General update
The States Trading Supervisory Board was established under the changes to the structure of government in 2016, and was given the task of overseeing a very diverse, and most likely unique portfolio.
An airline, two airports, utility companies, waste management, dairy production, commercial harbours, marine leisure facilities, a lottery, property management, and ownership of fuel supply ships.
Some are fully formed commercial companies in their own right, operating at arm's length from the States for a number of years. Others were previously under the auspices of various Departments - and going back even further sat under different political Boards.
As such, they still had different management and governance arrangements, and to some extent very different cultures and commercial outlooks.
Therefore one of the very first tasks for the new STSB board, when it was formed in late 2016, was to agree a clear vision for all these disparate operations. We also had to decide the appropriate governance and leadership arrangements for each of the various assets, to enable them to deliver on the agreed vision.
That vision - in line with the purpose of establishing the STSB - is that the States Trading Assets shall be a consistently well-managed, efficient group of companies that deliver a significant return in the long-term best interest of islanders. However we are also very clear that acting commercially does not mean always maximising financial return.
That in part reflects the essential nature of the services they provide to islanders, which is one reason they are still in States' ownership. It also reflects a challenge they all face from being in public ownership. The States may have determined they should behave commercially, but the public generally have higher expectations of publicly-owned operations than they would of private companies.
Such expectations are if anything amplified in a small community such as Guernsey. That is something that we as a board and each of the trading assets are acutely aware of.
In terms of establishing governance and management structures, long-standing arrangements were already in place for Guernsey Electricity, Guernsey Post, the "Aurigny Group", and the holding company for the fuel ships, JamesCo. These roles are performed by distinct, standalone boards of directors for each incorporated assets, supported by experienced senior management teams.
STSB's job is not to replace or duplicate those functions, but to provide oversight as the shareholder. That is now done through quarterly meetings between representatives of STSB, and the Chairman and senior directors of each company. These meetings are an opportunity to review financial performance, progress against key performance indicators, performance against shareholder objectives and their business plan, and the core business risks.
Our mandate is different with respect to the unincorporated trading assets. For Guernsey and Alderney Airports, Guernsey Dairy, Guernsey Harbours, Guernsey Water, the lottery, Property Services, and States Works, we have more direct responsibility for their efficient management and operation. However, that does not mean the STSB is responsible for the day to day running of all these vastly different operations. Our role is to focus on providing long-term strategic direction, and ensuring they are able to deliver on that.
We therefore established separate "company boards" for most of them - in many ways mirroring the corporate governance arrangements of the incorporated entities. Instead of the traditional non-executive director role, additional commercial expertise and independent perspective has been provided by co-opting senior managers from other trading assets, or someone from within States of Guernsey with relevant experience, to sit on each board.
They are either now working to a long-term business plan, or developing such a plan, which sets their strategic direction and establishes their key performance indicators. These are agreed by the individual company boards, for endorsement by, and regular reporting to, the STSB.
Inevitably, this has been a period of transition for all of the trading assets. As well as adapting to the new STSB model, they all face significant challenges, often due to external factors. The challenge for the Board is to ensure that when we hand on to the next STSB, they are in a better position than when we started. In that respect, I am pleased to say we have made a very positive start.
In terms of financial contribution to the States, in the past 18 months the trading assets collectively have returned £38 million to the treasury. That has been achieved through a combination of ordinary and special dividends, and the refinancing of infrastructure projects previously funded through the capital reserve. That total of £38 million also includes a first year contribution of £5 million to the Medium Term Financial Plan target of £30 million over five years.
This contribution towards the delivery of public services and long term savings targets is clearly important. However as I stressed earlier, it is not all about maximising profits. Significant progress is also being made in other important areas.
One such area is the need for transformation. A prime example is States Works, for which the ongoing pressure on public sector spending presents a key challenge. Given that around 90% of its revenues are from contracts with other States Committees, future profitability will only be possible through improved efficiency. That in itself will deliver wider benefits to the public purse. It is therefore the focus for the current management, and a new Target Operating Model is being developed to identify how best take the organisation forward.
Another major transformation programme is the implementation of the waste strategy, which will deliver on a key policy priority set by the P&R Plan.
We have also seen some excellent new initiatives in improving customer service. One example is the hidden disability lanyard scheme introduced at Guernsey Airport, which recognises that some travellers require extra support. That can be anything from help reading signs or screens, listening for announcements, or extra time to get through security. Airport and airline staff are now trained to look out for the specially designed lanyards and offer discreet assistance where required.
Guernsey Harbours is also investing £500,000 to replace various legacy IT systems and manual processes with a new, integrated port management system for both leisure and commercial port users. This should not only provide a better service for customers, it is another good example of transformation in practice.
A number of major infrastructure projects are also underway - not least the construction of the new waste facilities at Longue Hougue.
Coupled with this, Guernsey Water is making major improvements to the sewer network in the north of the island, and last year also took the difficult but right decision to close down its Longue Hougue water treatment works and recommission the former works at Juas Quarry. That decision will result in significant long term operational savings.
Guernsey Dairy has similarly made significant strides in improving its commercial focus, particularly given the challenges that it faces in operating with dated equipment and premises. That situation was underlined in 2016 when its previously good hygiene rating was downgraded. Significant investment in the fabric of the building was required, as a result of which I am pleased to say the Dairy has since regained a four star rating.
On the property front, Funky Pigeon's move to the former post office headquarters in Guelles Road last year was a major boost for the island. The agreement of a long term lease was possible because the STSB took a broader view of the benefits it could bring, beyond a simple rental agreement on an otherwise disused building.
As a result, the island retained a major player in the greetings card market, which might otherwise have relocated, and that secured jobs not just at one company but in the wider sector as a whole. Of even greater significance is the vital contribution that the bulk mail business to Guernsey Post's profitability and viability, which this deal will help safeguard.
This touches on another aspect of the STSB mandate, which has been a priority for the current Board. That is the need for better management of the States extensive property assets, for which a comprehensive estates plan has now been developed and we will be bringing proposals to the Assembly in the very near future to progress this.
As well as focusing on the trading assets, STSB's mandate also requires us to work closely with other States Committees across a number of policy areas. That includes Environment & Infrastructure, with whom we have brought forward four joint policy letters on waste; and Economic Development, who we assisted in identifying sites for light industry, and have advised on matters of air connectivity for both Guernsey and Alderney.
We have also worked with the Policy & Resources Committee, most notably on the strategic review of Aurigny, and in delivering on the recommendations arising from that review which will help shape the future of the airline. In the medium term, the intention to introduce a public service agreement for the provision of services to and from Alderney should substantially improve Aurigny's overall financial performance - whether or not it wins the contract.
At this point it is only right to acknowledge the contribution of the management and staff of all our operations, without whose expertise and commitment we would not have achieved the progress that we have. They have also ensured that while a major transition has been going on behind the scenes, the various business as usual continues as normal.
In many instances these are 24 hours a day, 365 days a year operations. The fact we can largely take these for granted is only highlighted when there is threat of significant disruption, such as with the adverse weather we experienced a number of times this year. Our ability to cope with such incidents and their aftermath owes a great deal to the commitment of the staff of States Works and our other trading assets - the airports, harbours, and Guernsey Water in particular - and they deserve enormous credit for that.
In closing, I would also like to thank my fellow STSB Board Members for the invaluable contribution that they have made. It has been an interesting challenge, we have seen a number of notable achievements, and I am pleased to say with the support and hard work of the staff and management of the trading assets, we have made considerable progress.
