Response to Wightlink CEO
The letter below dated July 2023 from Karl Hunter has been sent to the press. He has asked that we publish it on our website and FB page. There has been an ongoing open correspondence between him and the CEO of Wighlink Keith Greenfield. This letter is in response to the letter from Mr Greenfield published by the County Press on the 10th May 2023. https://www.countypress.co.uk/news/23510567.isle-wight-ferry-firm-wightlink-responds-criticism-fares/
In summary Karl writes that that Keith Greenfield stated, “group accounts show that we have made losses in recent years which is why no corporation tax has been due”
This gives the impression WL is making a loss. It’s not.
WL makes millions. WL’s parent company Arca Shipping (AS). and WL are one and the same. AS accounts show huge losses totalling a staggering £128 million in just the previous 6 years. Obviously, something doesn’t add up here. Basalt Infrastructure Partners in the UK and Fiera Infrastructure in Canada are the private equity funds (PEFs) that currently own WL. They load the business with debt, and maximise the cash coming out of by reducing the service and decreasing the amount of staff, then distribute the extra cash from the business to themselves in dividends. No matter how well the business is doing, a PEF will ensure they are making a loss. A business that makes a loss won’t pay tax.
Mr Greenfield went on to state he doesn’t receive WL dividends. Directors’ payouts are classed as bonuses. One such bonus was £1,875,000 paid to WL Directors for the sale of 50% of WL to Fiera Infrastructure in June 2019, but of course, he won’t mention that.
Why did WL take £7.3 million of taxpayer’s money in 2021/22? Mr Greenfield stated “There was indeed a very real risk that operators such as Wightlink would run out of cash”. If WL was run appropriately without deliberately making a loss and being stripped of cash then it wouldn’t get into cash flow issues and require public handouts. For Basalt, WL is an opportunity to get its hands on millions of taxpayer’s money while paying its Directors millions for running the service down and stripping WL to the bone. The truth is our ferry links have been heavily exploited since they went into PEF ownership and Islanders are paying the price in fares and the taxpayer is paying the price in subsidising what is essentially a viable profit making business.
The complete letter is below:
Keith Greenfield, the CEO of Wightlink (WL) recently wrote some statements which I believe are misleading and attempt to project an image of WL that does not reflect reality.
In one statement in relation to why WL doesn’t pay tax, he states “group accounts show that we have made losses in recent years which is why no corporation tax has been due” This gives the impression WL is making a loss. It’s not.
WL in its own right makes millions. The group accounts that Mr Greenfield refers to include WL’s parent company Arca Shipping (AS). It’s important to know AS and WL are one and the same. AS accounts show exactly the same revenue as WL every year for the last 6 years I have reviewed. Likewise, AS financial statement reads as if it is WL, mentioning only WL. However, AS accounts show huge losses totalling a staggering £128 million in just the previous 6 years alone. Obviously, something doesn’t add up here given WL is a highly profitable business.
At this point, it’s helpful to know a little about WL’s history of ownership. In 1995 WL was bought out by its management who then sold it in 2005 to a private equity firm (PEF). Unsurprisingly, this is where we start to see WL via AS being subjected to growing losses and where the gradual decline in services and the excessive hike in prices begins. Basalt Infrastructure Partners in the UK and Fiera Infrastructure in Canada are the PEFs that currently own WL.
The typical business model of a PEF is to first load the business they acquire with debt. This is how they quickly maximise their return on investment. Then they work on a way to maximise cash coming out of business, including measures such as reducing the service and decreasing the amount of staff. Then they distribute the extra cash from the business to themselves in dividends.
It’s not unusual for the PEF to then loan the money they stripped from the business back to the business charging high interest. In this instance, WL is being charged 9.25% in a company-to-company loan. No matter how well the business is doing, a PEF will ensure that the accounts of the acquired business are making a loss. The advantage is a business that makes a loss won’t pay tax.
This is essentially the story of WL since it went into private equity ownership. Mr Greenfield went on to state he doesn’t receive WL dividends. In this instance, it’s WL’s corporate owners that receive the dividends, but the Directors payouts are classed as bonuses. One such bonus was £1,875,000 paid to WL Directors for the sale of 50% of WL to Fiera Infrastructure in June 2019, but of course, he won’t mention that.
However, in relation to why WL took public funds, Mr Greenfield stated “There was indeed a very real risk that operators such as Wightlink would run out of cash”. This, of course, is the reason why WL took £7.3 million of taxpayer’s money in 2021/22. It’s worth noting shortly after that huge bonus was paid the need for more taxpayer’s money arose.
If WL was run appropriately without deliberately evoking a loss and being stripped of cash then it wouldn’t get into cash flow issues and require public handouts and millions in tax rebates year after year. In the words of our own MP, “Wightlink, as a company, represent the unacceptable face of capitalism“.
For Basalt, WL is an opportunity to get its hands on millions of taxpayer’s money while paying its Directors millions for running the service down and stripping WL to the bone.
The FastCat timetable is a fine example of a service that is now a shadow of what it was 10/15 years ago.
Mr Greenfield might argue all is well, but never before has there been this level of protest among Islanders. I am told every prospective Conservative candidate for East Wight referred to the unacceptable situation with our ferry links in their final speeches to voters. In addition to the many letters from Islanders and Island businesses such as Wight Karting all venting their anger, there is now the ever growing Wightlink User Group also protesting that enough is enough.
The truth is our ferry links have been heavily exploited since they went into PE ownership and Islanders are paying the price in fares and the taxpayer is paying the price in subsidising what is essentially a viable profit making business.
