There is a better ferry future
A letter to the County Press from Patrick Seely
Further to Mr Kew’s latest letter (CP, 06-12-13), we all welcome any efforts by Wightlink to make our lives simpler and cheaper but the problem is that these changes have once again been introduced abruptly and without sufficient prior consultation with the customer, which might have avoided some of the more extreme effects.
Given Wightlink’s clearly stated objectives to eradicate loss-making routes and increase profits above the current £15.4m of earnings before interest, taxes, depreciation and amortization, known as EBITDA (these are true cash profits not affected by tax, interest payments or capital expenditure decisions), it is hard for Islanders to believe the company would make any investments without anticipating a healthy return.
Indeed, given the company has £195m of bank debts and an annual interest burden of £10.5m, the company has no choice but to invest for its own benefit.
We are once again involved in an important discussion with the ferry companies. What can be done to improve the service and lower prices?
Should we have an OFT enquiry? What if anything would that achieve? Indeed is there anything that can be done?
There is a group of Islanders who believe that we can have a ‘better ferry future.’
It is always possible to do things differently and to do them better.
One option is for Wightlink to address its fundamental problem of having too much debt.
Around 60 percent of current profits are being used to pay interest; to the best of our knowledge the company has no viable plan for re-paying its debts; and we don’t believe the company has a viable financing plan for its planned £40m investment in a ferry on the Portsmouth-Fishbourne route.
Hence Mr Kew’s plea for the Island not to make his life too difficult in his letter.
A reduction in the bank debts by 50 percent would reduce the annual interest burden by over £5m and significantly reduce the pressure on the business and the requirement to maximise profits and reduce services.
It would also enable the business to compete more effectively with Red Funnel, which as we all know has become an increasingly attractive alternative.
It is not impossible to do. In 2008-9 Red Funnel’s shareholders put money into the business and persuaded its banks to write off around £40m, over 30 percent of its then debts. The reason they are doing better than Wightlink today is mainly because they made that brave move.
We do not see any sign Macquarie has an appetite to do the same but we welcome it if they did.
As an alternative, there is an Island group led by John Buckland, one of our most successful entrepreneurs, ready and willing with the support of London-based financial advisers to set up a community interest company (a limited company operating for the benefit of the community) to work with the banks and Maquarrie to restructure and recapitalise the business.
Your readers’ views on such a community interest company would be welcomed and anyone interested in expressing a view on the idea should contact the Island’s MP Andrew Turner at: email@example.com