducted in December 2019 and a planning decision is expected in early 2020.

As evidenced by the fall in trade in the latter half of 2008 and continuing into 2009 the Company is exposed, through the normal course of its operations, to the impact of an economic slowdown on Port activities. Throughput through Dublin Port has grown by 36% over the last seven years and as a result trade levels are now 23% higher than at the previous peak in 2007. It is clear that the prospects for the Irish economy in general will continue to impact on the Company’s growth prospects into the future.

In this regard the impact of Brexit on the Irish economy at a macro level and its impact in particular on GDP growth will have a knock-on impact on Dublin Port’s volumes. While the EU and the UK have entered discussions on the new trading relationship to be established following the UK’s exit there remains a possibility of a hard Brexit occurring in the absence of agreement. At a practical level the possibility of a hard Brexit and the consequent introduction of customs controls will result in the Company having to allocate scarce land resources to facilitate customs and other state agencies. The Company has completed construction of new primary inspection facilities and continues to work with the Office of Public Works and the relevant State agencies with regard to the provision of secondary inspection facilities.

Over the course of the first quarter of 2020 the outbreak of the Covid-19 (Coronavirus) has raised a further risk to global trade which could have a knock-on effect for volumes through Dublin Port.

The Company has ensured that it retains flexibility within the delivery of the capital investment programme envisaged under Masterplan 2040 to advance or delay implementation of projects in response to wider economic developments.

The Company is also exposed to the impact of an economic slowdown on its non-core Port activities. This has been evidenced by the diminution in value of the Company’s investment property located in the Eastpoint Business Park from €10.9m in 2001 to €4.4m at the end of 2013. The property was again valued by our property advisors at the end of 2019 resulting in no change to the prior year valuation of €8.5m. The cumulative diminution in value now stands at €2.4m.

The Company is committed to successfully managing its exposure to risk and to minimising its impact on the achievement of business objectives. The Board has an established Audit and Risk Committee with specific terms of reference reflecting the Committee’s role in supporting the Board in managing the Company’s exposure to risk.

The Company has put in place a Risk Management Framework comprising of the following components:

• Processes for identifying, prioritising and categorising risks,
• On-going assessment and measurement of risks, and
• Monitoring and reporting of risks to the Audit and Risk Committee as a sub-committee of the Board.

This comprehensive Risk Management Framework has been developed across all aspects of the business and includes the following elements:

1. Enterprise Risk Management
2. Emergency Management Plan
3. ICT Risk Management
4. Common Oil Pipeline Risk Management
5. Capital Projects Risk Management
6. Annual Board Strategy Review

In February 2020 the Board completed a review of the Risk Management Framework and agreed that in order to strengthen the overall management of risk within the Company, the following additional measures will be implemented:

• At each Board meeting, the Chief Risk Officer (the Chief Executive) will present a Strategic Risk Report focussing on specific risks of a strategic nature.
• Each year at the annual Board strategy review (in June / July), the risks reported and discussed at Board meetings during the year will be consolidated into the agenda for the Board strategy review to ensure that short-term business plans take account of these strategic risks.
• Responses to the strategic risks will subsequently be incorporated into the Work Programme presented to Board in September prior to commencement of budget preparation for the year ahead.
• The Board will periodically commission an external review of the effectiveness of the company’s overall approach to risk management as required in the Code of Practice. The first such review will be carried out in 2020.

Risk Appetite

The Company’s risk appetite profile varies across different areas and activities of its business:

• The Board is willing to tolerate a moderate level of risk in pursuit of strategic objectives.
• Recognising that there is a trade-off between risk and reward, the Board achieves a balanced risk appetite by taking a prudent approach to ensuring the business is adequately financed, particularly as regards funding infrastructure projects. The Board is not prepared to take risks that would jeopardise key covenants in the Company’s debt facility agreements.
• The Board prioritises the safety of passengers, visitors, staff and port workers and its risk appetite in the areas of safety and security is very low.
• The Company takes measures to identify and manage operational risks. There is a low risk appetite in relation to maintaining critical systems and protecting data.
• The Company seeks to ensure that compliance activities meet the requirements of relevant regulations and maintains a low risk appetite for compliance and regulatory issues.

