John B. McGuckian,
Chairman
2021 was another challenging year for the Group, with a continuation of travel restrictions due to the Covid-19 pandemic. However, it was also a year of significant progress for the Group in particular the commencement of Irish Ferries services on the strategic Britain – Continental Europe short sea route between Dover and Calais. It has been a long-term objective of the Group to expand into this route and its commencement in 2021 is all the more impressive given the current difficulties in our market caused by the pandemic related travel restrictions.
Investment in future growth and our future sustainability continued throughout 2021. We acquired one ferry, the Isle of Innisfree during 2021 together with the charter of a second vessel, the Blue Star 1. In addition, we agreed to the purchase of a third vessel for delivery in 2022. We also added a further container vessel, the CT Daniel to our fleet. As summarised below and detailed later on in the Annual Report, we continued to invest in a sustainable future for the Group. Continued investment in the electrification of Dublin Ferryport Terminal (DFT) took place, which will lead to an achievable and material reduction in emissions from this container terminal based in Dublin Port.
Despite the difficulties in our passenger business, both our RoRo freight operations and container and terminal operations enjoyed another strong year of growth. The Container and Terminal Division had another exceptionally strong year, with growth in both revenues and profitability. Ferries Division RoRo revenues recovered from a difficult start to the year following the end of the transition period between the European Union and the United Kingdom. The flexibility of the Ferries Division fleet allowed Irish Ferries to quickly adjust to changing trade flows in the first half of the year.
I would like to take this opportunity to thank all our colleagues who made retention of these critical services possible through the Covid-19 pandemic that is now hopefully behind us. As in the prior year, particular thanks are extended to our colleagues on our front line in the ports, on our ships and in our terminals. Again, this year and throughout this pandemic, their dedication to their roles kept our ships sailing, our container terminals operating and crucially the supply lines of our island open.
Financial Outcome
The overall financial outcome for the Group was a loss before tax of €4.1 million (2020: loss of €18.0 million) while operating loss before non-trading items was €0.2 million (2020: €0.8 million profit). EBITDA (pre non-trading items) generated was €52.3 million (2020: €42.1 million) from total revenues of €334.5 million (2020: €277.1 million).
EBITDA remained broadly in line with the prior year in our Ferries Division where EBITDA before non-trading items was €23.2 million (2020: €22.3 million). The division saw increased revenues from the easing of travel restrictions and commencement of the Dover – Calais service which was offset by an increase in costs, driven primarily by higher fuel prices and increased activity.
Performance in our Container and Terminal Division improved with an EBITDA of €29.1 million (2020: €19.8 million) through a continued focus on cost optimisation and increases in revenue.
As in the prior year, when the Group also faced challenging trading conditions, our diversified revenue streams and cost containment measures protected our strong balance sheet. While Net Debt increased from €88.5 million to €142.2 million, this was primarily due to strategic capital expenditure of €41.7 million. It is testament to the strength of the business and the balance sheet that despite the trading difficulties, we had the ability to continue investing in the future growth of our business.
Strategic Development
The Group has continued to progress a number of key strategic developments during the year.
In keeping with our progress over the last number of years, we have placed a significant focus on enhancing our approach to ESG and sustainability. As detailed in the Annual Report, we have rolled out a number of exciting initiatives across the Group. These are discussed later in the Annual Report at pages 40 to 61, highlights of which include the significant progress we have made in reducing the emissions of our container terminal operations. With the investment we have made and continue to make in more environmentally friendly terminal equipment, we are on course to achieve a reduction in the emissions from our container terminal operations of 70 per cent by 2025 (versus 2020). The progress made to date and the expected future investment have allowed us to target net zero emissions in our container terminal operations by 2030. This year also sees the publication of our environmental policy and the development of our climate risk framework. As a business, we recognise the growing importance of providing transparency over our efforts to create value in a sustainable manner, based on a set of topics which we have identified as material to our business and our stakeholders.
On 26 March 2021, ICG subsidiary Irish Ferries announced that it would commence a new ferry service on the Dover – Calais route. This new service launched on 29 June 2021, with the introduction of the Isle of Inishmore on the route. The service was further expanded by the introduction of the Isle of Innisfree onto the route on 16 December 2021. The service offered will be further expanded by the planned introduction of the Isle of Inisheer in the first half of 2022. This is an exciting development for the Group and in line with our long-term ambitions. The route is a strategic short sea route between Britain and Continental Europe. Following the introduction of the Isle of Inisheer, Irish Ferries will offer up to 30 sailings per day on the Dover – Calais route.
In the prior year, the Group took delivery of and commissioned two electrically powered remotely operated rubber-tyred gantries (RTGs) at DFT following the previous successful commissioning of two similar units. This increases the total number of electric gantries in our Dublin Terminal to four continuing our transition to this more environmentally efficient mode of operation. Following the successful deployment of these environmentally friendly electric rubber-tyred gantries, DFT placed an order for an additional five of these cranes which will be delivered and commissioned in the second half of 2022. The deployment of these electric cranes will allow us to meet our target of reducing emissions in our terminals by 70 per cent in 2025 (versus 2020) and reaching our target of net zero emission in our terminals by 2030. Furthermore, the delivery of these cranes and the relocation of our empty depot facility to the Dublin Ferryport Inland Depot will increase the capacity of DFT to meet the need of the market.
Belfast Container Terminal (BCT) operates the sole container terminal at Belfast under a services concession agreement with Belfast Harbour Commissioners (BHC) at a 27 acre site in Belfast Harbour. The £40 million re-investment project by BHC commenced in 2020 and continued into 2021. The project includes extensive civil works and the delivery of two new ship-to-shore gantry cranes along with eight new electrically operated RTGs. As per the investment in DFT, this investment is essential to reducing emissions in our terminal operations. The project is now nearing completion and the deployment of the final three RTGs is expected to be completed by the end of 2022.
