Silja Annual Report 2000

Silja Oyj Abp Annual Report 2000 Key Figures EUR m 2000 1999 1998 1997 1996 Gross revenues 526 540 593 605 669 Operating result 23 43 –20 22 18 Result after net financial items 1 17 –62 –13 –22 Cash flow from business operations 43 65 36 28 39 Interest-bearing liabilities 420 492 517 653 629 Capital employed 575 646 656 772 768 Share of risk-bearing capital, % 31 29 26 20 22 Result after net Cash flow from Interest-bearing Share of risk- financial items, business operations, liabilities, bearing capital, EUR m EUR m EUR m % 20 70 700 35 10 60 600 30 0 50 500 25 -10 -20 40 400 20 -30 30 300 15 -40 20 200 10 -50 10 100 -60 5 -70 0 0 0 ‘96 ‘97 ‘98 ‘99 ‘00 ‘96 ‘97 ‘98 ‘99 ‘00 ‘96 ‘97 ‘98 ‘99 ‘00 ‘96 ‘97 ‘98 ‘99 ‘00 Operations Convertible bonds Non-recurring items Other liabilities Silja in Brief Contents Silja Oyj Abp was founded in 1883 as Finska 2 Significant Events of the Year Ångfartygs Aktiebolaget (Finland Steamship 4 To the Shareholders 5 President’s Review Company Limited). The company’s shares have been listed on the Helsinki Exchanges since 1912 Business Operations when the Exchange commenced operations. 6 Silja Line The Group’s business idea is to offer high- 6 Passenger Services quality passenger transports and experiences at 10 Cargo Services sea, and also cargo transports, in the Baltic Sea 11 Other Operations area. A fifty-year long, continual development of 12 The Fleet 14 Environment the concept of combination tonnage, with passen- 15 Safety ger facilities and car decks on the same keel, forms 16 Personnel the framework of operations, today and in the future. Financial Statements Silja Line is the leading passenger shipping 17 Report of the Board of Directors company in the Baltic Sea. Silja Line’s renowned 21 Consolidated Income Statement brand, built up over a long period through pur- 22 Consolidated Balance Sheet 24 Consolidated Statement of Changes in poseful investment in quality in a wide sense, is Financial Position based on five values, which permeate all our 25 Accounting Principles activities. These values are: safety - the customer - 27 Notes to the Consolidated Financial Statements commitment - quality - profitability. 37 Parent Company Income Statement Since April 1999, the Group’s principal 37 Parent Company Balance Sheet owner is Sea Containers Ltd. of London, who 37 Parent Company’s Statement of holds 50 per cent of the share capital and voting Changes in Financial Position 38 Notes to the Parent Company Financial rights. Statements 40 Five-year Review 43 Definitions 44 Shares and Shareholders 48 Board of Directors’ Proposal to the Annual General Meeting 49 Auditors’ Report 50 Corporate Governance 52 Board of Directors, President and Auditor 53 Board of Management 54 Addresses 55 Information to Shareholders Significant Events of the Year 5.2 million passengers were welcomed on board Silja Line’s ships in the first year of the new millennium. May 2000 The Annual General Meeting decided to change the Group’s name to Silja Oyj Abp as of May 30, January 2000. The cruise ship Crown Dynasty was sold to Com- Labour actions disturbed services on Silja modore Holdings Ltd. Line’s ships under Finnish flag. During a two-week dry-docking, catalytic converters were installed in the Silja Europa’s main June engines and the ship obtained new life-saving The President of the Group, Mr Jukka Suominen, equipment. announced his intention to resign on July 31. Mr Nils-Gustaf Palmgren was appointed new March President. Mr Lars Wendelin took over responsibility for pas- The Group sold its 50-per cent holding in senger services after Mrs Riitta Vermas, who re- the Oy Backman-Trummer Ab forwarding com- signed from the Company. pany. In Sweden, Silja Line was, for the eighth time Due to the heavily increased fuel prices, Silja running, awarded the Grand Travel Award for the Line introduced a bunker surcharge, which is best passenger ferry company. added to the ticket prices for all regular voyages and cruises and to the freight rates. April Sea Containers’ fast ferry SuperSeaCat Four July started her service between Helsinki and Tallinn. Silja Europa was out of service for five days due to propeller damage. 