CALMAC FERRIES LIMITED

MINUTES OF BOARD MEETING HELD AT THE CARLTON HOTEL, NORTH BRIDGE, EDINBURGH, AT 2PM ON WEDNESDAY 20 NOVEMBER 2013 ______

Present Mr D C McGibbon, Chairman Mr S Hagan Mr N L Quirk Ms P J D Stark Mr M Dorchester Mr R L Drummond Mr S A Ure

In attendance: Mr M Easton, Non-Executive Director, David MacBrayne Ltd Mr J Stirling, Non-Executive Director, David MacBrayne Ltd Mr B Fulton, Operations Director Mr A Collier, Chief Risk Officer Ms C Roberts, HR Director, David MacBrayne HR (UK) Ltd Mrs C Craig, Head of Marketing and E-Commerce Mr D Cannon, Public Relations Manager Ms K McGregor, Chief Executive, Firstport Mr C Paterson, Board Administrator ______

1. PRELIMINARIES

Mr McGibbon welcomed Mr Easton, Mr Stirling, Mr Fulton, Mr Collier, Ms Roberts, Mrs Craig Mr Cannon and Ms McGregor to the meeting.

1.1 Apologies for absence

There were no apologies.

1.2 Declarations of interest

There were no further declarations of interest, other than those previously made and known to all Directors.

3. CHAIRMAN’S REMARKS

Mr McGibbon referred to the postponed meeting with the Minister for Transport and Veterans, Keith Brown, MSP. He highlighted the Minister’s five key requirements of the Company; the successful delivery of the CHFS and Gourock/Dunoon contracts; implementation of efficiencies; alignment with Scottish Government Purpose Targets and National Outcomes; the support of the implementation of the Ferries Plan; and the strategic development and business activities that support Scottish Government Purpose Targets and National Outcomes.

Company DVD presentation

Mrs Craig presented a DVD which she noted had been updated to be an infommercial and developed to be presented to any organisation to explain the Company’s operations.

The Board commented favourably on the DVD. A suggestion was made that location captions could be added where particular scenic views were shown. Mrs Craig added that most of the content had been included in the Gotland Bid submission and the DVD could also potentially be used as a staff induction tool.

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Minister’s Presentation

Ms Roberts introduced the slide presentation that had been prepared for the Minister. She noted that all of the Executive Team had contributed to it. There was a focus on the awards that the Company had won. Other focuses included were; the Group’s Transport Strategy and Group Mission Statement; that the Government had identified 16 National Outcomes and the Group has identified many that the business can align to; the many island and network-based jobs, cadet training and investment in career progression and the Company being in receipt of an STUC Employer Learning Award for 2013; Route reliability and punctuality and high quality service provision; a Continual Improvement Programme; Port Operation efficiency and the successful introduction of new staff terms; and matching resource to requirement and revised absence management policy.

Education Research and Innovation slide Mr Dorchester noted that ITIL Best Practice IT Service Management accreditation had been gained by all members of the IS Dept and suggested that this should be inserted into the presentation. He also noted that the Group regularly contributed to safety initiatives and the IMO. Mr Hadfield noted that best practice in Project Management was being implemented and that there was recognition by Transport Scotland of CalMac Ferries’ strategic development.

Environmental slide Ms Roberts noted that it was important for the Group to emphasise corporate environmental responsibility.

Strategic aims slide Ms Roberts noted that Strategic Aim 1 of the Group was to generate revenues, in hand with Strategic Aim 2 in addressing cost reduction efficiencies. Mr Ure noted that the cost of modifications and upgrades had doubled to maintain the reliability of elderly tonnage. Strategic Aim 3 addressed extending the reach of the Group, to develop contact with local councils, identify new contracts and increase international tourism. The Group should highlight how easy it is to reach destinations using the development of combined ticketing. Mr Dorchester noted that the ScotRail 2015 Contract contains a requirement for the operator to provide Smart Integrated Ticketing. He added that the Minister had yet to announce a smart ticketing standard and that the Group had been in early discussion with Transport Scotland in respect of national ticketing.

Progress on delivery of Ferries Plan Ms Roberts noted that the Group had helped deliver the short term aspirations of the plan, and the MV Isle of Arran had been key in developing routes. It was noted that a very extensive amount of management time had been spent in delivering the new routes.

The Board discussed the Group’s efforts and how they were recognised within Transport Scotland. The presentation was also discussed and it was felt that there should be more focus on being dynamic and highlighting the passion that staff had for operating the Company.