In addition overall business performance risk is managed through the following measures:

• The preparation of an Annual Budget and Five Year Financial Plans,
• Monthly Reporting and Variance Analysis,
• Financial Controls,
• Key Performance Indicators, and
• Detailed Policies, Standards and Guidelines to support the control and mitigation of risks.

Financial Risk Management

The Company’s operations expose it to a variety of financial risks that include interest rate risk, credit risk, and liquidity and cash flow risk. Policies to protect the Company from financial risks are kept under regular review. The Directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the Board. The Policies are set out by the Board of Directors and are implemented by the Company’s Finance Department.

Liquidity and Cash Flow Risk

The Company maintains a mix of short, medium and long term debt finance to ensure sufficient funds are available for planned capital investment. The Company put in place a €50m borrowing facility with Ulster Bank in March 2017 to replace and extend the Company’s debt. At the end of 2019 the Company had in place un-drawn committed facilities of €50 million on this facility.

In December 2015 the Company entered into a Finance Contract with the European Investment Bank in respect of a €100m project finance facility. This facility is for a 20 year term was fully drawn at year end 2019.

In December 2019 the Company issued €300m unsecured senior bonds to a range of institutional investors. At 31 December 2019 €100m of bonds had been purchased. There is a commitment in place for the investors to purchase the remaining €200m of bonds, referred as forward purchase bonds, at specified dates in 2020 and 2021. However, the Company has the option to cancel the commitment to purchase some or all of the forward purchase bonds at no cost.

The Company’s policy is to maximise investment return by placing surplus cash balances on low risk cash deposit on a short term basis. The Company has treasury mandates in place with a number of financial institutions for this purpose.

Credit Risk

The Company is exposed to credit risk in the course of trading and to manage this risk it carries out appropriate credit checks on potential customers and trades only with recognised creditworthy third parties.

Interest Rate Risk

In order to manage the Company’s exposure to significant adverse interest rate movements, the Company has a policy of maintaining a minimum of 60 per cent (2018: 60 per cent) of its debt at fixed interest rates. In order to achieve this objective, the Company has entered into a fixed interest rate agreement with the European Investment Bank on the €100m project finance facility. In 2019 the Company issued €300m unsecured senior bonds at a fixed coupon rate.

Events since the end of the financial year

There have been no events between the Balance Sheet date and the date on which the financial statements were approved by the Board.

Future Developments

The Company has a budgeted Capital Investment Programme of €122.6m for 2020. The planned Capital Investment Programme for 2020 includes €32.2m in respect of the Alexandra Basin Redevelopment project (“ABR”) and €69.8m in respect of Masterplan Phase 1 (MP1).

Results and Dividends

The Company’s profit for the financial year amounted to €38.6m. The Directors’ allocations and recommendations in respect of this amount were as follows:

	2019	2018
	€’000	€’000
Interim Dividend of €0.3543 (2018: €1.052) per ordinary share paid	4,100	12,173
Increase in Profit Retained	34,545	29,348
Profit for the Financial Year	38,645	41,521

The Directors do not propose to declare a final dividend.

Directors’ and Secretary’s Interests

The Directors and Secretary had no interest in the share capital of the Company at 31 December 2019 and 2018.

Prompt Payments Act

It is Company policy to pay suppliers in accordance with the terms of the European Communities (Late Payments in Commercial Transactions) Regulations, 2002 and the Prompt Payments of Accounts Act, 1997.

To this end, the Company’s payment routines are designed to provide reasonable assurance against material non-compliance with the terms of the Regulations. The standard credit period is 30 days unless otherwise specified in contractual arrangements. Substantially all payments by number and value were made within the appropriate credit period as required. Consequently, the Directors are satisfied that the Company has complied with the requirements of the Act.

