Writing in the company’s Annual Report for 2001-2, which is laid before Parliament today (Friday, November 1, 2002), Dr Mills states: “Traffic carryings have been very satisfactory, with year-on-year increases of 2.8% for passengers and 6.4% for cars; the number of cars carried on the routes we now serve was an all-time record. Commercial vehicle traffic overall remained satisfactory despite the loss of traffic to a competitor in the period from March to August, 2001. Our satisfactory trading outcome resulted in substantially higher-than-budgeted income, which, with savings on operating costs and after receipt of a deficit grant from Scottish Ministers of £20.4 million, led to a net surplus of £1.2 million for the financial year.”

The Annual Report confirms that the company has achieved the annual performance targets set by Scottish Ministers, covering quality of service, efficiency, finance and was close to achievement on the staff costs target.

The Chairman goes on to highlight the importance to the company of the draft Invitation to Tender for the Clyde and Hebrides ferry services which Caledonian MacBrayne currently operates. The timetable for the tendering process envisages that the operator who wins the contract will take over the services in the autumn of 2004. Dr Mills says:  “Much of what has been done within the Company during the last financial year has been designed to prepare the Company, operationally, commercially and financially, for the challenges of the next two years. Caledonian MacBrayne believe that it is the continuation and enhancement of the lifeline services which is paramount. We, for our part, will do all we can to maintain and improve the services to the communities we serve as the tender process proceeds. In parallel, we will prepare what we hope will be a winning bid, building on the success of previous years.”

Managing Director Lawrie Sinclair also reflects on changes taking place within the company, aimed at these challenges. He says: “We are conscious that if the Company is to be successful in securing the contract under the State Aids tendering process, which is one of the biggest challenges we face in the period ahead, all of our operations must be re-examined.

 “We recognise that while Gourock is the administrative centre of the Company it is not at the forefront of our operations. Gourock has now become the centre for support services, allowing managers throughout the network to work closely with Masters and Chief Engineers who are our managers on board the vessels. This devolved responsibility and delegation of authority should benefit the Company and our customers.

Mr Sinclair concludes his contribution to the Report: “Much of what we have achieved in the past year has been in the face of difficult economic conditions and adverse factors outwith our control. However the Company is in good shape and the steps we have taken to improve our operation as a business and our continuing efforts to be more customer oriented lead me to believe that we can approach the challenges we face with great confidence. As we prepare for the impending State Aids tendering process, our customers can be assured that we will continue to provide the highest standards of service and safety on all our services.”

In the course of the financial year, the Board of Caledonian MacBrayne continued its tradition of holding Board meetings in the network. Meetings held in Islay, Rothesay and Stornoway enabled Board members and senior managers and officers of the Company to meet customers and representatives of the communities in these areas.

Mrs Patricia Ritchie, the longest serving Member of the Board and the Senior Non-Executive Director, retired at the end of the period covered by this Report. In the Report, Dr Mills thanks Mrs Ritchie for her valuable service over nine years, including membership and chairmanship of the Company’s Audit Committee. “She served the Board of Caledonian MacBrayne with distinction and made a significant contribution to all that the Company has achieved during her period of office. We were all delighted when Mrs Ritchie’s contribution to the Company was recognised by HM The Queen in the 2002 Birthday Honours List by the award of an OBE.”

The Annual Report carries a comprehensive range of statistics detailing the company’s performance over the last five years and an analysis of turnover and expenditure. Other sections detail other aspects of the company’s operations, including customer care and facilities, community events and joint marketing initiatives.

Background note:

Caledonian MacBrayne (CalMac) is a limited liability company whose share capital is wholly owned by Scottish Ministers as successors to the Secretary of State for Scotland following the establishment of the Scottish Parliament and the Scottish Executive. It has a financial responsibility set by its shareholder to break even, after receiving an annual revenue deficit grant to meet its operating loss. In return for the grant, CalMac provides a network of services approved by Scottish Ministers under an undertaking. This undertaking contains the conditions under which the grant is paid.

All of the services currently operated by CalMac within the undertaking require subsidy within the overall grant, as the normal operation of market forces would not ensure a sufficient service level to the communities all the year round.  This is done to support approved services which, in the opinion of Scottish Ministers, are necessary to maintain the economic or social conditions in the Highlands and Islands.  In 1997-8 the grant was £10.5m; in 1998-9 it was £14.4m;  in 1999-2000, it was £15.0m; in 2000-1 it was £19m and in 2001-2 it was £20.4m.

CalMac currently operates a fleet of 28 vessels providing passenger, vehicle and shipping services to the islands off the West Coast of Scotland and in the Clyde estuary.   There are currently 26 routes within the network. In 2001, 4.8 million passengers and over 960,000 accompanied cars were carried on the company’s services.