The board has welcomed the short-term extension, which was granted at a special Chief Pleas meeting this week, but was clearly been taken aback by a highly critical statement issued by Sark’s Policy & Finance Committee straight afterwards.
The committee was scathing about the financial management and reporting of the company as it looked for a method to secure repayment of the loan.
It also raised concerns about the Isle of Sark's ‘significant financial challenges’, and said that the company needed to be better organised, better governed and better able to meet the island’s needs in future. And it was firm that the loan extension should not be misinterpreted.
‘This is a disciplined and practical decision, but no one should mistake it for satisfaction with the current position.
'Chief Pleas should not have found itself in a situation where such fundamental questions remain about the company’s finances and financial reporting.’
Isle of Sark Shipping, which is owned by Chief Pleas but run at arm’s length as a commercial entity, directed by its own board, said the statement was made public without its knowledge and could be unfairly read as suggesting the company had buried its head in the sand over its financial position.
It said that it had raised the shareholder loan with Chief Pleas over a considerable period, and had made clear that it would not be able to make a single repayment without weakening the company’s liquidity, resilience and ability to invest.
It had only been paying off interest due for some years.
‘The company has sought engagement on restructuring the facility, an appropriate capital repayment profile and the assurances required while a replacement agreement is agreed,’ it said in a statement.
‘For that reason, the board would not wish the public statement issued by Policy & Finance committee to create the impression that the current situation has arisen through a failure by the company to identify the issue or seek a resolution.’
It called for improvements in communication with Chief Pleas to help both parties.
‘The board agrees that improvements are required in the timeliness and presentation of financial information and in a number of the company’s underlying systems, and work to address these areas is already well under way.
‘These issues should also be viewed in the context of long-standing under-investment in systems and infrastructure, which the company is now working to address alongside significant fleet, operational and financial priorities.’
‘It is important to recognise that the company’s executive has consistently identified and raised the principal financial, operational and structural challenges facing the business. Many of those challenges pre-date the current board, and have been brought to the shareholder’s attention over a considerable period.’
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