Friday 28 August 2020

High noon in Sark

Where to start?

After the previous night's debacle at Chief Pleas, the directors of the Isle of Sark Shipping Company (IOSS) hastily convened a public meeting for noon on the 27th of August, not only that, but they also released a document detailing their response to the Chief Pleas allegations (item 5 if you're interested).

If you're an avoid avid reader of the Sark Newspaper, you might have seen that on pages 10/11 there was a piece, in the usual damning style, that questioned the need for such a hurried event, especially as it was in the middle of tourist season. Rather inevitably it forgot to mention that the more usual time for a public forum was impossible owing to the tiny issue of a pandemic. The time set though was a far more worker friendly one of 6:30pm, and, whilst many would still be busy, this is also after the last boat returns to Guernsey thus ensuring as many people as possible could attend.

Five of the IOSS directors turned out for the meeting, Yan Milner (Managing Director), Paul Burnard (Finance Director) and three of the four non-executive directors, Peter Gill (Chairman), Richard Graham and Andy Cook. Unfortunately Mark Dunster couldn't attend

Let's just nip back to that Sark Newspaper article where the current board where described rather poetically as of the  "off heads, on cabbages" school of management. Hmm, okay, let's look at what this field of cabbages is made up of...

Peter Gill, previously a Guernsey Harbour Master, has spent all of his life in shipping and managing shipping.

Yan Milner, ex Condor Ferries and knows a bit about the merchant side of running a shipping company.

Paul Burnard, ex BDO, extremely experienced in financial matters, as Peter described it "far beyond the needs of this company", he is also a member of the ethics committee of the Institute of Chartered Accountants, and a Jurat.

Andy Cook, a Sark resident. I met and know Andy through the Sark Electricity User Group, he's diligent, a cogent thinker and brings a wealth of knowledge, experience and, of course, an interest in what is best for Sark.

Colonel Richard Graham, formally the Lieutenant Governors ADC in Guernsey, hence bringing the knowledge and connections this inevitably fosters.

Mark Dunster

A cabbage.
Le chou

Cabbages? Surely not, perhaps it's a Sercquiais word for someone whose skills and experience can only be attacked by name calling as the sky fairy forbids recognition of abilities when they don't suit your agenda. Who knows?

Peter started by acknowledging that their communication with the public had not been as good as it ought. This was a theme that would come up time and time again, I suspect that they will do something about it. However, he also stated that, unilateral communication aside, they were open and transparent. Sadly, the same can't be said for Chief Pleas. Whilst we're talking of communication, guys, seriously, if you're reading this, put your directors biographies and qualifications on your website!

Back to the talk.

Peter went on to state that the board of the company is charged with operating and acting in the best interests of the company, which is by definition, in the interests of the Isle of Sark. If you didn't already know, IOSS is owned by the Isle of Sark, unusually, the directors do not have shares in the company. He went on, that's not to say they have to do what the shareholders say they should do.

On to the Sark Venture. This came out of service early in the year and was expected to be unavailable for a very short while. Unfortunately, whilst out of service they discovered other issues with the vessel and, along with requirements of the MCA, it meant they head to extend the period it was out of service.

Do you remember the issue over the MCA? No? Okay, well, the MCA had confirmed by email that they would not be able to travel to Guernsey to certify the vessel and if moved to the UK they would not attend it as it had come from overseas. Fair enough. However Conseiller Guille, it's coming back to you isn't it, said he'd unilaterally contacted the MCA, though he's not authorised to speak for the company, and, apparently he his informed by the senior surveyor that they'd had a change of heart and they could take the vessel to the UK to have it surveyed. Bless, there will be more on this. A huge change of circumstance and Peter was very pleased to hear this.


On returning to Guernsey the next day, they immediately went to see the Guernsey Harbour Master to explain they'd now been told they could take the vessel to the UK and have it surveyed there and that the MCA were happy for them to do this. Hurrah!