Directors

The names of the persons who were Directors at any time during the year ended 31 December 2019 are set out below.

L McCaffrey (term of office expired 23^rd December 2019)

E O’Reilly

M Brophy (appointed 29^th January 2019)

H Collins

G Darling

M Hand

K Nolan

L Williams (appointed 29^th January 2019)

Relations with Shareholders

The Chairperson, Chief Executive and management maintain an on-going dialogue with the Company’s shareholders on trading performance, future plans and strategic issues. Certain specified matters require the approval of the Minister for Transport and/or the Minister for Finance and on-going communication with the relevant Minister is maintained through their respective departments. The Chairperson reports to the Minister for Transport as required under Section 28 of the Harbours Act, 1996 and as required under the Code of Practice for the Governance of State Bodies.

Corporate Governance

Dublin Port Company is committed to maintaining the highest standards of corporate governance and has adopted the principles of corporate governance and the Code of Practice for the Governance of State Bodies issued by the Department of Finance in May 2009. The Code of Practice was updated on 1 September 2016 and the provisions of the updated Code have been applied to the financial reporting period commencing 1 January 2017. The Company also complies with its obligations under the Ethics in Public Office Act, 1995 and the Standards in Public Office Act, 2001.

The majority of Directors are non-executive and are appointed by the Minister. The Board meets formally on a monthly basis and has a formal schedule of matters specifically reserved to it for decision. The Board is responsible for exercising all the powers of the Company, other than those reserved to Shareholders, and has collective responsibility for all the operations of the Company. The Board may delegate such of its powers as it sees fit, to either a Board Committee or the Chief Executive, subject to whatever restrictions or regulation it imposes with such delegation. Subject to ministerial consent in certain cases, the Board has formally approved the reservation of decisions in relation to certain functions in the areas of Governance, Finance, Procurement, Operations, and Appointments in Human Resources. The Board has access to the advice and services of the Company Secretary and can take independent professional advice as and when deemed necessary.

The Code of Practice for the Governance of State Bodies requires that an annual self-assessment exercise is undertaken by the Board to assess its effectiveness. A self-assessment review based on the questionnaire contained in the Code of Practice was last completed by the Board in 2017. The exercise for 2019 was deferred pending the conclusion of a formal external evaluation. The Code of Practice requires that an external formal evaluation is undertaken at least on a three yearly basis. In June 2019, following a procurement competition, the Board approved the appointment of an independent external supplier to conduct the external review of Board effectiveness. The independent review was carried out during the summer of 2019 and reported to Board in September. The results of the 2019 formal evaluation confirmed that the Board is operating effectively and recommended a number of areas for consideration by the Board.

The Board established an Audit Committee in 1997 under formal terms of reference. This Committee was reconstituted in 2012 as the Audit and Risk Committee. The terms of reference set out the purpose, authority and membership of the Committee and its responsibilities in the areas of external financial reporting, external audit, corporate governance and internal audit. During 2018, following Board vacancies, the full Board performed the role of the Audit and Risk Committee with Ms Helen Collins as Chairperson.

At its meeting on 29^th March 2019 the Board confirmed the appointment of Ms Lesley Williams as Chairperson of the Audit and Risk Committee and Mr Michael Brophy and Ms Helen Collins as committee members.

The Audit and Risk Committee met five times during the year. The members of the Committee over the course of the year were Ms Lesley Williams, Mr Michael Brophy, Ms Helen Collins, Mr Geoffrey Darling, Mr Michael Hand, Ms Lucy McCaffrey, Mr Keith Nolan and Mr Eamonn O’Reilly.

The Board also established a Remuneration Committee in 1999. The members of the committee during the year were Ms Lucy McCaffrey (Chairperson), Mr Geoffrey Darling and Mr Michael Hand. The Committee operates under formal terms of reference.

