Saturday, 2 November 2013

Thinking out of the box (9)

Thinking out of the box (also thinking out side of the box, thinking beyond the box or thinking the unthinkable) is a metaphor that means to think differently, unconventionally, or from a new perspective. The cliché, has become widely used and refers to novel or creative thinking. Thinking out of the box, is forcing yourself to give considerations to options that you might discount in the first place. To think outside the box is to look farther and to try not thinking of the obvious things, but to try thinking beyond them.

I don't claim to have a background in financial matters. I admit to only having a passing understanding of accountancy. But when it comes to reading a balance sheet I can get a subjective feel for the financial state of any business. However, reading all the various articles that appear on Narrowboat World and elsewhere. Article after article pointing to what appear on the surface to be a significant cause for concern to all boaters. 

All these articles remain unchallenged as to their accuracy. Now that can be down to either complacency, because the figures are accurate or because they are an embarrassing underestimate of the real situation.

I like to play the stock market, I have some stocks and shares and I pride myself on being about 35% up on my initial speculation. I'm not looking at serious long term investments I mostly trade quite short. The floatation of Royal Mail gave a welcome if small boost. Because I wanted more than the 227 penny shares that most of us received. As I follow the news of businesses where my money is invested. I have acquired myself an inbuilt alarm. I call it my “niggle”. The thing is that my niggle is telling me that the Canal and River Trust is one operation that does not conform to the norm.

The first thing that I can't get my head around is the business model that the trust is operating. For well over a decade British Waterways had been operating a year on year under investment in the business. In particular the infrastructure which if the statement made to the high court by Nigel Johnson is correct. As reported by Allan Richards in130mq-says-johnson It requires a £130 million year on year spend just to stand still. The trust is seemingly happy to continuing to operate with this part of the old British Waterways business plan.

As reported by Allan Richards in worst-year-everconfirmed This year its infrastructure maintenance spend is £78.7 million, some £1.3m less than last year and a massive £51.3m less than the amount needed to bring to a stop the continuing year on year deterioration. Never mind the huge amount that would be needed to start to reverse the trend.

There are historical financial matters such as the Waterside Pub Partnership set up with grandiose plans to acquire some 100 pubs. But it went into administration with debts of £22m. In total, BW wrote off its entire investment of £2.6m. This was a small scale repeat, of BW's Gloucester Quays joint venture where it wrote off its entire investment of some £33m! One cannot but help but compare CaRT's marinas. Which have failed to deliver significant profits for years and yet CaRT continues to invest the taxpayers money in them rather than the canal infrastructure.

Another worrying concern is the number of private marinas that are currently up for sale. Many new new marinas, were constructed on the basis of British Waterways' 2005 Inland Marina Investment Guide which claimed a growing demand for new berths. The guide identified a need for 10,000 new marina berths within 10 years. Well the ten years is almost up and the demand is proof of another poor prediction.

However, as Allan Richards highlights in (marinas-not-profitable) The report produced for Paul Lillie, Managing Director of Pillings Lock Marina that only 48 of the country's marina operators are trading at a profit with a further 77 operators showing signs of failing and 45 are currently up for sale at a loss on their original capital investment. New marina owners' problems are exacerbated by Network Access Agreements with Canal and River Trust which assume full occupancy. Older established marina operators are not subject to such charges. 

In February of this year the CEO of CaRT said 'It is not for the Trust to regulate the supply of marinas on its network. This is a matter for market forces to determine'.

Another couple of worrying concerns for me include the CaRT moorings auctions. The first one is the number of long-term empty moorings. Which seem are being ignored by the punters because of the price hike. Even so there has been a steady increase in the top line guide price. However the minimum auction price has been raised from some 25% to within 10% of the headline price. Essentially adding a further 15% hike via the back door. How exactly do 'market forces' come to play upon auctioned moorings where the minimum price seems to mirror the guide price so closely. Or maybe market forces can be seen in empty berths. Now, call me old fashioned, but you expect to see a price fall as the demand tapers off. 

The question also arises whether the economic downturn will dampen further the already dwindling demand for berth availability. Many boat owners of recent years were people, who sold the family home. Then invested the proceeds in a smaller house or flat and their dream of a life afloat in a narrowboat. With the downturn in the housing market this is less appealing and has resulted in new boat sales falling dramatically, pushing some boat builders into closure.

Add to this, the recent year on year fall in the number of licensed boats on the trusts waterways. Whilst this might not be a significant amount in the bigger picture. However the old adage of looking after the pennies comes to mind.

Now the government have seen the writing on the wall. Whilst its supposed to be a delay. There is no way that the minister was going to pass over the management of the inland  waterways currently under the remit of the Environment Agency. How much of a poke in the eye do you need. Than timing of the 'postponement' announcement to coincide with the first birthday celebrations. 

So ask yourself what's the rational?

I have absolutely no idea, but I know that if the deterioration of the infrastructure continues. Then the inland waterways will slowly but surely become a no go area for boats. We are already seeing places on the canal which is becoming difficult to traverse for deeper drafted boats. The number of breaches and lock failures this year is a pretty good indicator of the future. Today there is a further failure. A total of nine major failures in 10 months, The crumbling waterways and is surely indicative of the continuing reduction, year upon year, of required maintenance.  So what of the much vaunted CaRT project on the Lapworth Flight this winter. The John Dodwell trumpeted CaRT £1,000,000 project has been cancelled. The only work that will now take place on the dilapidated Lapworth Flight this winter, is some minor repairs to the Top Lock.

Thinking out of the box, is forcing yourself to give considerations to options that you might discount in the first place. To think outside the box is to look farther and to try not thinking of the obvious things, but to try thinking beyond them. I can see some of the high maintenance canals like the Huddersfield Narrow closing. Its an inevitable reaction to the under funding of the maintenance. But maybe making the whole of the inland waterways boat free is the long term business plan. No boats will certainly do away with the need of much of the maintenance.  Fund raising would be a much easier task to achieve.

What is the outcome for the public perception of CaRT. The public is becoming more and more aware of the issues. There are already a few things that 'Joe Public' does not like. High salaries and bonuses for the directors is certainly one.  Neither do the Charity Commission. Joe Public also do not like their donations being used for expensive rounds of litigation. Money wasted on crazy projects like trees in boats. Requests for for money to plant ash trees in the middle of an outbreak of Ash die back. 

The list goes on!

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