The Harbour Master was a little surprised, Yan Milner was flabbergasted, why? Well before taking any voyage, the master of any vessel must assure himself that the vessel is seaworthy, seems obvious to me. But how do you do this? Well, first you need to ask yourself, is the vessel stable? You'll do this by referring to the vessel's stability booklet. However... as a result of the shiny new (French, remember?) engines and, owing to previous MCA concerns, the vessel stability booklet was now null and void.

Oh. Can you see where this is going.

So you can't use this booklet as a means to establish the vessel is seaworthy. Now I'm sure Conseiller Guille is a fine naval architect, but this little detail must have slipped his mind. I'm sure he would have remembered eventually. They asked the Harbour Master whether he could assure them that they could make the voyage as they were unsure even though the MCA had agreed with Conseiller Guille that this was the case. Further could the Harbour Master agree, in writing, that he, or the MCA, or anyone, could be held responsible and that it was safe to do the voyage to the UK. The Harbour Master didn't actually laugh, but he did say he would contact the MCA to establish how they'd come to this decision... 

Later that day, he came back to say the MCA back pedalled a little and had agreed to reconsider. Whilst this was going on, Peter had a brainwave, we have an air-bridge with the Isle of Man, and as they have a shipping register along with surveyors who could visit and do the survey. WooHoo!

Peter asked the Harbour Master to suggest to the MCA that if they wouldn't do it, would they accept an Isle of Man inspection? After all, they have equivalent competence!

The MCA didn't like that. They are the competition, and wouldn't accept and Isle of Man surveyor. Oh.

Now on the back foot, the MCA agreed that all that needed to happen was for Yan to agree with them a date when the surveyor could visit. The date is pending and this is probably the only positive thing that's come from Conseiller Guille's ham fisted attempt at interfering.

Next. Peter went on to reference to a recent Paul Armorgie interview that expressed how good a summer Sark has had, indeed IOSS have committed to carrying circa 20,000 passengers, that's crossings already done and those booked. These were done on their own bat, the last instructions received from the representatives of the shareholders, that is through Chief Pleas, was there was to be effectively a winter service of only two cargo boats per week for the foreseeable future.

There have been no further instructions.

The company decided to lay on the services beyond those required and, fortuitously, this has made the company (owned by Sark) better off to the tune of around £250,000. This is a good thing™. Furthermore, they also required that IOSS made all staff redundant beyond those needed for the basic cargo service. Let's repeat this...

Through Chief Pleas, presumably Policy & Finance, all IOSS staff other than those needed for a cargo services were to be terminated.

Remember that bit about them not having to listen to the shareholders, fortunately they did what was best for the company and the Isle of Sark, the primary directive. The redundancies alone would have cost around £50,000. But there's more and we'll come back to that in a while.

At this point a member of the audience asked a very simple question, who are the shareholders? As if the island owns the shares then she, as an islander, doesn't recall being asked if those were suitable instructions. Quite right, I certainly wasn't asked.

Until about six or seven weeks ago, the shares were held in trust by the Seigneur, the Prévôt and Treasurer of Sark, the company was then instructed by Policy& Finance Committee to transfer those shares in to the name of the Chief Pleas of Sark. Now here's the thing, I've just gone back through resolutions of Chief Pleas back to Easter and... nothing. Nothing appears to note, authorise or, presumably, discuss this transfer. I'll go through the agendas and Hansard after I've written this to see if I can find anything that reports that happening.

You might, dear reader, be unsurprised to learn that with the possible exception of Conseiller La Trobe-Bateman and the directors of IOSS, this was news to everyone. It got a little loud at this point.

There was a clarification that this was allowed as P&F did have the mandate to do so, but that doesn't take away the fact that this was kept quiet. And to think P&F complained about IOSS not communicating.

On to Yan Milner.

We'd been warned that, unlike Peter, Yan liked to talk. To be honest, he was a pleasure to listen to, informative, engaging and clearly passionate about what he does.

