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Port's promise

Friday 23 November 2012 11:00

In these economic hard times Port of Tyne is thriving through diversification and finding new markets, as Peter Jackson reports

Port of Tyne is on course for another year of increased revenues and profits, despite the global downturn. Chief executive Andrew Moffat says: “We have budget assumptions which are indicating financial growth of somewhere between 20% and 25% and at the moment, with eight months of the year gone, we are looking on target.’’

And this comes on top of a decade of growth. Last year the recorded turnover was £59.2m and pre-tax profits of £9m compared to 2002 revenues of £20.7m and pre-tax profits of £3.6m.

This has been on the back of a considerable growth in activity. Last year more than £10bn worth of goods were handled by Port of Tyne. There were record cargo volumes – an increase of 66% in all areas, a 63% increase in cargo turnover, container volumes up by a quarter and car volumes up by a fifth to 667,000 vehicles.

In fact the year saw Port of Tyne become the UK’s leading car exporting port, also rising from 7th to 5th position in Europe, and it became the 4th largest coal port. Cruise ship calls also rose to a record level, up from 20 to 37.

“It’s a combination of the broad portfolio of interests that we have performing quite well,’’ says Moffat. “Also, against that, when we do see things moving in the opposite direction we have such a broad base that allows us to more than compensate for that.’’ The health of the port is of major importance to the region.

Not only does it directly employ 440 people, it is estimated that it supports about 9,500 additional jobs and contributes an estimated £467m gross value added, GVA, to the North East economy. Yet 10 years ago the prospects for Port of Tyne looked very different.

It was reliant on coal and, with the decline of that industry, there was a need to reinvent and diversify, or risk turning into a local port unable to compete against international competition.

At a time of the decline of the region’s other major traditional industries reinvestment and reinvention became even more important. The Port undertook a programme of commercialisation and culture change and sought out new markets. It incorporated these into a five year strategic business plan which is reviewed every year.

This focuses on the future, reviewing the current economic trends and markets, and forecasts where the main areas of the business might be over that time. It has also made significant capital investments. The river channel and main operational berths were dredged to their deepest ever depths in 2010, in an investment programme of more £5m, enabling today’s largest cargo vessels to berth at the Port.

Another £5m was been invested in quay strengthening, buying new bulk cargo hoppers, and major engineering works. £1.1m on constructing a new plough dredger and a major upgrade to a section of rail track at the Port ‘The Boldon Curve’ has also helped to increase efficiencies at the port’s three rail terminals. A further £23m was invested in the construction of Europe’s biggest wood pellet handling facility.

Over the last 10 years, £30m has been invested in the port’s three car terminals. In 2012 the port placed a £6m order for a second gantry crane in response to continued growth of the port’s logistics operations.

The port has made a number of strategic land acquisitions to increase its land holdings in a position near the mouth of the river. Deepening the river has allowed more imports of the port’s traditional cargo of coal with bigger vessels being able to enter the port making it more economical for customers.

Improvements to the car handling facilities allows cars to be brought to the port and stored for transshipment to their final market. “We have had a huge transformational programme of cultural change over these last few years,’’ says Moffat. “In 2010 the port launched a profit share scheme for all employees based on the John Lewis Partnership principles and, in 2010, the associated investment was £212,000.

This first award, made in respect of 2010 business performance was equivalent of 2% of individual employee remuneration, and for 2011 the total award was 4%. “I’m a big admirer of John Lewis and we spent a lot of time with people from John Lewis,’’ says Moffat.

“Once the profits after tax are announced, we look into our investment plans, see what’s left and distribute it as we can to our employees. Last year that equated to about an extra two weeks pay.

“We have focused on Investors in People and we are now accredited. The business needed the discipline that it provides. We are talking about transparency of performance. We are trying to be as open as we can and get people to contribute to the preparation of budgets, plans and forecasts, so there’s a whole communication issue there,’’ he adds:

“We are not just going to stop there because there are various grades within an IIP and we are moving along the path.’’

Enhanced communications at supervisory and corporate levels have included team briefings, in-house Tyne Crier magazine and Insight presentation events. The port also prints and circulates key business information every quarter. A process of personal development reviews was rolled out over five months and more than 90% of the staff said it was a good experience which they were looking forward to again next year.

