Ytmoreaf EC= by George Malcolm
Page 63
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Sealink now Freightliner next?
THE CONTROVERSY over the Government's policy of privatisation has nowhere to date aroused such divided feelings as over the disposal of Sealink. This is largely because, unlike the National Freight Corporation, it is very much in the public eye. Currently it is the subject of bids by a number of other companies which include the National Freight Consortium. However, with the two existing ferry groups removed from the takeover trail for monopoly reasons — Trade and Industry Secretary Norman Tebbit has blocked the bids of P&O and European Ferries. Four are left to battle it out including the NFC. The others are Trafalgar House, Ellerman Lines and Sea Containers.
Not surprisingly, P&O and European Ferries are somewhat "miffed" about not being able to bid and have not given up hope. At least, however, European Ferries can take some consolation from the fact that their financial performance is rather better than Sealink's. The company made a pre-tax profit of £44.1m in 1983 on a turnover of £322.9m. This compared with a profit of £30.6m in 1982 on a turnover of £292.9m. The company's shipping interests contributed £16.6m of the profits in 1983 compared with £12.8m the previous year.
The group says it expects the improvement in general trading conditions to continue and its efforts will be concentrated on shipping, harbour and property sectors.
The NFC is backing an employee buy-out headed by the existing management team in association with Charterhouse Rothschild, Globe Investments and James Fisher and Sons. Whether this will follow quite the same pattern as that for the NFC itself remains to be seen, but it certainly must be attractive to the Government which is known to be an admirer of the original NFC employee consortium buy-out.
The picture of what is on offer at Sealink was made clear by the recent publication of the company's report and accounts for 1983.
As a subsidiary of the British Railways Board it might be thought that separate accountability might be difficult to establish at least with accuracy. This is not so although Sealink in the following comment on accounting policies indicates that there are problems in this connection. This is what it says: "Due to the complexities of the business, particularly the complications of international settlements, the processing of returns of revenue cannot be completed within the time permitted by the parent body, the British Railways Board, for the preparation and submission of the annual accounts. Accordingly, the turnover figures for the year and the related debtors and creditors at the end of the year are calculated by reference to actual revenue processed, unprocessed returns and estimates of outstanding returns based upon reports received from individual ports of the business handled and previous experience. In previous years revenue was estimated by reference to reports received from individual ports of the business handled, evaluated by using estimated average fares and the results of the processing of the previous year's returns. Differences arising on actual processing are accounted for as they arise."
But how did Sealink perform in 1983? Quite well, is the short answer. It made a trading profit before interest and extraordinary items of £12.8m, an improvement of nearly £10m over 1982. After interest, tax and extraordinary items profit in 1983 was £6.4m compared with a loss of £6.4m in 1982, a turnround of E12.8m. However, retained losses brought the bottom of the line figure to a £17.1m loss;the £6.4m profit being set against 1982 losses of £13.5m carried forward.
There were record carryings of passengers and freight on almost every route despite a background of flat market conditions for passengers and "an intensely competitive one" for freight. This reflected the company's internal policies designed to give better service and dispel old, unfavourable views of the company.
Preparing for its existence separate from British Rail, it began setting up its own inhouse functions in key financial and administrative areas and contracts were prepared for Sealink to continue to carry passengers and freight for British Rail after privatisation.
There were, of course, the best results in years reported by British Rail which actually produced an operating profit. Freightliner was another of BR's subsidiaries to make a useful contribution to this.
Describing itself as "the world's largest overland container haulier," Freightliner reported not only a return to profitable trading in 1983 but a new business peak. Turnover hit a record £97,602,000 compared with £69,602,000 in 1982 and trading profit was £1,456,000 after all charges including redundancy payments compared with a 1982 loss of £4,362,000.
Container carrying volumes were close to 1 million TEUs (20ft equivalent units) and new productivity schemes raised road vehicle driver output by up to 16 per cent.
An interesting disclosure was that Freightpoint, the company's new distribution and storage service launched in May 1983, is, it was indicated when the results were announced, justifying early confidence. New joint operating agreements have apparently been reached with other hauliers, valued at over £2.0m per annum. Deep sea container traffic increased more sharply than any other sector, the company said.
The question which automatically comes to mind is: "Is Freightliner a possibility for privatisation?" Could be — and a natural possibility for the buyer might be the NFC, its former owner in Corporation days. That would seem a better bet than the consortium's first venture in the USA announced recently. The NFC has bought an American transport company. I would have said it was far too early in the consortium's life for such a move although I hope I am wrong. The development, says the NFC, is in line with its strategy for increasing its international business and entering the transport market in the USA.
At least the company it has bought matches NFC's experience — at least in the UK. _ It is Merchants Home Delivery Service Inc., a contract carrier based at Oxnard in California with branches in 30 states of the USA offering a nationwide distribution service. It is mainly engaged in delivering furniture to the home from department stores under contract with a number of major groups, but is also developing a timber delivery service for a large Texas customer and a package delivery service based in Los Angeles.
It has a record of profitable growth since it was established as a family business in 1970, NFC reports, and currently has an annual turnover of around £30 million. The NFC sees considerable potential for further development of the company. Let's hope that's right!