He started out by saying in the previous they had carried more passengers than in any of the previous ten years. Since he took over things have steadily improved and, coupled with efficiencies and changes they had a strong balance sheet. This meant they had reached the point where they were in the position to purchase a new vessel, so they went through the correct channels and gained permission from Chief Pleas to make the purchase. That purchase went through and whilst, owing to the pandemic, it's still with the previous owners, they are looking after it. This was also driven by a move from the MCA to remove old tonnage and in the case of the Bon Marin de Serk they were in a position to either sell or scrap the vessel. They found, via a broker, a buyer in Finland who was ready just before lockdown to sign. By all accounts this was a better sale than they expected and certainly more than they would have received if it had been scrapped.

The buyer is still interested and they are looking at ways of getting the boat to him or him to the boat.

With the Sark Belle there was a buyer that wished to take the vessel immediately, however they asked him to wait as it was early in the season and they wished to ensure it was available as a backup as they bedded in the new boat. Sounds sensible and pragmatic to me. Unfortunately, the buyers business was operating excursions from cruise ships along the Firth of Forth, needless to say, this has been impacted by... All together now, the pandemic.

He's still interested but the sale is on hold until things clear, there is however another potential buyer.

Back to the Sark Venture. This would remain as a general purpose vessel, so backup for both passenger and cargo crossings, as well as excursions from cruise ships to Sark. The big problem with the Sark Venture was the engine being near the end of its life and, as was seen last year, there were increasing problems. But that wasn't all, it was the perfect time to install new RADARs, plotters, refurbish the cabin, needless to say with an old boat, as they took it apart they found more issues. He mentioned that as this was a passenger boat, you couldn't just do a quick bodge job. For instance, any welding had to be done by an approved coded welder, hard to find, not cheap and, as it turned out, they didn't plan on said welder being sent to prison. That didn't help.

And then there was the pandemic. Suddenly they didn't have £1.3 million worth of passenger revenue and all of the equipment and contractors has to be paid for somehow. Even the cargo revenue was down. As directors they couldn't ask for contractors to work for them if they knew they were not in a position to pay them. It doesn't matter if the creditor wasn't asking for payment, the fact remains you can't do it. This is to protect not just the directors, but also the company. As for administration, it's there to protect the company and keep it running. It's not the same as liquidation.

At the same time, they spoke with the States of Guernsey, part of this was to gain assurances that if needed, their work boat would be available to keep the flow of cargo to Sark.

Work didn't stop on the Sark Venture, it slowed down. At the time the company said that once they were in a position of positive cash flow, work would resume as normal. Pragmatic. And this is what happened. As an aside, there had been a date set of mid-April for the MCA to perform their inspection.

Yan also touched on the fact that if they had sent the Sark Venture to the UK, if anything had happened, he would have found himself in front of the MAIB, the Harbour Master and probably the Police. In short, they couldn't consider sending the vessel away. Even though he was 99.999% certain it would pass the test, that wasn't good enough. He then explained how the stability tests are based on the date from previous tests. For instance, a few years ago the results were miles out from where they expected. The result of this would have been reducing the cargo capacity of the Sark Venture to 15 tons with nothing on the roof owing to a raised centre of gravity. They did check, and found this wasn't the case, but that doesn't matter, it's what the surveyors find from calculations made on the stability model. Don't worry, I'm not going to now delve in to research as to why this matters. We'll trust the experienced expert.

They maintained the cargo service, they forecast figures in to 2021 and, having been told to not expect to see any passengers before next season, i.e. 2021. This was in May, as mentioned above, they were asked to make staff redundant, which Yan was reluctant to do this, firstly because new regulations in Guernsey said that unless you were a certified hand, or a certified engineer, or a certified master, you can't operate as crew. Coupled with the need for Sark pilotage he doubted there were more than a dozen people in Guernsey qualified to drive a commercial vessel to Sark. Don't want to lose that. If they lost them, they might not be able to replace them.

Instead, they used the director's good relationship with the States of Guernsey and it was agreed to furlough the staff, not ideal, but it meant they remained as available.

