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BLYTH HARBOUR COMMISSION Annual report and financial statements

for the year ended 31 December

2014

Blyth Harbour Commission

An independent statutory Trust established in 1882 in order to manage, maintain and improve the Port of Blyth. As a modern thriving commercial Trust Port, Blyth Harbour Commission is operated for the benefit of its stakeholders.

Annual Report and Financial Statements

for the year ended 31 December 2014

Contents

Board Members (Commissioners) and Principal Officers .............................................................................. 1 Strategic Report of the Board for the year ended 31 December 2014 ......................................................... 3 Members' Report for the year ended 31 December 2014 .............................................................................. 4 Independent auditors’ report to the members of Blyth Harbour Commission ............................................. 8 Consolidated profit and loss account for the year ended 31 December 2014 .......................................... 10 Consolidated statement of total recognised gains and losses for the year ended 31 December 2014 11 Balance sheets as at 31 December 2014 ....................................................................................................... 12 Consolidated cash flow statement for the year ended 31 December 2014 ............................................... 13 Statement of Accounting Policies .................................................................................................................... 15 Notes to the financial statements for the year ended 31 December 2014 ................................................. 17

Blyth Harbour Commission 1

Board Members (Commissioners) and Principal Officers

Commissioners All appointments are under the Blyth Harbour Revision (Constitution) Order 2004 (“the Order”) which adopts the requirements contained within Modernising Trust Ports (MTP) – A Guide to Good Governance published by the DFT in respect of recruitment, selection and appointment or re-appointment of Commissioners. B Ripley (Chairman)

Brian Ripley has been a Commissioner since 2000, being appointed Vice Chairman in 2003 and Chairman in 2013. Brian was formerly Group Managing Director of the Unipoly Industrial Group consisting of 7 companies in Europe with a turnover of £100 million and also a Director of the Unipoly Hose Group of 16 companies with a £167 million turnover. A beekeeper for 12 years, Brian joined the Executive of the British Beekeepers Association in 2006 and was Chairman in 2010 & 2011. Brian has put his vast experience within the manufacturing sector to good use as a Commissioner, assisting in improvements to business performance to both the Port and BHC’s subsidiary companies. G M Hodgson (Deputy Chairman)

Appointed a Commissioner in 2012, Geoff Hodgson spent his early career in sales and marketing roles for multi-national companies including Proctor and Gamble, Diageo and Coca Cola. He returned to the North East in 1994 to work for Newcastle Breweries, ultimately becoming Chief Executive of the Federation Brewery. He currently is working as an investor, advisor and mentor with a variety of local companies and has held a number of non-executive Board positions including One North East, 2012 Olympic Nations and Regions, North East Tourism, Universal and Newcastle Building Societies and BENE. Geoff is an Oxford graduate and former High Sheriff of Tyne and Wear. M Lawlor (Chief Executive) Martin Lawlor was appointed Chief Executive of Blyth Harbour Commission in 2006 having previously held the roles of Deputy Chief Executive and Commercial & Operations Director. In overseeing the Group, Martin also acts as Chairman of BHC’s subsidiary company Transped Ltd. Prior to joining the Commission in 1994, he held various commercial management roles at the ports of Tees & Hartlepool (now PD Teesport). Martin is a Council Member of the British Ports Association, former Deputy Chairman of the Northeast Chamber of Commerce (Northumberland Committee) and a former Board Member of Northumberland Strategic Partnership. N Kemp

Nick Kemp, appointed a Commissioner in 2012, is Managing Director of a regional strategic communications business and Head of Operations of the North East Economic Forum. He is also a board Member of the Byker Community Trust and a Trustee Director of Food Nation, a health and nutrition CIC. Previously Nick was the Business Development Manager of a regional development agency and also an advisor and researcher for the Rt. Hon Nick Brown MP. Nick is a City Councillor in Newcastle, serving the Byker Ward, and brings his vast experience of politics, economic development and communications for the benefit of the Port and the wider community.