Mr Mc Gibbon thanked all concerned in the production of the presentation.

Guest introduction

Mr Dorchester introduced Ms McGregor, Chief Executive of Firstport. He noted that the body was a social enterprise organisation, which he chaired. He was keen for Ms McGregor to interact with the Board and highlighted that it offered a pragmatic opportunity to become involved in the development of community businesses.

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2. MINUTES/MATTERS ARISING

2.1 Minutes of previous meeting and Action Point

Mr Fulton noted that the reference to the Mystery Visitor programme in 1.3.1 should have noted that while it was due to end in September, the programme was being reviewed with an option to extend.

Action point Mr Collier confirmed that the Action Point had been closed out, with Mr Thomson conducting a Project which would be reported on later.

The Board had a short discussion on the funding of a Voyage Data Recorder installation programme.

Subject to the amendment, the Minutes of the Board Meeting held on 17 September 2013 were approved.

2.2 Matters arising

There were no matters to record.

3. CHAIRMAN’S REMARKS (continued)

Mr McGibbon noted that he would be speaking to the Minister in order to re-arrange a meeting date and opportunity to give the presentation.

Mr McGibbon that the National Mod had been a great success and congratulated the Company on achieving the Best Ferry Company 2013 award for a fourth consecutive year in the Guardian, Observer and guardian.co.uk Readers' Travel Awards. He also congratulated Mr Drummond and all concerned in the construction of the Gotland bid, assisted by Mr Easton and Mr Stirling.

Mr McGibbon referred to the commencement of the new Ferries Plan route between Lochboisdale and Mallaig.

Mr McGibbon noted that the new CalMac Pension Fund deficit reduction plan had been submitted to the Pensions Regulator. Mr Drummond noted that CMAL was to make direct payment to the Fund within the next couple of weeks and that the Company would be completing calculations on what needed to be paid to meet the agreement.

Mr McGibbon noted that there had been some 65 applications to fill the post of Non-executive Director subsequent to Mr Quirk’s tenure being completed.

4. OPERATIONAL PERFORMANCE REVIEW

SAFETY and RISK REPORT

Mr Collier presented his report on-screen. He noted that there had been no RIDDOR reports, no fatalities and no prosecution notices in the September-October period.

Safety Performance

Mr Collier noted that an incident involving a crewmember on the MV Isle of Lewis who had put his foot in the bight of a rope on the mooring deck and sustained injury when the rope was wound onto the drum, had been investigated and a comprehensive report written. Also, following a recent serious incident involving injury to a night-watchman, a report was being prepared and some aspects of concern had already been identified.

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Mr Collier referred to a small fire which had broken out in a compartment while welding work was carried out on MV Loch Riddon while it was at Ardmaleish Boatbuilding Company’s premises. He noted that the incident raised the question of audits of 3rd parties’ management systems. There was a resource constraint – for example this year there had been 20 investigations, whereas last year there had been 4. Mr Ure referred to the fact that there would be a large number of fleet SMCs due for renewal in 2014. Shipyards should conform to the ISO9001 management system and it would be prudent to look more closely at smaller yards’ safety systems.

Internal Audits

Mr Collier noted that audits were being progressed as per timetable. He added that the more that was investigated presented the opportunity to identify what needed addressed. Mr Collier noted that Mr Wood, Chief Officer, was seconded to the office and was assisting with a number of projects. Mr McDonald, OSM, would be assisting with Waste Management plans in 2014.

Following an ISO9001 Audit, four minor non-conformances were being closed out.

Mr Collier noted that Mr De Wolff is considering options in respect of a management system to control company documentation.

Tobermory incident

Mr Quirk raised the matter of the incident at Tobermory slipway involving an excavator becoming submerged by the tide after being delivered in the evening. There had been some considerable risk to the haulier’s personnel and Company staff had become involved in rescuing the situation. Mr Collier had written to CMAL to inform them that the whole incident required to be reviewed by them as they had arranged for the delivery of the plant. Mr Drummond noted that the management of plant delivery would be referred to in future Contracts. Mr Collier noted that there appeared to have been an expectation by CMAL that Company staff would have been on-site to manage activities but that this had not been arranged prior to the incident.

The Board discussed the incident and CMAL’s responsibilities.

OPERATIONAL EXECUTIVE SUMMARY

Mr Fulton presented his paper and summarised the key points. His team consisting of Marine, Customer Contact, Harbours and Network Ops is now fully resourced.