And then... June arrived, along with the Bailiwick Bubble, and suddenly a passenger service was needed again. Remember that bit about doing what was best for the company and the island? Good. They had avoided the £50,000 redundancy payments, the staff were ready to go and... the co-funding received from the States of Guernsey remains. If they'd been laid off and then re-employed this would not have happened. Result? £50,000 down and a full wage bill from little reserves. Not by any stretch of the imagination ideal.

How did this happen? Well, the talked, they listened, the looked ahead. In short, they managed the problem, no knee-jerk, no "I know better", simple, pragmatic management. I for one was grateful for this as on the 1st of June friends of mine from Guernsey came to visit and I couldn't have been happier to see them!

They had no idea how many passengers to carry. Yan explained how they calculated their market size, I might come back to this and add the figures. But let it just be said his process and calculations seemed reasonable. He went on, explaining the marginal cost of each vessel rotation, you can't just keep putting on boats, remember, this is in the interest of the company and ultimately Sark. The initial changes with the timings, peak sailing being moved from 10am to 9:45am, was simply because of... You guessed it, the pandemic and social distancing, namely to avoid the clash with visitors to Herm on the Trident. Pragmatic.

Initially they prioritised people travelling to stay rather than day-trippers. As demand has increased they have increased the number of rotations, the sailings. It's always about keeping the revenue above the cost. Think of this next time you're almost the only person on the boat in the winter, your ticket price is a fraction of what it costs to run it. It might be that it's not as convenient as it's been in the past, this is a year round service which means the company must balance its budget. And that means compromises.

He continued talking about load factor, how many passengers you get on the available crossings as compared to the amount of space. This is what drives profitability, which means you can invest in equipment, boats and, needless to say, making sure there is a service in winter when there are very few people using the service. This latter point, I feel, is key. You can't fritter away money just to ensure anyone can travel whenever suits them. You wouldn't get that from an airline or a train company, so why expect it of a boat. Talking of airlines, many of them will completely shut down routes over winter as they is little demand, in some areas, I'll use Croatia as I know it well, it's down to occasional flights from the bigger airlines and the state carrier to keep things moving. Sark Shipping is the state carrier, but it doesn't give them a bottomless pit of cash to draw on and I'm sure as tax payers we'd rather they didn't keep coming back to say "please sir, can I have more".

In short, they are doing well and it's efficient.

Yan did add, if it was his company and his money, he would run it exactly the same way. It was the sensible way.

Some other decisions were made along the way, one of which was to improve the experience for Guernsey visitors, for instance, if the weather was rough, they would give the option for day-trippers to cancel and move their crossing. If the weather was marginal and they might drop from two rotations to one, they would give priority to staying visitors over day-trippers when filling the one vessel, as he pointed out, they are not holidaymakers, they live in Guernsey, they can be flexible. Thank goodness. The reaction to this was positive. The decision was, again, pragmatic.

Next up... Paul Burnard to take us through the statement they'd released. But first, as he had a little more time having moved another meeting, he ran through the original P&F report...

He started by saying to say it's [the report] inaccurate is being extremely generous to the authors of the report.

He said, that's wrong. They purchased the boat on the 20th of March 2020, before the island had gone in to lockdown. They did not use deductions made for employee tax and social security payments as those deductions were not to be paid to the States of Guernsey until the 15th of April, by which time they would have had revenue to cover those deductions.

Chief Pleas approved the guarantee on the 19th of February. Why did it take so long? Well that will appear in the next blog post. The second part of this paragraph stating it was to fund general expenses was, as he put it, just not true. What the bank actually said was, they couldn't take a bond over the boat at the moment because it's in France (and under a French flag) so will you, Chief Pleas, release £200,000 of the loan to enable the company to keep going until such time that the bank can take on the bond over the boat. That's not what was said in the report. Chief Pleas refused to sign that guarantee.

He skipped ahead at this point. Which lead to me trying to find the relevant paragraph.