Dr. A. Lowdon Alan Lowdon has over 25 years’ experience of the international energy and utilities sectors, focussed on technology, innovation, commercialisation and new venture creation in particular. This has included working for organisations such as NEI, British Gas, Shell, ITI Energy, Narec and SKM. Alan has also been MD of two university spin off businesses. Alan is a chartered mechanical engineer, also holding BSc, MSc and PhD degrees in engineering mathematics as well as an MBA from the University of Durham Business School. In addition, Alan also holds visiting appointments at both Durham and Strathclyde Universities and is nonexecutive director of two cleantech businesses. S. Mills Stephen Mills has been a shipping lawyer for 32 years, is an experienced mediator of commercial disputes, and currently jointly manages a team of about 26 lawyers in the Newcastle, Athens and Singapore offices of North of England P&I Association. He was a founder partner of law firm Rayfield Mills, and of the Maritime Solicitors Mediation Service, sitting on or chairing various sub-committees of BIMCO or the International Group of P&I Associations. He is the author of two loss prevention guides; on Bills of Lading (now in its second edition) and Letters of Indemnity. G Hall Gillian Hall was appointed a Commissioner in 2014 and is Senior Partner at commercial law firm Watson Burton. In this role Gillian is very active in the corporate finance market both locally and nationally and brings valuable expertise to the Port Board. Gillian advises clients on corporate and commercial law and has particular experience in transactions involving overseas companies. She has many years’ experience buying and selling businesses and advising generally on commercial transactions. Gillian is a CBI Regional Council member in the North East. She also sits on the board for North East Industrial Development and the North East LEP. C Young Catherine Young became a Commissioner in 2015 and is also a Pension Scheme Trustee. She is a qualified chartered accountant spending time with KPMG PricewaterhouseCoopers and Reg Vardy PLC. Catherine has since worked both in practice, holding several advisory and non-executive roles. Catherine is currently Chair of audit committee at national charity Breast Cancer Care, a Governor at the University of Sunderland and a Non-Executive Director at the North East Ambulance Service. She also sits on the Northern Regional Strategy Board for the Institute of Chartered Accountants and delivers further finance and accountancy related appointments via accountancy business Wetton Young Limited. Catherine brings her experience in governance, board reporting and accountancy to her role as Commissioner. At 31st December 2014, Commissioner R H Maudslay completed his tenure of service with new Commissioner C Young being appointed from 1st January 2015. Details of the remuneration paid to Commissioners during the year are disclosed in note 2 on page 18.

Principal Officers M Lawlor, B.A. Chief Executive

J A Davies, B.Sc., A.C.M.A Commission Secretary & Finance Director

A S Todd, C.Eng., M.I.C.E Port Director

Captain M Willis Harbour Master


Strategic Report of the Board for the year ended 31 December 2014

The Commissioners present their report and the audited consolidated financial statements of the Commission and the group for the year ended 31 December 2014. Principal Activities

The principal activities of the Commission during 2014 have been the operation and maintenance of the Port and the provision of handling services for the import and export of cargo. The Commission also operates a wholly owned subsidiary, Transped Limited which provided international logistics and forwarding services. Financial Results & Business Review

The board monitors performance of the Port and that of its subsidiary Company via detailed financial performance reporting and also operational, health and safety and customer satisfaction indicators. These are all taken into account when reviewing strategic objectives and assessing how we serve our stakeholders. Key measures of these performance indicators are as follows:

Group Performance Indicators 2014 2013

Turnover (£’000s) 17,801 17,742

EBITDA (£’000s) 1,895 2,097

Operating profit (£’000s) 606 787

Profit on ordinary activities before taxation (£’000s) 626 720

Port Performance Indicators 2014 2013

Turnover (£’000s) 8,942 10,320

Operating profit (£’000s) 322 848

Profit before taxation (£’000s) 497 787

Total tonnage throughput inc road / rail (tonnes) 1,705,000 1,711,000

Total tonnage throughput seaborne only (tonnes) 545,000 610,000

Customer feedback (service satisfaction levels; scale 1 to 10) 9.32 8.91

RIDDOR accident statistics (per 100 workers) 0.9 1.8

Group turnover was £17.7 million for 2013 compared to £17.1 million in 2012 continuing the recent increases in levels over recent years. An operating profit of £787,000 is reported representing an increase on the profit of £653,000 achieved in 2012. Group results reflected a very strong performance from the core port operational business although a loss was reported for Transped Ltd following difficulties in the supply chain with their main container sector business amid general difficult trading conditions.


Members’ Report of the Board for the year ended 31 December 2014

The Ports overall volume of cargo handled in the year increased from 1,327,000 tonnes in 2012 to 1,711,000. This was due primarily to a significant increase in non-seaborne cargoes, primarily road to rail coal. Seaborne trade was below 2012 levels with 2013 being the first full year without Rio Tinto Alcan cargoes following the closure of their Lynemouth based aluminium smelter. However, other trade continued to grow, in particular energy sector related work (onshore and offshore wind, project lifts, oil & gas related mob/demob etc) building on an already well established reputation for expertise in this area and providing significant grounds for future optimism. Other commodities including containers, dry bulks (aggregates, cement, grain, coal, waste glass etc), forest products (tissue, paper, plywood, logs), metals (slab, plate, piling) and general breakbulk (bagged cargo, bales, pallets etc) completed the diverse range of cargoes handled during the year. Turnover levels generally reflected cargo throughput with the notable exception of high value energy sector trade which has continued to expand to such an extent that financial performance overall improved rather than declined. Property revenue also continued to grow with further tenants being attracted to the Port estate together with expansion of existing tenancies. Other revenue streams included non cargo related conservancy revenue (smallcraft, layby, fishing etc), general warehousing (non seaborne commodities) and haulage. Tight control on cost of sales (operating costs including labour, third party hire, consumables etc) and administrative expenses ensured a very satisfying resultant financial performance for the year. A further increase in EBITDA (earnings before interest, tax, depreciation and amortisation) to £2.11 million ensured adequate capital was available to service debt and investment in facilities and equipment. Fixed Assets