2 SILJA OYJ ABP August One of the highlights of Mr Nils-Gustaf Palmgren took up the position of the year 2000, when President of the Silja Group on August 1. Helsinki was a European city of culture, was the September Tall Ships’ Race in July. Negotiations were initiated with the authorities The Finnish Minister of concerning the unprofitable Gulf of Bothnia serv- Culture Suvi Lindén ice. watched the event from Silja Line was awarded the Volvo Transport the bridge of the Silja environment prize in Sweden. Serenade. Silja Line and Scandic Hotels intensified their alliance by integrating their products, mar- keting and loyal customer programs. October Silja issued a profit warning owing to increased costs and to losses in the Gulf of Bothnia service and informed of its plans to transfer the Silja Europa to another flag and initiate preparations to close down the Gulf of Bothnia service. The previously introduced bunker surcharge added to ticket prices was raised. Mr Henrik Österberg, Executive Vice Presi- The Swedish Government informed of a pro- dent and CFO, announced his intention to leave posed bill concerning the introduction of a net the company at the beginning of 2001. salary system for passenger ships as from 2002. The Finnish Shipowners’ Association and the Commodore Cruise Line filed a petition for Finnish Seamen’s Union agreed on changes to the Chapter 11 procedure. collective agreement, to be applied as from spring 2001 and resulting in cost cuts of about 15 per cent. The plans for flagging out were discontin- ued. 2001 November A decision was made to discontinue the Gulf of February Bothnia service at the turn of the year because of Mr Henrik Österberg resigned from his position unsatisfactory passenger volumes and subsequent as Executive Vice President and member of the losses. Board of Management. Mr Sören Pettersson was appointed new December CFO. A decision was made to have the Silja Europa call The Fennia was sold. at Kapellskär instead of Stockholm during the period March - mid May 2001. This will give the Finnish market a better cruise product and at the same time reduce the fuel bill. SILJA OYJ ABP 3 To the Shareholders Finnish flags and our seafarers have promised to co-operate in achieving them. These new arrangements should secure the jobs of our seafarers on the Sweden-Finland routes, while on the routes where we compete with low cost Baltic flag ships we need to extend the mixed manning arrangement which has been pio- neered with the fast ferry service. On the Turku-Stockholm line Silja is taking the following steps: First, the Silja Festival is being upgraded by redecoration, addition of cabins and improvement of public rooms. Second, the Silja Europa will operate between Turku and Kapellskär in winter, permitting more time on board and hence greatly im- proving the cruise product. Third, we are planning to replace in early 2002 the Star Wind with a much larger freight ship, also able to carry passengers. On August 1, 2000, Nils-Gustaf Palmgren became the Managing Director of Silja, replacing Jukka Suominen. Mr Palmgren is a highly experienced veteran of Silja and its many predecessor companies. His mission is to strengthen management through promotions and recruitment, to keep Silja’s image ”fresh” in the marketplace, to improve systems and to increase revenue. The company owes a debt of gratitude to Jukka Suomi- The first full year of Sea Containers’ investment in Silja has nen and Henrik Österberg, Chief Financial Officer, both of been a ”Baptism Under Fire”. Three serious problems adversely whom have stepped down recently. They both contributed sig- impacted earnings. First, fuel costs were EUR 19 million higher nificantly to Silja over the period of their association with the in 2000 than in 1999 and Silja was only able to recover a small company. part of this cost through higher fares. Second, the Vaasa-Umeå Commodore Cruise Line, previously a Silja company, route was heavily loss making without the support of profits entered into a suspension of creditors in the US in December from duty free sales. Third, introduction of the new fast ferry 2000 (called ”Chapter XI” bankruptcy). Commodore owes Silja service between Helsinki and Tallinn was more costly than ex- approximately USD 30 million in connection with the sale of pected. two ships. These loans are secured by mortgages on the vessels. Fortunately, we think all three problems are now behind Your board has felt it prudent to set up a provision of EUR 15 us. We have been able to buy forward most of our 2001 fuel million on the 2000 accounts to allow for possible loss on resale requirements at much lower prices. We have terminated the of these vessels. Vaasa-Umeå service and sold m.v. Fennia to a new operator. Despite the difficulties of 2000, I expect Silja to emerge as Sea Containers has reached agreement with the trade unions a stronger company, able to expand its activities on a solid foot- permitting employment of Estonian cabin crew at international ing. The staff are to be congratulated on their dedication and wage rates on the fast ferry. loyalty. Crew wages has been a very sensitive issue. The Swedish government has endorsed the concept of a net wages agreement James B. Sherwood and the Finnish government is giving it serious consideration.

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