John B. McGuckian,
Chairman
INVESTING FOR GROWTH AND A SUSTAINABLE FUTURE
2022 has been a year not just of recovery, but of building for long-term growth. With the Covid-19 pandemic now behind us, we have turned our full attention to maximising the opportunities that have arisen for the Group over the last two years. We come out of the pandemic operations larger than we had at its commencement, and with a balance sheet that is as strong as ever.
2022 saw the completion of our planned fleet investment for the Dover – Calais route. The entry to this route has been a long-term objective for the Group and the expansion to a three ship operation in the first half of this year allows us to compete effectively on this route. The ending of pandemic related travel restrictions alongside the continued support of our freight customers have driven revenues to a record level.
We continued our investment in future growth and sustainability throughout 2022. We acquired a further ferry, the Isle of Inisheer, for the Dover – Calais route bringing the total number of vessels on the route to three. We also added a further container vessel, the CT Pachuca in March 2022. 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 the container terminal based in Dublin Port.
Alongside the recovery in our passenger business during the year, 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 and Tourism revenues both grew to record levels driven primarily from the new operation on the English Channel.
As in prior years, I would like to take this opportunity to thank all our colleagues who made these results possible. Our colleagues, particularly those on the front line, have ensured operations continued throughout the Covid-19 pandemic. Those same colleagues are essential to the strong recovery in our business during the year and our planned growth in the future.
Financial Outcome
The overall financial outcome for the Group was a profit before tax of €62.5 million (2021: loss of €4.1 million) while operating profit was €66.7 million (2021: loss of €0.2 million). EBITDA generated was €127.2 million (2021: €52.3 million) from total revenues of €584.9 million (2021: €334.5 million).
EBITDA grew strongly versus the prior year in our Ferries Division where EBITDA was €95.7 million (2021: €23.2 million). The division saw increased revenues from the recovery in our tourism markets, continued growth in the freight market, increased charter revenue and the introduction of a third vessel on the Dover – Calais service which allowed us to compete effectively on the route.
Performance in our Container and Terminal Division improved with an EBITDA of €31.5 million (2021: €29.1 million) through a continued focus on cost optimisation and increases in revenue.
In the prior year, our diversified revenue streams and cost containment measures protected our strong balance sheet and allowed us to begin 2022 from a position of strength. The ending of travel restrictions and strong growth in our markets allowed us to build on that strength in the current year allowing us to both further invest in the business and make material returns to shareholders. Cash generated from operations of €132.0 million (2021: €67.0 million) together with net debt increase of €28.9 million was used to fund strategic capital expenditure of €57.4 million and returns to shareholders of €73.4 million via a combination of dividends and share buybacks. Net debt at year end was €171.1 million (2021 €142.2 million).
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. We have rolled out a number of further initiatives across the Group and continued initiatives that commenced in prior years. These are discussed later in the Sustainability and ESG Report at pages 36 to 59, highlights of which include the significant progress we have made in reducing the emissions of our container terminal operations. Continuing our expansion and modernisation programme at Dublin Port, 2022 was a year of further material investment in this business. 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 over the course of the programme. With the progress made to date and the expected future investment, we expect to achieve our target of net zero emissions in our container terminal operations by 2030. We also continue to develop our environmental reporting processes in co-ordinating the collection of relevant data and considering how best this can be harnessed to affect behaviours in order to drive further improvement. This also provides the basis for increasing transparency over our sustainability credentials as set out in the Sustainability and ESG Report. We continue to engage with our stakeholders to understand their key pressing and material issues which we will evaluate and implement in our day to day business when appropriate.
We continued the expansion of our Dover – Calais service with the addition of a third vessel, the Isle of Inisheer, during April 2022. This service commenced by Irish Ferries in June 2021 has been well received by both passengers and freight customers. The introduction of the third vessel is the culmination of our planned investment for the route. With Irish Ferries now offering up to 30 sailings per day on the Dover – Calais service, we now offer a genuine alternative for all customers on the Channel route.