Group Capital expenditure in 2013 was £2,180,000 of which the majority was on port infrastructure projects with the remainder on new and replacement plant and equipment. Full details about fixed assets are shown on pages 21 and 22. Health, Safety and the Environment

The safety of port personnel and other port users is a primary consideration of the Commission and detailed Health and Safety procedures are in place, managed by a full time Health & Safety Manager. Reportable accidents remain in line with national targets set for the ports industry at 1.8 per 100 workers in 2013 but with recordable accident statistics well below the port industry benchmark. As the Statutory Harbour Authority responsible for commercial and recreational activity within Blyth Harbour, Port of Blyth takes its environmental responsibilities very seriously in maintaining a sustainable and commercially viable Trust Port. The Port works closely with a variety of environmental bodies such as the Environment Agency and Natural England to ensure environmental best practice is maintained and compliance with all relevant environmental legislation.


Members’ Report of the Board for the year ended 31 December 2014 (continued)

All relevant marine plans (Port Emergency Plan, Oil Spill Contingency Plan and Port Waste Management Plan) continue to be effectively managed and the overall Marine Safety Management System is regularly audited to ensure continued compliance with the Port Marine Safety Code. Corporate Governance

The Commission is committed to the highest standards of corporate governance and embraces the recommendations contained within Modernising Trust Ports (MTP) – A Guide to Good Governance published by the DFT. The Blyth Harbour Revision (Constitution) Order 2004 adopted many of the recommendations in the first edition of Modernising Trust Ports published in 2000 particularly in respect of recruitment, selection and appointment or re-appointment of Commissioners. The Commission also follows guidance relating to publication of Annual financial statements, stakeholder engagement, the holding of an Annual Public Meeting, involvement in regional planning / regeneration and compliance with and management of all legal obligations. Following the publication of the second edition of Modernising Trust Ports in 2009, the Commission is continually reviewing its governance and looking to strengthen compliance particularly in relation to the format of Annual financial statements, master planning,degree of stakeholder engagement and with a port user group being formed during the year. Stakeholders

As a Trust, the Commission fully recognises its responsibilities towards its stakeholders which include all Port users, employees, the local community and the wider sub region. As such it holds frequent and broad consultations with a wide range of bodies and organisations including community liaison groups, the regional and national public sector, Port commercial customers and leisure groups. An Annual Public Meeting is also held to further strengthen this process. The Port of Blyth is a major employer in the region and provides an essential gateway for international trade. With many businesses relying on Port facilities and services to access world markets, the Commission remains an important generator and facilitator of economic wealth, provides major benefits to its stakeholders. Other stakeholder benefits include sponsorship and support of regional organisations, events and festivals, community initiatives, schools and charities. Business Strategy

The Port has seen its diverse trade base continue to expand, significantly within the energy related sector with a number new customers being attracted by Port facilities and the flexible nature of services being provided. This diversity strategy is supported by the Port’s subsidiary Transped Ltd with its provision of complimentary international logistics and forwarding services. Construction of a new marine fuel facility began during the year and with a number of major schemes are also under consideration the Port is confident of delivering significant development and is set for rapid growth over the coming years.



With an established reputation as one of the main renewable energy related ports in the UK, the Port will continue to work closely with Arch (the development arm of Northumberland County Council) to promote BEREZ (the Blyth Estuary Renewable Energy Zone). This initiative looks to attract and support a renewable energy cluster of organisations around the estuary. A number of Companies have already been attracted and with plans for a major biomass power station at Battleship Wharf also continuing to progress, the expansion of The National and Renewable Energy Centre’s (NaREC) facilities in proximity to Wimbourne Quay and Bates Terminal, which now benefits from Enterprise Zone status, the opportunities to develop a significant ‘energy base’ in the Port are strengthened. Major Port developments would undoubtedly bring substantial additional economic benefit to the region over the coming years and significantly increase stakeholder benefit. Principal Risks and Uncertainties

In respect of the Port’s strategic development, the Commissioners believe that the key risks and uncertainties are primarily associated with trade fluctuations and global economic trading conditions. The on-going strategy of diversification does provides an important degree of mitigation and the Commission believes that the loss or substantial reduction in trade from any one customer or sector is now more manageable than perhaps in the past . Having identified opportunities for significant future growth, the Commission accepts that there are inherent risks associated with project management and financing. Careful master planning and contractual safeguards are seen as essential to mitigate such risks and where any significant capital investment is required from the Commission, contractual commitments and guarantees from new customers will be sought wherever possible. With a strong asset base, the Commission considers it has the ability to finance any foreseeable potential future development schemes. The Port operates in a competitive marketplace, albeit with limited scope for new entrants given the infrastructure requirements and demands of Port operations, and as such monitoring of customer requirements, industry pricing levels and competitor strategies are key elements of the Port’s commercial function. The Port’s performance depends significantly on its staff and as outlined the Commission has introduced strategic improvements in this area in order to mitigate any resultant adverse impact which a high level of staff turnover and loss of key skills would have on the business. The board formally reviews the risks to the business on an on-going basis and, where possible, sets strategic plans and delivery targets which would mitigate the areas of concern as appropriate. Going Concern

The Commission’s previous loan facility expired on 31 March 2013. A new facility was arranged upon its expiry which meets the requirements of the Commission. Accordingly the financial statements have been prepared on a going concern basis. As the new loan facility was finalised post 31 December 2012 the previous facility, which expired on 31 March 2013, was shown as a creditor due within one year in the previous financial statements. The new facility is repayable in 2018 and is shown as a creditor due after one year within these financial statements and going forward.



