The Directors present their Annual Report together with the audited financial statements of the Company for the financial year ended 31 December 2018.

Directors’ Responsibility for Financial Statements

The Directors are responsible for preparing the Directors’ report and the financial statements in accordance with Irish law.

Irish law requires the Directors to prepare financial statements for each financial year that give a true and fair view of the Company’s assets, liabilities and financial position as at the end of the financial year and of the profit or loss of the Company for the financial year. Under that law the Directors have prepared the financial statements in accordance with Generally Accepted Accounting Practice in Ireland (accounting standards issued by the Financial Reporting Council of the UK, including Financial Reporting Standard (FRS) 102, the financial reporting standard applicable in the UK and the Republic of Ireland and promulgated by the Institute of Chartered Accountants in Ireland and Irish law).

Under Irish law, the Directors shall not approve the financial statements unless they are satisfied that they give a true and fair view of the Company’s assets, liabilities and financial position as at the end of the financial year and the profit or loss of the Company for the financial year.

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

• select suitable accounting policies 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 applicable accounting standards and identify the standards in question, subject to any material departures from those standards being disclosed and explained in the notes to the financial statements; 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 keeping adequate accounting records that are sufficient to:

• correctly record and explain 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; and
• enable the Directors to ensure that the financial statements comply with the Companies Act 2014 and enable those financial statements to be audited.

The Directors 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.

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

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 Company’s obligation 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 2017, 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 2017 by 4.3% at 38.0 million tonnes (2017: 36.4 million tonnes). Exports grew by 2.5% in the year to 15.3 million tonnes (2017: 14.9 million tonnes) while imports grew by 5.5% to 22.7 million tonnes (2017: 21.5 million tonnes).

Turnover for the year amounted to €90.4m, an increase of 5.7% on the previous year (2017: €85.5m).

Total Operating Costs at €43.6m in 2018 have increased by €2.7m (6.6%) on 2017 (2017: €40.9m). Payroll costs have increased by €1.1m (9.7%) arising from additional staff recruited together with salary increases. Other non-pay costs have increased by €2.2m mainly arising from pre-planning costs on the MP2 project. Pension costs have decreased by €0.6m mainly due to a past service cost arising in 2017 together with lower current service costs.

Operating Profit increased to €47.4m in 2018 from €46.5m in 2017 resulting in an Operating Margin of 52% (2017: 54%).

Net financing income was €0.5m (2017: €0.2m cost). Finance income amounts to €973k (2017: €254k).

Net Interest charges (excluding net interest on pension schemes) were €0.5m (2017: €0.4m) and the Company’s interest cover is 94 times (2017: 110 times) based on Profit before Interest and Taxation over net interest charges. Net Debt increased from €37.9m in 2017 to Net Debt of €91.6m in 2018 and the Company is fully compliant with all covenants in respect of its borrowing facilities.

Profit for the financial year was €41.5m (2017: €40.6m).

The Profit and Loss Reserve increased from €393.7m at 31 December 2017 to €425.1m and Shareholders’ Funds increased from €409.0m to €440.4m during the same period.

The Company has a target throughput of 40.1 million tonnes for 2019. Throughput of 38.0 million tonnes was achieved in 2018, which was just 0.4% behind of the budgeted 38.1 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 in 2018. It is intended to bring the second major project, the MP2 Project, forward to an Bord Pleanála for planning in 2019.

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 six 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. In addition at a more 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 commenced construction of new primary inspection facilities in order to ensure that these facilities are available for the relevant State agencies ahead of the 29 March 2019 Brexit date. The Company is also working with the Office of Public Works and the State agencies with regard to the provision of secondary inspection facilities.

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 2018 resulting in an increased valuation of €0.6m to €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.

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 and medium 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 2018 the Company had in place un-drawn committed facilities of €15 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 2018 (2017: €75m undrawn).

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 (2017: 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 2017 the Company had in place an interest rate swap agreement on its previous term loan facility agreement with Bank of Ireland. Both the facility and swap agreement matured in March 2017.

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 €147.2m for 2019. The planned Capital Investment Programme for 2019 includes €54.9m in respect of the Alexandra Basin Redevelopment project (“ABR”) and €60.6m in respect of Masterplan Phase 1 (MP1).

Results and Dividends

The Company’s profit for the financial year amounted to €41.5m. The Directors’ allocations and recommendations in respect of this amount were as follows:

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 2018 and 2017.

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 2018 are set out below.

L McCaffrey

E O’Reilly

P Bates (term of office expired 18^th September 2018)

H Collins (appointed 16^th January 2018)

G Darling

E Finnan (resigned 31^st August 2018)

M Hand (appointed 21^st February 2018)

K Nolan

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 completed by the Board in February 2017. The exercise for 2018 was deferred pending the filling of a number of vacancies arising during the year. The Code of Practice also requires that an external evaluation is undertaken at least on a three yearly basis. A procurement competition for an appropriate service provider was initiated in March 2019 and it is anticipated that the relevant appointment will be made in April 2019 with a view to completing this exercise within the first half of the year.

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. On 23^rd February 2018 the Audit and Risk Committee was re-established with Ms Emer Finnan (Chairperson), Mr Paul Bates and Ms Helen Collins. Following the Board vacancies arising from the resignation of Ms Emer Finnan and the term of office expiry of Mr Paul Bates the full Board performed the role of the Audit and Risk Committee during the remainder of 2018 with Ms Helen Collins as Chairperson.

The Audit and Risk Committee met four times during the year. The members of the Committee over the course of the year were Ms Emer Finnan, Mr Paul Bates, 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 10 General Board Meetings during the year ended 31 December 2018.

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

Audit and Risk Committee

Remuneration Committee

Directors’ Expenses

Expenses in the amount of €5,735 have been paid to Board members during the year in respect of other 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 requires 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:

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

Lucy McCaffrey

Eamonn O'Reilly

29^th March 2019