This redundancy exercise was never, as Yan said, agreed by the board. They would have cost the company £50,000 and a few weeks later they would have had to reemploy the staff, they wouldn't have got the redundancy packages back, plus, there would have been no States funding as they would have been classified as new employees.

As for the further financial injection? He clearly stated, that's not true. 

What is true, he went on, is at the time all of the company financing was rearranged with the bank and the bank placed a condition on Chief Pleas that said, on top of us advancing a loan of £350,000 to the company and an overdraft of £220,000, £570,000 total, all the board requested was the borrowing of £350,000. However, a member of P&F, without the board's knowledge, went to the bank and negotiated a deal making the island liable for £220,000 more than the board wanted. The bank also said to Chief Pleas they needed to put in £30,000 to support the companies immediate cashflow. As it happened, they put in £20,000. A few weeks later, once operations resumed, Paul received a call from the bank manager who said he'd received a call from Conseiller Raymond asking if the company could repay them the £20,000 they've committed to put in. Unsurprisingly, the bank manager said no.

It was this last act that lead directly to Paul offering his resignation from the company, even though the report said...

I'm big on details, I'm not so sure P&F are. Paul resigned on the 25th of July. These inaccuracies paint a very different picture to reality, the report is looking like a work of persuasive, plausible fiction. Though in this case, names haven't been changed to protect the innocent.

The report goes on.

Paul: They haven't, he had clause 3.4 ingrained in his memory.
Finance & Resources Committee will appoint a liaison officer who will act as the principal point of liaison between Chief Pleas, Finance & Resources Committee, Harbours & Shipping Committee and the Company on a day to day basis.

Oh dear, they haven't appointed one of those. Mind you, it's only been two years, and we know it takes ages to do anything, which is presumably why they gave other Conseillers only a few hours to read and digest a report. Then 46 hours to review it all before returning, I'll not bore you with the details again. 

Right, back to their response to Chief Pleas.

1) The purchase of Corsaire de Iles 2. There were no conditions place on that purchase regarding how it would be funded. That's what the directors are for, Paul then reminded people of the previous years meeting when he'd predicted they would have £900,000 in the bank by the end of the financial year. Sure enough, he reported, they had £900,000 in the bank at the end of the financial year. It's almost as if they are doing their jobs well. As soon as the purchase was agreed by Chief Pleas, the company paid the deposit of £127,279 to the vendors of the boat. It was non-refundable and if the company had withdrawn from the purchase, they would have lost the money. This is not in the interest of the company or the island. Owing to the extended delay in Chief Pleas signing the guarantee, the company had no choice but to find other means to pay for the boat, using both their cash reserves and part of the overdraft facility. Even after finalising the purchase, they had £30,000 headway in their overdraft facility. 

2) was skipped as, well, it was quite simply untrue.

3) Pushing the company to administration. It was not the board that did this, it was P&F's actions. The company's tax and social security contributions amounted to £50,637. Paul had negotiated a repayment programme of 3 monthly instalments of £16,879. They paid the one at the end of March, informing P&F of this in a conference call, which involved one of the financial supporters from the States of Guernsey, P&F said it was all fine, not a problem. When it came to paying, the company asked for funds and P&F said... No, we're only giving money for the wages. Errr, were they listening at all? The company had given an undertaking to the States of Guernsey, who were supporting them to the tune of £10,000 a week to support the wage bill, and even though the company had made the undertaking, P&F said, no, you can't pay it. P&F also said, send us a list of creditors and, presumably going through the list, "oh, not them, they've only been there six weeks, they can wait".

At this point I should point out that I used a number of words that my mother wouldn't approve of. Actually, I wouldn't approve of either.

Remember the brief bio I did above? Paul, being a member of the ethics committee of the ICAEW and a Jurat and all that, well, this means he has to be squeaky clean and they could not put the company in a position where they reneged on an agreement with the States of Guernsey or didn't pay suppliers. Though only advice he could reasonably give was to put the company in to administration. Never mind the personal liabilities, the company would have been at risk. This would be very bad for the island.