Statements of Commissioners’ Responsibilities

Under company law the Commissioners are responsible for preparing annual reports and group and Commission financial statements in accordance with applicable law and regulations and the United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). As such Commissioners must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and Commission and of the profit or loss of the group for that period. In preparing these financial statements, the Commissioners are required to:

select suitable accounting policies and then apply them consistently;

make judgements and accounting estimates that are reasonable and prudent;

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group or Commission will continue in business

The Commissioners are responsible for keeping adequate accounting records that are sufficient to show and explain the Commission’s transactions and disclose with reasonable accuracy at any time the financial position of the Commission and the group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Commission and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Statement on disclosure of information to auditors

Each of the persons who is a Commissioner at the date of approval of this report confirms that:

so far as the Commissioner is aware, there is no relevant audit information of which the Commission’s auditors are unaware; and

the Commissioner has taken all the steps that he/she ought to have taken as a Commissioner in order to make himself/herself aware of any relevant audit information and to establish that the Commission’s auditors are aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006. On behalf of the board B Ripley Chairman 12 May 2014


Independent auditors’ report to the members of Blyth Harbour Commission

We have audited the group and parent company financial statements (the “financial statements”) of Blyth Harbour Commission for the year ended 31 December 2013 which comprise the consolidated profit and loss account, the consolidated statement of total recognised gains and losses, the group and company balance sheets, the consolidated cash flow statement, the statement of accounting policies and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

Respective responsibilities of Commissioners and auditors

As explained more fully in the Statements of Commissioners’ Responsibilities set out on pages 7 and 8 the Commissioners are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Commission’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group and parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the report and financial statements to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements In our opinion the financial statements:

give a true and fair view of the state of the group and the parent company’s affairs as at 31 December 2014 and of the group’s profit and cashflows for the year then ended;

have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

have been prepared in accordance with the requirements of the Companies Act 2006.


Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Report of the Board for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

the parent company financial statements are not in agreement with the accounting records and returns; or

certain disclosures of commissioners’ remuneration specified by law are not made; or

we have not received all the information and explanations we require for our audit.

Bill MacLeod (Senior Statutory Auditor) For and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Newcastle upon Tyne 12 May 2014


Consolidated profit and loss account for the year ended 31 December 2014

Note 2014

£’000

2013

£’000

Turnover 1 17,801 17,742

Cost of sales (14,913) (14,510)

Gross profit 2,888 3,232

Administrative expenses (2,282) (2,445)

Operating profit 2 606 787

Interest payable and similar charges 3 (231) (202)

Other finance income 14 251 135

Profit on ordinary activities before taxation 626 720

Tax on profit on ordinary activities 4 (203) 12

Profit for the financial year 12 423 732

All results refer entirely to continuing operations.

There are no material differences between the profit on ordinary activities before taxation and the profit for the financial year stated above and the historical cost equivalents for 2014 and 2013.

As permitted by Section 408 of the Companies Act 2006, the parent company’s profit and loss account has not been included in these financial statements. The parent company’s profit after taxation for the financial year was £354,000 (2013: £777,000).


Consolidated statement of total recognised gains and losses for the year ended 31 December 2014

Note 2014

£’000

2013

£’000

Profit for the financial year 423 732

Actuarial (loss)/gain on pension scheme 14 (1,515) 1,669

Movement of deferred tax relating to pension scheme 11 270 (359)

Total recognised (loss)/gain relating to the year (822) 2,042


Balance sheets as at 31 December 2014

Group Company

Note 2014

£’000

2013

£’000

2014

£’000

2013

£’000

Fixed assets

Tangible assets 5 23,206 21,355 23,121 21,276

Investments 6 - - - -

23,206 21,355 23,121 21,276

Current assets

Stock 7 80 42 - -

Debtors 8 4,463 3,732 2,680 2,768

Cash at bank and in hand 453 1,537 414 1,338

4,996 5,311 3,094 4,106

Creditors: amounts falling due within one year

9 (3,771) (3,688) (2,308) (2,853)

Net current assets/(liabilities) 1,225 1,623 786 1,253

Total assets less current liabilities before pension deficit

24,431 22,978 23,907 22,529

Pension surplus/(deficit) 14 (255) 826 (255) 826

Total assets less current liabilities including pension deficit

24,176 23,804 23,652 23,355

Creditors: amounts falling due after more than one year

10 (7,290) (6,086) (7,277) (6,079)

