Port of Tyne may be a trust port, not a plc, but even during these testing times, commercial objectives still apply. Andrew Moffat, the port’s new chief executive, says that although there are no dividend payouts, which enables higher profits to be ploughed back, recent investments to diversify have necessitated some borrowing.
“While we’ve borrowed about £20m, our net assets are £160m, so we’re very low geared. Our lenders wanted us to borrow more,” he explains.
“Like any business, we’re exposed to economic change. By diversifying, we’re gaining protection. The port is a barometer of the economic climate, but also a facilitator. We, like everyone though, shall be impacted.
“We do take a broader view on some things and recognise that, as a trust, we have environmental and social responsibility. In terms of commercial responsibility, we’re like the private sector.” Andrew, 52, joined the port, strengthening its board as finance and commercial director, in November 2007.
A year later, when MD Keith Wilson retired, Andrew became chief executive. He claims no credit for the ‘diversify to fortify’ initiative, explaining: “Until the early 1990s, the port was predominantly a coal exporter.
When that business dried up, the management looked at the organisation and recognised that estates was still a major asset; 300 acres on the north side of the Tyne, centring on the passenger terminal, and 300 acres on the south side, where bulk and container cargo is handled.
“Through subsequent development, we now have five major activities: bulk and general conventional cargoes, ferries and cruise, estates with a base of about 60 tenants, also car terminals and a logistics business comprising container terminal, warehousing and distribution.
Customers can use one or all, and we are robustly placed.” The downturn in the motor industry, not least for Nissan, affects the port, given the normally extensive use of its car terminal.
“As part of Nissan’s supply chain, we shall be impacted. Also our container business includes car components, so that will be affected.” Ferry business has already taken a knock with last year’s ending of the Bergen service, but Andrew says: “That’s less a part of downturn as the effect of cheap air fares and high fuel costs last year.
Also, the size of DFDS’s vessel meant the economics didn’t work out.” Coal is now big business again - imported rather than exported.
“Cargo will be seen to have increased to almost 4m tonnes in 2008,” Andrew says.
“That’s up 1m from 2007, and that’s predominantly coal from Russia and South America. It’s mainly for Drax, Scottish and Southern, EDF; big generators looking to fuel their power stations, Alcan and Morgan Stanley too. Contracts like these are long term, seven to ten years, because the importers want to ensure consistency of supplies.
“With doubts surrounding the country’s future fuel policies, any shift towards clean coal or nuclear appears to be taking longer than first expected. That, for us, is good news.
So we’re talking about 35% increase in cargo year on year and about 60% in coal.
On the back of those contracts we’ve been able, over the past four or five years, to invest in berths, quay and craneage and conveyor.” Capacity has thus grown to meet changing customer needs and the port is always ready to handle ships at any time, any day of the year. In cruises, longer breaks could be affected.
“But last year we had 29 vessels. We already have 23 for this year and that could rise yet. We have 19 so far for the year after. So we’re established on the cruise calendar.
“We’ve spent a lot to this end, enhancing the passenger terminal, and developing the Northumbrian Quay to 350 metres which enabled it to take the QE2 twice recently.” As for ferry competition, some economic distress for cut-price airlines could spell opportunity and a review of sailing routes.
Andrew says: “On the Bergen route we still had between 150,000 and 160,000 people sailing yearly - quite significant. And we still have about 500,000 passengers moving between here and Amsterdam.
“I don’t think people realise the magnitude of our passenger throughput – about 10% of Newcastle Airport’s. The airport is bigger and has greater variety of destinations, but passenger volumes at the port remain important to the region.
A lot of gross value is added through people entering and spending money that benefits the local economy - between £75m and £80m.
The loss of Bergen has probably cost about £20m, but there’s still some £60m coming in. That’s substantive.
“We’re working with DFDS to ensure Amsterdam routes move in the right direction. I’m hopeful passenger holidays on that route will hold up.” Won’t the sinking pound help increase the export of goods? “Absolutely right.
But lack of demand and commodity prices remain factors. Coal has fallen since July from £120 a tonne to about £50. Steel, scrap and grain prices are similarly down, some by even more. You’re looking at drops of between 50% and 80% in the prices.
“That changes demand in business models. Oil prices were a major issue last year.
We’ve managed that quite well. It has made things very difficult, though. The price fall is a positive for transport, but now there aren’t enough goods moving round the country.
It’s a question of demand and supply.” Strolling among regular mountains of coal and scrap, and avenues of high-piled containers, Andrew is still fascinated by his career switch, from high flyer in the high tech telecoms industry to running a port of Roman ancestry with responsibility for 22 miles of the river.