During 2020 the Group was successful in the public tender to operate a container depot at the new Dublin Inland Port. The Group has signed an agreement to enter into a 20-year lease for this operation on completion of certain civil works by the landlord. The facility became operational in January 2022. The facility will be used for the remote storage, maintenance and upgrade of empty container boxes, releasing valuable capacity for the handling of containers in the port area. The Dublin Inland Port is located adjacent to Dublin Airport with direct access to the M50 Motorway (Dublin Ring Road) and Dublin Port via the Port Tunnel.
Exit of the United Kingdom from the European Union
On 31 December 2020, the UK and EU ended the post Brexit transition period. While trade flows have decreased between Ireland and Britain, our customers have gained more experience with custom formalities and many are returning to the more efficient and reliable short sea services. The change in trade flows and volumes throughout the year has been managed by having a flexible fleet that has allowed us to adjust capacity on our direct continental RoRo and container shipping services. While over the course of the entire year (excluding our new service on Dover – Calais) this has led to a reduction in RoRo volumes, the change in yield mix has maintained RoRo revenues at levels only slightly behind the prior year.
Still of concern to the Group is the lack of implementation of appropriate checks on goods arriving into Northern Ireland from Britain, which are required under the Northern Ireland Protocol. To the extent that goods are destined for the Republic of Ireland, this is causing a distortion in the level playing field as goods that arrive directly into the Republic of Ireland ports from Britain are being checked on arrival.
Corporate Governance
The Board acknowledges the importance of good corporate governance practices. We have developed a corporate governance framework based on the application of the principles and provisions of the UK Corporate Governance Code (2018) and the Irish Corporate Governance Annex. I report on this framework in the Corporate Governance Report on pages 80 to 93.
During the year, I led the annual evaluation of Board performance, which was externally facilitated, of which further details are set out in the Corporate Governance Report on pages 88 to 89. As Chairman, I am satisfied that the Board operates effectively to ensure the long-term success of the Group and that each Director is contributing effectively and demonstrating commitment to their role.
Dividend and share buyback
On 1 July 2020, the Group announced that due to the effect of Covid-19, the Directors considered it prudent not to proceed with the 2019 final dividend previously announced. With the continuation of travel restrictions throughout 2020 and the consequential effects on the Group’s financial results, no interim dividend was declared or paid relating to 2020. As travel restrictions continued in and throughout most of 2021, the board did not declare or pay any interim dividend relating to 2021.
Following the easing of travel restrictions in 2022, and the consequent improvement in passenger revenues together with the continuation of strong performance in all other revenue streams, the Board has considered it appropriate to recommence the payment of dividends. The Board is proposing the payment of a dividend of 9.00 cent per ordinary share on 7 July 2022 to shareholders on the register at the close of business on 10 June 2022. Irish dividend withholding tax will be deducted where appropriate.
In November 2021, the Group bought back 4.6 million shares which were cancelled. The total consideration paid for these shares was €19.8 million (2020: €1.7 million).
Outlook
Since our last update to the market, in the Trading Update of 24 November 2021, trading to the end of 2021 in our freight business was strong with a continuation of the trends that have seen freight customers returning to the short sea routes. It was a disappointing end to 2021 for our passenger business with the reintroduction of Covid-19 travel restrictions following the emergence of the Omicron variant.
In the period from 1 January 2022 to 5 March 2022, trading has been strong in the Ferries Division with a continuation of the positive trends in our freight business and a lifting of most Covid-19 travel restrictions. Irish Ferries carried 35,900 cars in the period, an increase of 392% over the same period in the prior year. Excluding the new Dover – Calais service, on a like-for-like basis car carryings grew by 163%. While these increases are encouraging, it is over a seasonally less significant time of the year for passenger travel. While the early months are typically a quiet period for passenger travel, the increase in volumes seen in 2022 to date over the prior year are an encouraging indicator for post Covid travel trends.
RoRo volumes in our Ferries Division have also started strongly in 2022. Overall, Irish Ferries RoRo volumes are up 145% on the same period in the prior year. Excluding the new Dover – Calais service, RoRo volumes on the legacy routes are up 27% on the prior year. This is a continuation of the trend of a return of freight volumes to the short sea routes. While the beginning of 2022 has also been encouraging in our RoRo business, still of concern to the Group is the lack of implementation of appropriate checks on goods arriving into Northern Ireland from Britain that are destined for the Republic of Ireland, unlike the required checks on goods arriving directly into the Republic from Britain.
The Container and Terminal Division has had a weather disrupted start to 2022 which has materially reduced the number of sailings in the container business. The number of sailings reduced by 17% versus the same period in the prior year and this resulted in a 10.6% reduction in containers shipped. Port lifts in our container terminals decreased overall by 1%.
Our new service on Dover – Calais continues to perform in line with our expectations and we are encouraged by the very positive reception received on the route from customers.
As in the prior year, there is still some uncertainty over the possible emergence of further waves of Covid infections and any effect they may have on travel patterns. Also of concern is the conflict in eastern Europe and the extent to which fuel prices will remain at current historically high levels. While we will pass these increased costs through to customers, the underlying effect of the conflict on economic growth is uncertain. Nevertheless, with our significant investment in a flexible modern fleet and in our container terminal footprint combined with our strong balance sheet, this places us in a very good position to benefit from any continued growth in all our markets.
John B. McGuckian,
Chairman
9 March 2022