Provisions for Liabilities 11 (157) (167) (157) (167)

Net assets 16,729 17,551 16,218 17,109

Capital and reserves

Profit and loss account 12 16,729 17,551 16,218 17,109

Total capital and reserves 16,729 17,551 16,218 17,109

The financial statements on pages 10 to 31 were approved by the Commission on 11 May 2015 and were signed on its behalf by:

B Ripley M Lawlor J A Davies Chairman Chief Executive Secretary and Finance Director


Consolidated cash flow statement for the year ended 31 December 2013

Note 2014

£’000

2014

£’000

2013

£’000

2013

£’000

Net cash inflow from operating activities

1,169 2,606

Returns on investment and servicing of finance

(231) (202)

Net cash outflow from returns on investments and servicing of finance

(231) (202)

Taxation (156) (89)

Capital expenditure and financial investment

Sale of tangible fixed assets - 200

Purchase of tangible fixed assets (3,140) (2,180)

Net cash outflow from capital expenditure and financial investments

(3,140) (1,980)

Financing

Loan Financing 13 750 4,250

Loans repaid 13 - (3,650)

Grants received

Capital element of finance lease payments

13

13

888

(364)

234

(376)

Net cash inflow from financing 1,274 458

(Decrease)/Increase in cash 13 (1,084) 793


Consolidated cash flow statement for the year ended 31 December 2014 (continued)

2014

£’000

2013

£’000

(i) Reconciliation of operating profit to net cash inflow from operating activities

Operating profit 606 787

Depreciation 1,289 1,310

Grant release (54) (67)

(Increase)/decrease in debtors (814) 267

(Increase)/decrease in stocks (38) 15

Increase in creditors 93 316

Profit on disposal of fixed assets

Difference between pension charge and cash contributions

-

87

(92)

70

Net cash inflow from operating activities 1,169 2,606


Statement of Accounting Policies

These financial statements are prepared on the going concern basis, under the historical cost convention, and in accordance with the Companies Act 2006 and applicable accounting standards in the United Kingdom. The principal accounting policies, which have been applied consistently throughout the year, are set out below.

Consolidation

Consolidated figures are prepared under the acquisition method of accounting and consolidate the Commission and its subsidiaries. The Commission’s own balance sheet and related notes are described as “company” throughout these financial statements.

Going concern

At 31 December 2014 the Group had net current assets of £1,225,000 (2013: 1,623,000). In April 2013 the Group agreed a new bank loan facility of up to £6,000,000 which expires in 2018. The Commissioners believe that the Commission will be able to operate within the terms of the facility over the next 12 months and beyond and accordingly have prepared the financial statements on a going concern basis.

Turnover

Turnover represents the value of goods and services, provided in the period exclusive of value added tax. It is principally derived from the activity of managing a harbour and related activities, and comprises harbour dues, cargo handling, forwarding and freight income and ancillary income.

Tangible fixed assets and depreciation

All tangible fixed assets have been stated at cost less accumulated depreciation. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is calculated to write off the cost over the estimated useful lives which are as follows:

Dredging 25 to 50 years Dock structures and excavation 25 to 50 years Freehold buildings 15 to 50 years Floating craft 20 to 30 years Office equipment 5 years Motor vehicles 5 years Plant and equipment 5 to 30 years

Freehold land is not depreciated.

Deferred taxation

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. A net deferred tax asset is recognised as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits against which to recover carried forward tax losses and from which the future reversal of underlying timing differences can be deducted. Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on tax


Statement of Accounting Policies (continued)

rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on an undiscounted basis.

Fixed asset investments

Fixed asset investments are stated at cost less any provision for permanent diminutions in value.

European Regional Development Fund (“ERDF”) and other grants

Grants received on fixed assets are credited to a separate account and are released to revenue over the lives of the relevant fixed assets. Grants of a revenue nature are credited to the profit and loss account upon receipt.

Finance and operating leases

Where the company enters into a lease which entails taking substantially all the risks and rewards of ownership of an asset, the lease is treated as a “finance lease”. The asset is recorded in the balance sheet as a tangible fixed asset and is depreciated over its estimated useful life or the term of the lease, whichever is shorter. Future instalments under such leases, net of finance charges, are included within creditors. Rentals payable are apportioned between the finance element, which is charged to the profit and loss account, and the capital element which reduces the outstanding obligation for future instalments.

Costs in respect of operating leases are charged to the profit and loss account on a straight line basis over the lease term.

Pension costs

The Commission has a defined benefit pension scheme for which the Commission nominate four Commissioners as trustees with a further two being elected by the membership. Independent actuaries complete valuations every three years and, in accordance with the recommendations annual contributions are paid to the scheme so as to secure the benefit set out in the rules. The operating cost of providing this pension, as calculated periodically by our independent actuary, is charged to the operating profit or loss in the period that those benefits are earned by employees. The financial return expected on the scheme assets are recognised in the period to which they relate as part of finance income. The changes in value of the scheme asset and liabilities are reported as actuarial gains or losses as they arise in the statement of total recognised gains and losses. A pension scheme deficit is recognised in full and presented in the balance sheet net of any related deferred tax. A pension scheme asset is recognised only to the extent that it is considered recoverable in the future.