“Telecoms was young, easy to design and shape. Ports are old, have a wealth of experience already, lots of history and a completely different culture.” His track record in managing change was a major consideration in the port board’s decision to appoint him.
“There has to be change,” he says, “but people need to know why I’m doing it. They need to be on side.
I can’t do it myself.” The career switch isn’t proving difficult.
“I wasn’t in manufacturing but financial strategy, and in telephone and port services, customer focus and satisfaction is a common theme.” Born in Newcastle and raised in Whitley Bay, Andrew’s childhood wish was to be a footballer or a doctor.
Instead, commercial management came through an economics degree at Newcastle University, and accountancy.
He’s a member of the Chartered Institute of Management Accountants.
He spent 10 years with the pre-privatised Northumbrian Water, rising from trainee accountant to commercial manager of Northumbrian Natural Spring Water, whose product was gathered from Broken Scar in Darlington then bottled by Lowcocks of Middlesbrough and Villa of Sunderland.
He entered telecoms in Darlington, with a company about to link with Vodafone.
When it wanted to relocate a service providers’ centre from Battersea and found no-one willing to go north, it sent Andrew and colleagues to Battersea to prepare the relocation to Darlington instead.
The service was acquired in 1991 by Hutchison (later to develop Orange), and as financial controller Andrew shuttled between operations in Darlington, Bristol and Hertfordshire.
Eighteen months after Orange was launched in 1994, Andrew became group financial controller, commercial manager, then strategy director.
He remained for seven years, during which time the company floated.
At the end of the 90s, Orange was acquired by Mannersman, which was acquired by Vodafone, which then had to sell Orange under licence restriction. Then France Telecom bought Orange – all this in less than a year. It was a world away from the usually steady business of port work.
“All those changes so quickly and the big numbers – that sort of thing will never be repeated,” Andrew says. When France Telecom bought Orange it was valued at around £30bn. Around that time, Andrew had to immerse himself also in the 3G licences scramble. There were four mobile phone operators, and the Government proposed to award five 3G licences.
“As a 2G operator, you needed one of them. But there’d also be one new entrant. If you didn’t get a new licence there’d be two new entrants. If all four didn’t get one you’d suddenly have a market place with nine in.
You didn’t want that. Much as the marketing was aggressive, it was also a defence of market share.” After a couple of years more with France Telecom, Andrew rejoined Hutchison, which had got the fifth 3G licence. He worked for 3Italia as chief financial officer in Milan and Rome for nearly two years.
“It was great, it really was. But when the opportunity came along to return to the UK as chief financial officer of 3UK, another subsidiary of Hutchison, I took it.” He remained there for nearly three years.
When a projected share flotation did not come about Andrew felt the pull of home irresistible.
“Mostly while I worked away my family had remained in the North East.
So I’d been doing lots of Mondays to Fridays away, and clocking up nearly 600,000 air miles.” Andrew and his wife Gillian have three children – Emma, 14, James, 12, and Matthew, five.
“I wasn’t seeing enough of them. It gets harder to work away as children grow.
As the business wasn’t doing what we’d hoped within a time frame I decided in December 2006 to come home.
Redeveloping a property we had bought in Gosforth about 20 years earlier kept me busy.” Then in mid-2007 Andrew was headhunted for his first appointment with Port of Tyne, requiring that cultural leap from cellnets to shipping movements.
“I think the cocktail of previous experience and my passion for the North East helped when I joined as financial and commercial director. I now have a great opportunity to apply a lot of my experience, both commercially and culturally.
“The great thing for me and for the port, I think, is that I’m local. It’s in my bones.
But I’ve seen a bit of the world, different environments and had many challenges.
I was appointed chief executive in November.” At Whitley Bay Andrew attended Valley Gardens and Whitley Bay High schools, and at 15 he got a Saturday job trundling baggage for passengers at Port of Tyne for a year and a half.
“It was interesting. There were more ships then because they were smaller. I still have pictures of vessels I worked on.
I’ve gone full circle now.” Sir Ian Wrigglesworth, the port chairman, has described him as an astute strategist and an invaluable member of the team.
Andrew says that whatever lies ahead, the port’s people will remain a key asset. It employs 450 and gives work indirectly to maybe 8,000 more. Change “for the right reasons” will include helping people to develop.
“Like any business now, we must change quicker than perhaps we have done in the past.” The port’s 2008 development aims have been achieved: £10m of investment.
So now? “We need more land. We’ve been evaluating an infilling of the Tyne Dock, about 12 acres of water which, if retrieved, could enable us to bring in more bulk cargoes, and more containers.
We’re also looking to acquire any contiguous parcels of land.”