During 2022, the Group continued its investment in the modernisation and expansion at DFT. It took delivery of and commissioned a further five remote control semi-automated electric rubber-tyred gantry cranes (RTGs) bringing the total of electrically powered units at DFT to nine. Six of these RTG’s have been commissioned and are in use, with a further three due to be commissioned in 2023. This will increase the total number of electric gantries in our Dublin Terminal from six to nine by the end of 2023, continuing our transition to this more environmentally efficient mode of operation. Following the successful deployment of these environmentally friendly electric rubber-tyred gantries the Group has also ordered one new electrically powered ship-to-shore crane (STS) for delivery in 2023. The deployment of these electric cranes puts us on track to meet our emissions reduction target of net zero emissions 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 2022. The project included 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 completed following the deployment of the final three RTGs in 2022.
The Group commenced operations at the new Dublin Inland Port in January 2022, under a 20 year lease agreement awarded following a public tender process. Trading as Dublin Ferryport Inland Depot (DFID), this 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.
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 compliance with the 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 78 to 90.
During the year, I led the annual evaluation of Board performance of which further details are set out in the Corporate Governance Report on page 86. 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
Following the easing of travel restrictions and the subsequent increase in our tourism carryings, the Directors declared and paid during 2022 a final dividend of 9.00 cent per ordinary share for 2021 and an interim dividend of 4.64 cent per ordinary share for 2022. Dividends paid during the year totalled €24.2 million. Payment of dividends had been suspended during 2020 and 2021 due to the effects of the Covid-19 travel restrictions on the financial performance of the Group.
During the year, the Company bought back a total of 12.0 million shares which were cancelled. The total consideration paid for these shares was €49.2 million (2021: €19.8 million). The Directors are proposing a final dividend in respect of 2022 of 9.45 cent per share subject to shareholder approval at the AGM on 11 May 2023, which will be paid on 9 June 2023 to shareholders on the register at close of business on 19 May 2023.
Outlook
We have experienced strong growth in car and RoRo freight volumes in 2022, due partly to the unwinding of Covid-19 restrictions and also due to the expansion of our services on the Dover – Calais route. Container volumes were down slightly as they are more impacted by the slowdown in world growth and international trade volumes.
In the period from 1 January 2023 to 4 March 2023, Irish Ferries carried 50,000 cars, an increase of 42.0% over the same period in the prior year. While these increases are encouraging, it is over a seasonally less significant time of the year for passenger travel. We do see an opportunity for material growth in our passenger business with the expected return to pre-pandemic levels.
RoRo volumes in the Ferries Division have also started strongly in 2023. Overall, Irish Ferries RoRo volumes are up 21.1% on the same period in the prior year to 111,900 RoRo units. We expect that 2023 sees a continuation of the trend of freight customers returning to the landbridge and we are hopeful that the Windsor Framework will remove the distortion from the non-implementation of the Northern Ireland Protocol. We welcome recent calls for the establishment of Green lanes on ferry routes between the UK and the Republic of Ireland, for traffic destined for Northern Ireland. This will ensure freight moves on and off the island of Ireland in the most efficient, timely and environmentally friendly manner.
The Container and Terminal Division has seen a reduction in containers shipped in the period from 1 January 2023 to 4 March 2023 of 4.4%. The number of terminal lifts has seen a similar drop of 5.6% in the same period. This is indicative of a slowdown in the global economy and is not unexpected. However, the recent and ongoing investment in capacity expansion and plant modernisation at our container terminals will provide a platform for both growth and more efficient operations at our Dublin terminal. This will be further aided by the operations at our new Dublin Inland Port facility which commenced during 2022.
We note the ever-increasing expectations and regulatory requirements to reduce the effects of our operations on the environment. While the Group acknowledges that its operations have an inevitable impact on the environment it does so in the knowledge that it operates essential services from the island of Ireland, which was clearly evident during the worst of the Covid-19 lockdowns. Our operations remain the most environmentally sustainable form of transport for facilitating trade and movement of people on and off the island. Nevertheless, reducing our impact on the environment is embedded in the Group’s DNA through maximising the effectiveness and efficiency in our operations while continuing to invest in appropriate technologies to reduce our impact on the environment. We remain committed to our decarbonisation targets set out in the Sustainability and ESG Report.
While there is some uncertainty around economic growth rates, we look forward to continued growth during 2023 through the leveraging of our recent investments and the continued support of all customers.
John B. McGuckian,
Chairman
8 March 2023