PEEL PORTS is carrying a £1bn debt burden, some of which is not due to be repaid until the middle of the century, new figures show.
The latest accounts filed at Companies House for Peel Ports Shareholder Finance Co, covering the year to March 2012, show total debts of £1.25bn, up from £1.23bn the year before. This includes bank debt of £1bn, almost the same as 2011.
The complex group structure of the owner of the Port of Liverpool and Manchester Ship Canal must keep its auditors on their toes as they try to keep track of it.
As well as bank loans, the long-term creditors also show intra-group debts of £61.6m and amounts due to related undertakings of £61.4m.
The report and accounts acknowledge that this level of debt is not without its potential pitfalls.
In the document’s business review the company says: “The key financial risk arises from the level of long-term debt held by the group and the interest arising there-on.
“The group’s loans and loan note instruments with repayment dates between December 31, 2013, and September 30, 2046, amount to £1,185.7m.
“The cashflow risk arising in connection with interest charges is mitigated through the use of interest rate swaps.
“The directors consider that the combination of swap instruments and stable trading of the ports business, effective working capital management and the investment in the asset base assists in managing the risks arising from the level of debt and variability in interest rates.
“The group’s bank loans and swap instruments are spread over a large number of banks and within the current facility agreement there are undrawn funds of £100.7m available.”
When the Port of Liverpool was owned by the stock market-quoted Mersey Docks and Harbour Company, it was very profitable and highly cash generative, turning in tens of millions of pounds of bottom line profit for its shareholders. There was always the potential to lever in large levels of debt to acquire and build the business for the future, just as Peel has done.
In recent years, Peel Ports has struggled in the wake of the credit crunch, recessions and associated downturn in international trade. The year to March 2012 however showed signs of improved conditions.
Turnover for the year was £380.5m, up from £358.9m, a rise of 6%.
Group operating profit was £92.6m, up from £76.8m. When Peel’s share of joint ventures are taken into account, the operating profit rises to £98.1m, up from £80.3m.
Those high debt levels inevitably incur high interest charges. The net charge for the year was £71.2m, up from £69.7m. Pre-tax profit was £26.9m, up from £11.3m in 2011. The company paid a dividend of £23m, the same as last year.
In its review, the company claims its underlying trading position has improved. Earnings before interest, tax, depreciation and amortisation in 2012 was £149.8m, up £19.1m or 14.6%
Tonnage through Peel’s UK ports reflected the upbeat note about improving economic conditions.
Around 62.3m tonnes of cargo passed through Peel-owned ports which, as well as Liverpool and Manchester Ship Canal, include Twelve Quays at Birkenhead, Medway, Heysham, Hebburn, Belfast and Dublin. The same figure last year was 57m.
The business review stated: “Turnover and tonnage throughput have increased year on year which reflects some recovery in the wider global economy and improvements in market share.
“Higher volumes, better sales mix and realised benefits of the group’s restructuring exercises resulted in improved gross margin and operational efficiency.
“Business activity has been satisfactory in the current climate. Although the outlook remains uncertain, it is anticipated that the present level of activity will improve.”
Its diversified activities have helped it cope with slow conditions.
It said: “Although several European ports have been hit by the global decline in container volumes, Peel Ports is not as reliant on container handling.”