The Commission also provides a stakeholder arrangement. Contributions to this arrangement are charged to the profit and loss account in the period in which the liability to pay arises.

Stock and work in progress

Stock and work in progress are stated at the lower of cost and net realisable value, less any provision for slow moving or obsolete stock. Work in progress includes labour and materials.


Notes to the financial statements for the year ended 31 December 2014

1 Turnover

2014

£’000

2013

£’000

Class of business

Cargo handling and port maintenance 8,942 10,320

Freight and logistics 8,859 7,422

17,801 17,742

All turnover originates from the United Kingdom and has a United Kingdom destination.

2 Operating profit

2014

£’000

2013

£’000

Operating profit is stated after charging/(crediting):

Auditors’ remuneration

- Audit services 16 15

- Taxation services 11 12

Depreciation - on owned assets 1,283 1,308

- on assets held under finance leases 6 2

Grant release (54) (67)

Gain on sale of fixed assets - 92

Staff costs during the year were:

Wages and salaries 3,244 3,341

Social security costs 335 351

Pension costs (see note 14) 263 307

3,842 3,999


Notes to the financial statements for the year ended 31 December 2014 (continued)

2 Operating profit (continued)

The average monthly number of persons employed during the year was:

2014

£’000

2013

£’000

By activity

Port activities 35 36

Freight agency activities 22 22

Administration 51 47

108 105

Remuneration paid to the Commissioners (including benefits), inclusive of the Chief Executive remuneration, is as follows:

2014

£’000

2013

£’000

Aggregate Remuneration 202 189

Emoluments of highest paid Board Member 137 129

Benefits are accruing under a defined benefit scheme for one Commissioner (2013: one).

Pilotage accounts 2014

£’000

2013

£’000

Total income from Pilotage Services 117 143

Costs of:

i) Providing the services of a Pilot 106 104

ii) Providing, maintaining and operating the Pilot Boat 3 3

iii) Administrative costs 2 2

111 109



3 Interest payable and similar charges

2014

£’000

2013

£’000

Bank loan interest payable 197 160

Interest on finance leases 34 42

231 202

4 Tax on profit on ordinary activities

2014

£’000

2013

£’000

Current tax

UK corporation tax on profit of the year 115 145

Adjustments in respect of prior years - (15)

Total current tax 115 130

Deferred tax

Origination and reversal of timing differences 128 12

Adjustments in respect of prior years 1 (156)

Effect of change in tax rate (41) 2

Total deferred tax (note 11) 88 (142)

Tax on profit on ordinary activities 203 (12)



4 Taxation on profit on ordinary activities (continued)

The tax assessed for the year is lower (2013: lower) than the standard rate of corporation tax in the UK of 21.49% (2013: 23.25%). The differences are explained below:

2014

£’000

2013

£’000

Profit on ordinary activities before tax 626 720

Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 21.49% (2013: 23.25%)

135 167

Effects of:

Expenses not deductible 124 (23)

Capital allowances and other timing differences (421) 32

Adjustments in respect of prior years 1 (14)

Movement in short term timing differences 279 (31)

Effects of other tax rates/credits (3) (1)

Current tax charge for the year 115 130

Factors that may affect future tax charges: The standard rate of corporation tax in the UK changed from 23% to 21% with effect from 1 April 2014. Accordingly, the company’s profits for this accounting period are taxed at an effective rate of 22.5% and deferred tax calculated based on a rate of 21%.



5 Tangible assets

Group Assets in Freehold Dredging Dock Floating Plant & Total Course of buildings Structures & Craft Equipment Construction Excavation

£’000 £’000 £’000 £’000 £’000 £’000 £’000

Cost

At 1 January 1,375 18,264 1,627 5,959 967 15,975 44,167 2014

Additions 205 2,561 - - - 374 3,140

Disposals - - - - - (50) (50)

Transfers (1,375) 1,375 - - - - - ____________________________________________________________________________________________ At 31 December 2014 205 22,200 1,627 5,99 967 16,299 47,257 _______________________________________________________________________________________________

Accumulated Depreciation

At 1 January - 9,187 1,569 1,817 705 9,534 22,812 2014

Charge for the - 539 9 115 29 597 1,289 Year

Disposals - - - - - (50) (50) _______________________________________________________________________________________________

At 31 December 2014 - 9.726 1,578 1,932 734 10,081 24,051 _______________________________________________________________________________________________

Net book value

At 31 December 2014 205 12,474 49 4,027 233 6,218 23,206

At 31 December 2013 1,375 9,077 58 4,142 262 6,441 21,355 _______________________________________________________________________________________________ The net book value of assets held under finance leases at 31 December 2014 was £nil (2013: £nil)