Attendance at Meetings

There were 13 General Board Meetings during the year ended 31 December 2019.

The attendance of Directors at meetings of the Board was as follows:

	Attended	Eligible to Attend
L McCaffrey	13	13
E O’Reilly	12	12
M Brophy	12	12
H Collins	13	13
G Darling	13	13
M Hand	12	13
K Nolan	12	13
L Williams	12	12

Audit and Risk Committee

M Brophy	3	4
H Collins	5	5
G Darling	2	2
M Hand	2	2
L McCaffrey	2	2
K Nolan	2	2
E O’Reilly	2	2
L Williams	4	4

Remuneration Committee

L McCaffrey	2	2
G Darling	2	2
M Hand	2	2

Directors’ Expenses

Expenses in the amount of €6,244 have been paid to Board members during the year in respect of travel expenses.

Internal Controls

The Board has overall responsibility for the Company’s systems of internal control. These systems which are maintained by the Company can only provide reasonable but not absolute assurance that transactions are executed in accordance with management’s authorisation that assets are safeguarded, that fraud is prevented and that proper financial records are maintained. The Board confirms that it has reviewed the effectiveness of the system of internal control.

To ensure the effective application of the Company’s internal controls, the services of qualified personnel have been secured and duties properly allocated among them.

The systems of internal control include the following:

• The process of identifying business risks and the evaluation of their financial implications is carried out through regular reviews of the Company’s Strategic Plan. The Company’s Risk Management Framework process has been outlined above under the heading of “Principal Risks and Uncertainties”. The latest Strategic Plan for the period 2017 to 2021 was formally adopted by the Board in December 2016;

• An annual budget approved by the Board and monthly consideration of actual results compared with budget forecasts;

• An Audit and Risk Committee which has been established to review and discuss, with the internal and external auditors, the Company’s internal accounting controls, Internal Audit function, choice of accounting policies, internal and external audit plans, statutory auditors’ report, financial reporting and other related matters;

• An Internal Audit function which reviews key business processes and controls;

• Formal codes of conduct for Directors and employees; and

• Procurement policies and procedures. These ensure, firstly, that procurement activities are carried out so as to provide value for money in terms of overall lifecycle costs and, secondly, that all relevant State Guidelines and EU Directives applicable to Public Utilities are complied with. The appropriate requirements of the Department of Public Expenditure and Reform Public Spending Code are being complied with.

The Board, through the Audit and Risk Committee, has reviewed the effectiveness of the system of internal control up to the date of approval of the financial statements.

A review of the effectiveness of the system of internal financial control was undertaken by the Internal Auditor and no significant control weaknesses which pose a significant risk of financial loss or operational disruption, that require immediate attention at Board level, were revealed.

Compliance statement

The Directors of the Company acknowledge that they are responsible for securing the Company’s compliance with its relevant obligations (as defined in the Companies Act 2014 (the “2014 Act”)) and, as required by section 225 of the 2014 Act, the Directors confirm that:

(i) a compliance policy statement setting out the Company’s policies with regard to complying with the relevant obligations under the 2014 Act has been prepared;

(ii) arrangements and structures have been put in place that they consider sufficient to secure material compliance with the Company’s relevant obligations; and

(iii) a review of the arrangements and structures has been conducted during the financial year to which this Directors’ report relates.

Political Donations

The Board made no political donations during the year.

Disclosure of Information to Auditors

The Directors in office at the date of this report have each confirmed that:

• As far as he/she is aware, there is no relevant audit information of which the Company’s statutory auditors are unaware; and
• He/she has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Company’s statutory auditors are aware of that information.

Statutory Auditors

The auditors, Deloitte Ireland LLP, Chartered Accountants and Statutory Audit firm, continue in office in accordance with section 383(2) of the Companies Act, 2014.

On Behalf of the Board

Eamonn O’Reilly	Keith Nolan
Chief Executive	Director

27th March 2020