Just remember, this was triggered by P&Fs actions.

4) Failure to implement redundancies. Within 10 days of being told by P&F that they needed to implement redundancies the world, well, our little bit of it, changed again. How they laughed.

In short, if they'd done what the masterminds of P&F had insisted on, the Isle of Sark would be very different today, and not in a good way. That P&F were using this as a stick to beat them with simply beggars belief.

5) The board has mismanaged the finances. If they'd followed the instructions of P&F, they would have lost credibility with their suppliers, and with the States of Guernsey, spent £50,000 on unnecessary redundancy packages, furthermore... the revised bank financing, arranged by P&F, without any reference to the board, has cost the company an extra £14,000 in bank and legal charges. Plus, the island is liable for £120,000 more of guarantees. Also, the company has had to grant mortgages over all five vessels because of the negotiations that Conseiller Raymond did with the bank. The company were only looking for a mortgage on the boat they were buying.

Well done Conseiller Raymond, take a gold star, you've exposed the island and the company, and it was all done without reference to the company.

Some good news!

As of Wednesday this week, the company had £45,000 in the bank, that means, with the overdraft facility, they have £265,000 head room! More to the point, this is £265,000 better off than where they thought they would be when the financing was arranged.

And this, dear hearts, is what P&F call financial mismanagement. I think not, though I'd question P&F's judgement.

To finish off the presentation, Peter referred to a time about 18 months ago when Conseiller Guille decided, unilaterally, to attend a board meeting. He was shown the door as he'd neither been directed to do so my P&F nor had they informed the board that he was their liaison officer. This is your occasional reminder that as of last night they still don't have a liaison officer. If only they had an efficient civil servant to tell them what they need to do.

Anyhoo, Peter felt that Conseiller Guille didn't appreciate this. But it was a private meeting. Sorry bonny lad.

Peter went on to tell us that they only found out the previous day that their staff had sent a letter of support to all Conseillers, he, and the rest of the board, appeared to be genuinely moved by this and that they were eternally grateful for the letter and they would like to thank them.

Paul made a further comment on communication. He was trawling through the Chief Pleas looking for some information for the public meeting on Monday evening, you know, the one the Sark Newspaper felt was a little odd, he saw there was to be a special meeting on Tuesday and that there would be a proposition made regarding Sark Shipping. Quite rightly, as an executive director, he contacted P&F to say that in the interest you should let the board know what the proposition is about.

Astonishingly... this was met with silence.

Yan's final statement was to say he felt privileged to work with his fellow board members, that he trusts them, he'd even trust them with his money. There might have been laughter. He went on to say, that what the board do is not because it's their jobs or livelihood, that doing things risks their reputations with the rest of their work. Further, he said how much he loved what he did, his enthusiasm for the job, but, that if it was required for him to go he would accept gracefully on the proviso that this was done properly.

And this seemed to be the view of the entire board. Any change had to be done properly. This would mean new directors being approved after interviews, references, in short, a proper process.

At this point I will stop writing as I need a cup of tea, it's meat draw night and, also, the Sark Hillclimb. My impromptu day off has been spent trying to bash my scribbled notes unto something that vaguely makes sense. Unlike the P&F report, obvs.

But I will say this. The board were candid, honest, clear, intelligent. They know their stuff. They know the business. They made the right choices in difficult circumstances.

After the end of the presentation, the talking and questions went on for another hour, and, I will come back to this because I feel it's worth recording.

What's odd though is trying not to leap forward to what happened a few hours later during the reprised Chief Pleas meeting. I'd like to say that P&F managed to show they had listened and were statesmanlike, but, spoiler alert, it was clear they hadn't. The write up won't quite be a giant rollercoaster of a novel in four hundred sizzling chapters, a searing indictment of twisted politics in Sark, with some hot gypsies thrown in. Though, I imagine it could be.

We know what the ending is, you'll just have to wait to see how I present it.



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