5 Tangible assets (continued) Company Assets in Freehold Dredging Dock Floating Plant & Total

Course of buildings Structures & Craft Equipment Construction Excavation

£’000 £’000 £’000 £’000 £’000 £’000 £’000

Cost

At 1 January 1,375 18,255 1,627 5,959 967 15,718 43,901 2014

Additions 205 2,561 - - - 338 3,104

Transfers (1,375) 1,375 - - - - - _______________________________________________________________________________________________ At 31 December 2014 205 22,191 1,627 5,959 967 16,056 47,005 _______________________________________________________________________________________________

Accumulated

At 1 January - 9,187 1,569 1,817 705 9,347 22,625 2014

Charge for the - 539 9 115 29 567 1,259 Year _______________________________________________________________________________________________

At 31 December 2014 - 9,726 1,578 1,932 734 9,914 23,884 _______________________________________________________________________________________________

Net book value

At 31 December 2014 205 12,465 49 4,027 233 6,142 23,121

At 31 December 2013 1,375 9,077 88 4,142 262 6,362 21,276 _______________________________________________________________________________________________ The net book value of assets held under finance leases at 31 December 2014 was £nil (2013: £nil)



6 Investments

Fixed asset investments at the year-end are represented by:

Shares in group undertakings

Company Proportion of share capital held

Country of registration

Principal activity

Transped Limited 100% Ordinary England Freight forwarding

The Commission holds 40% of the share capital of Northern Continental Lines limited, a company operating as a UK parent company of Northern Continental Lines BV. This company is registered in Holland and ceased trade during 2004.

7 Stock

Group

2014

£’000

2013

£’000

Raw materials and consumables 37 22

Work in progress 43 20

80 42

8 Debtors

Group Company

2014

£’000

2013

£’000

2014

£’000

2013

£’000

Trade debtors 3,960 3,144 1,990 2,084

Amounts owed by group undertakings - - 256 161

Prepayments and accrued income 278 280 203 211

Deferred tax asset (note 11) 160 243 166 247

VAT debtor 65 65 65 65

4,463 3,732 2,680 2,768

Amounts owed by group undertakings are unsecured, interest free and have no fixed date of repayment.



9 Creditors: amounts falling due within one year

Group Company

2014

£’000

2013

£’000

2014

£’000

2013

£’000

Trade creditors 2,745 2,530 1,794

Amounts owed to group undertakings - - 12

Payments received on account 91 289 289

Corporation Tax 104 145 145

Other tax and social security 160 155 117

Obligations under finance leases 396 380 377

Accruals and deferred income 275 189 119

3,771 3,688 2,853

The Commission has a bank revolving credit loan facility of up to £6,000,000. This agreement has a term of 5 years from acceptance date, effectively 30 April 2013. Interest is paid on the loan drawn down amount at a rate of 2.50% above LIBOR per annum. The bank commitment interest is at a rate of 1.25% per annum on the daily available undrawn balance of the facility limit.

10 Creditors: amounts falling due after more than one year

Group Company

2014

£’000

2013

£’000

2014

£’000

2013

£’000

Bank loan 5,000 4,250 5,000 4,250

ERDF and other grants 1,477 643 1,477 643

Obligations under finance leases 813 1,193 800 1,186

7,290 6,086 7,277 6,079



11 Provisions for liabilities

Deferred tax liability/(asset) relating to pension deficit Group and company

£’000

At 1 January 2014 206

Deferred tax charge to the statement of total recognised gains and losses

(270)

At 31 December 2014 (note 14) (64)

Group Company

£’000 £’000

Deferred tax asset

At 1 January 2014 (243) (247)

Deferred tax charge in profit and loss account 83 81

At 31 December 2014 (160) (166)

Deferred tax has been recognised as follows:

Group Company

2014

£’000

2013

£’000

2014

£’000

2013

£’000

Accelerated capital allowances 163 83 163 79

Short term timing differences (135) 125 (135) 125

Losses 188 (451) (194) (451)

Pension scheme (64) 206 (64) 206

Total deferred tax liability (224) (37) (230) (41)

Provision for PNPF Obligation

Group and

Company£’000

At 1 January 2014 (167)

Charge for the year 10

At 31 December 2014 (157)



11 Provisions for liabilities (continued)

The Pilots National Pension Fund (PNPF) is an industry-wide defined benefits scheme. As at 31st December

2010, the date of the most recent full triennial actuarial valuation, the scheme had assets with a market value

£293m with liabilities of £479m. The Scheme rules do not provide a mechanism for allocating past service deficit

associated with the Scheme to the participating bodies. During 2008 the Trustees of the Scheme started the

process of seeking a Court ruling to determine, amongst other things, as to whether certain Competent Harbour

Authorities (CHAs) whom had either employed pilot members of the Scheme or merely authorised their self

employed status were liable to contribute to the Scheme deficit.

The initial High Court judgement which was subject to a significant appeals process gave the Trustees powers

to put together a recovery plan which could seek contributions from CHAs, such as Blyth Harbour Commission.

In late 2012, the Trustees completed the process of consultation and allocation of the deficit spilt between CHAs

with the amount of the liability of Blyth Harbour Commission was quantified as £175,000.