A significant area of diversification for Port of Tyne has been into wood pellet handling. In autumn 2010 its £23m biomass handling facility opened, which, with an annual capacity of 1.5m tonnes of material made from wood pellets, is the largest in Europe. In just the first two months of operation, it handled 153,000 tonnes of the material, which is transported by train twice a day to the Drax power station in North Yorkshire, which opted to use Port of Tyne over closer ports, and it is forecast to handle 1m tonnes this year.

The port believes Drax biomass volumes have the potential to increase to around 2.5 tonnes a year and it is talking to at least two major new customers which, if successful, could see the operation treble in size during the next 18 months. The port is therefore planning a multimillion pound capital investment over the next three years to expand the facility and its capacity.

It is confident this will consolidate the European lead it has established as a key hub in the new biomass infrastructure. It is forecast biomass will contribute £5.5m to turnover in 2012. The port had to overcome significant technical and environmental challenges on biomass. The pellets are a volatile cargo and the port pioneered new technologies and systems to handle the massive quantities that are forwarded to Drax, via a section of rail line reinstated for the purpose. It has also invested heavily in training employees to handle the new cargo.

“This will be our second full year of operation in wood pellet handling,’’ says Moffat. “There is significant investment behind that which allows us to be more robust and produce stronger financials going forward.’’

Offshore wind energy also figures in the port’s plans. Since the announcement of the Round 3 offshore wind farm development, the port has been working on the opportunities and is in discussion with large inward investors on locating wind turbine manufacturing on the Tyne. Round 3 will also open up opportunities in pre-development survey work, supply chain establishment, assembly and installation and ongoing operations and maintenance.

About 30% of the new Enterprise Zone for low carbon enterprises lies within the port’s land. It believes this is attractive to inward investors in wind turbines, particularly given its proximity to other EZ sites such as the old Swan Hunter and Neptune Yards and Newcastle College’s Energy Academy.

The port has made – and says it will continue to make - strategic land acquisitions such as the recent agreement to acquire 10 acres of land adjacent to Tyne Dock which adds 250m of operational quayside to the 750m the Port already has. But the port sees itself as more than a commercial operation. It is a trust port and, as such, has a dual responsibility.

On the one hand, it must operate as a commercial organisation and gain a market return on its investments and assets, but it also has wider responsibilities – some statutory - to the community. For one thing, this means the port’s commitment to the environment has to go beyond purely considerations of the effect on the bottom line. It has a dedicated environment officer to ensure its continued compliance with environmental legislation and requirements through the implementation of its Environmental Management System (EMS).

The port boasts its EMS was only the third in Europe to achieve the PERS (Port Environmental Review System) Certification, an accreditation scheme developed by the European Sea Ports Organisation and EcoPorts.

The port has also maintained the ISO 14001 standard for best environmental practice. This demonstrates an effective environmental management system and verifying compliance with all relevant environmental legislation. It also denotes a commitment to the prevention of pollution and implementation of a programme of continual improvement and environmental monitoring.

Its trust status also leads Port of Tyne to dedicate time and resources to corporate social responsibility and to the local community. In 2010 it made direct investments in stakeholder benefit worth £700,000, on causes ranging from supporting the North Shields Fish Quay Company to sponsoring South Shields Football Club and Durham County Cricket Club’s shirts.

The Port of Tyne Fund has supported more than 50 local initiatives in the past 50 years, contributing grant funding of £150,000. “We are unique as we are a trust port. We are not a charitable trust, we operate on a commercial basis, but what that allows us to do is reinvest all the profits we make for the benefit of our stakeholders,’’ says Moffat. “We classify our stakeholders as our employees, customers, business community, the local community and the government.

“So we are very much focused on providing a return for all of those areas.’’ Whether green shoots of recovery survive and grow or not, Port of Tyne is aware that there are challenges ahead.

“When you are growing a business you don’t want to stop growing. Growth clearly puts stresses and strains on the business and the volumes of growth we have experienced does put some strains on the organisation,” says Moffat

It’s also challenging and what comes with that is increased profile and visibility as well as pride. “Looking forward, we want to continue to grow. We have some fantastic opportunities associated with renewable energy and for significant volume growth. It will put some strains on the business but they are good strains to have.”