In 2013, Blyth Harbour Commission made no contributions to this Scheme as it has no active members, this

being the case since the mid-1990s. However, during the year, payments were made towards the deficit as per

a schedule agreed with the Trustees with all CHAs.

12 Profit and loss account

Group

£’000

Company

£’000

Balance at 1 January 2014 17,551 17,109

Profit for the financial year 423 354

Actuarial pension scheme (1,515) (1,515)

Movement on deferred tax relating to pension scheme 270 270

Balance at 31 December 2014 16,729 16,218



13 Analysis of changes in net debt

1 January 2014

Cash flow

31 December 2014

£’000 £’000 £’000

Cash in hand and at bank 1,537 (1,084) 453

Finance leases (1,573) 364 (1,209)

Bank loan (4,250) (750) (5,000)

Total (4,286) (1,470) (5,756)

Reconciliation of net cash flow to net debt

2014

£’000

2013

£’000

(Decrease)/increase in cash in the year (1,084) 793

Decrease in lease financing 364 376

Increase in borrowings (750) (600)

Change in debt (1,470) 569

Net debt at 1 January (4,286) (4,855)

Net debt at 31 December (5,756) (4,286)



14 Pension commitments

a) The Commission provides a stakeholder pension arrangement. Contributions are charged to the profit and loss account in the period in which the liability to pay arises. Contributions during the year were £66,000 (2013: £40,000) for the Commission and £73,000 (2013: £79,000) for the group.

b) The Commission also provides a defined benefit pension scheme.

The results of the most recent actuarial valuation as at 31 March 2014 were updated to 31 December 2014 for FRS17 purposes by a qualified independent actuary.

The principal assumptions used in valuing the pension liabilities were:

2014 2013

Rate of increase in salaries 3.5% 3.8%

Rate of increase of pensions in payment 1.9% 2.2%

Discount rate 3.5% 4.5%

Inflation assumption 3.0% 3.3%

The mortality assumptions used were as follows:

2014

£’000

2013

£’000

Longevity at age 65 for current pensioners

- Men 22 22

- Women 24 24

Longevity at age 65 for future pensioners (currently aged 45)

- Men 23 23

- Women 26 26



14 Pension commitments (continued)

The assets in the scheme and the expected rate of return were:

Expected rate of return 2014

Assets 2014

£’000

Expected rate of return 2013

Assets 2013

£’000

Equities 7.4% 7,029 7.6% 6,997

Corporate and Overseas Bonds and Gilts 3.4% 2,392 4.4% 2,142

Other 1.7% 369 3.0% 420

Total market value of assets 9,790 9,559

Present value of plan liabilities (10,109) (8,527)

Asset/(deficit) (319) 1,032

Related deferred tax (liability)/asset 64 (206)

Net pension asset/(deficit) (255) 826

2014

£’000

2013

£’000

Analysis of the amount charged to operating profit or loss:

Current service cost

Past service cost

171

72

228

-

Analysis of the amount credited to other finance (costs)/income 243 228

Expected return on pension scheme assets 635 516

Interest on pension scheme liabilities (384) (381)

Net return 251 135

Total charge before deduction of tax (8) 93




The reconciliation of the present value of the scheme liabilities is as follows:

2014

£’000

2013

£’000

Scheme liabilities as at 1 January 8,527 9,083

Interest on pension scheme liabilities 384 381

Current service cost 171 228

Past service cost 72 -

Actuarial (gains)/losses on liabilities 1,231 (925)

Employee contributions 79 80

Benefits paid (355) (320)

Scheme liabilities as at 31 December 10,109 8,527

The reconciliation of the fair value of scheme assets is as follows:

2014

£’000

2013

£’000

Bid value of scheme assets at 1 January 9,559 8,381

Expected return on assets 635 516

Actuarial (loss)/gain on assets (284) 744

Employer contributions (gross) 156 158

Employee contributions 79 80

Benefits paid (355) (320)

Scheme assets as at 31 December 9,790 9,559

Prior to 2005, the Trustees awarded discretionary pension increases to pensions in payment accrued before 6 April 1997. However, as no such discretionary increases have been subsequently paid and there is no legal obligation to provide these increases, no such allowance has been made in the 31 December 2014 liabilities.

Future contributions to the pension scheme are at a rate of 15.8% of pensionable salaries.




Amounts for assets and prior years are:

2014

£’000

2013

£’000

2012

£’000

2011

£’000

2010

£’000

Market value of plan assets 9,790 9,559 8,381 7,640 7,977

Plan liabilities (10,109) (8,527) (9,083) (8,039) (7,833)

(Deficit)/surplus (319) 1,032 (702) (399) 144

Actuarial (losses)/gains on plan assets (284) 744 353 (794) 499

Actuarial (losses)/gains on plan liabilities (1,231) 925 (739) 145 73

Total amount recognised in the STRGL (1,515) 1,669 (386) (649) 572

15 Controlling party

The Commissioners consider that they are the controlling party of the group.

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