OPERATIONS

Marine Dept

Safety Mr Fulton noted that recent incidents involving rope handling and berthing were being reviewed.

Loch Seaforth Mr Fulton noted that recent simulator trials had produced results on propulsion. It was noted that the vessel was slower to decelerate than anticipated and there was a focus on weather resilience.

Mr Dorchester indicated that he had informed the Minister that he would be writing to Transport Scotland in respect of the delivery of MV Hallaig and would be addressing warranty, deadweight and delivery timing issues.

Bull Hole workboat Mr Fulton noted that the suitability of the current boat was being reviewed, but the preferred solution would be a berthing structure accessible from the shore.

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Harbours

Ullapool Mr Hadfield noted that it had been agreed by Transport Scotland that a new linkspan should be designed.

Stornoway Mr Fulton noted that service operation would take place for a period of time in the summer from No.1 Pier while the pier and facilities at No. 3 Pier were redeveloped.

Brodick Mr Fulton noted that the CMAL-hosted meeting at Brodick had offered the opportunity for the community to debate the future-proofing of the Pier by extending it to accept a replacement vessel at some future point which would be likely to be 130M in length.

Project Poseidon Mr Fulton noted that the project had received two non-compliant tenders and alternatives were now being considered.

The Board requested that a brief descriptive term be added to any Project Name that was reported on.

Network Operations

Port Ts & Cs

In response to a query by the Board about the estimated cost of extending a current agreement to other segments of personnel, Mr Fulton indicated it would be in the order of £150K.

Finance Report

Mr Drummond presented his paper.

Key Financial Numbers Section 2 Mr Drummond highlighted that [FOISA Status - Exemption under Section 30 (Prejudice to Effective Conduct of Public Affairs)] would be returned to Transport Scotland. He indicated that the Transport Scotland budget had been exceeded and that variations to contract had been a significant factor.

Section 3 Mr Drummond noted that where Transport Scotland required additional contract delivery, the Group ensured that this was charged for, while demonstrating efficiencies at the same time.

IS Dept Mr Drummond noted that Project Valiant (Network) was progressing with 2 competent bids having been received. [FOISA Status - Exemption under Section 30 (Prejudice to Effective Conduct of Public Affairs)]

TECHNICAL REPORT

FLEET MANAGEMENT

Fleet Technical Safety

Safety items worth noting

Mr Ure noted that the small fire which had broken out in the engine room space of MV Finlaggan had been dealt with swiftly and efficiently by the engineering crew.

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Fleet reliability

MV Isle of Lewis Mr Ure noted that a loss of stern tube oil had resulted in the vessel having to be docked for repairs.

NEW BUILD PROGRAMME UPDATE

Hybrid vessel MV Hallaig

Mr Ure noted that the reporting by manufacturers’ representatives on the various technical failures had been less than satisfactory and that this was being pursued as a matter of urgency.

Fleet upgrades Mr Ure noted that increased funding had been required to address equipment upgrades and modifications and that some items still required to be agreed with CMAL.

Fuel supply strategy Mr Ure noted that a strategic fuel supply project had been commenced in view of industrial relations problems at Grangemouth potentially affecting future supply and the development of LNG as an alternative fuel.

The Board discussed the fuel contract and future considerations. It was noted that Royal Bank Leasing may have to consider selling the NorthLink fleet in respect of tax benefit rules.

Small Vessel Fleet Rescue Mr Ure indicated that a generic risk assessment had to be written. He pointed to the fact Man Overboard Recovery was an industry problem and not just restricted to the Company. It appeared that the MCA still had to give the regulations further consideration.

Mr Dorchester commented that he was very pleased with the marked improvement in the relationship between the Company and the MCA and congratulated Mr Ure for his efforts.

MARKETING REPORT

Mrs Craig noted that the Final Draft of the Homecoming 2014 paper had been produced and would be referred to elsewhere.

Mrs Craig noted that the Company achieves significantly more in terms of Marketing E-commerce and Public Relations that the Public Service Contract requires.

Referring to the Commonwealth Games in Glasgow in 2014, Mrs Craig noted that entry level marketing participation was very expensive but would be exploring ways in which to partner with other organisations.

Coach update Mrs Craig noted that coach booking enquiries had doubled from last year’s results.

CV update Mrs Craig noted that there was a continued decline in haulier business, and while it was not related to service levels, identifying the underlying reasons was proving challenging.

European/Overseas Mrs Craig noted that the Company had been approached by two wholesalers to take the services to market.

COMMUNICATIONS REPORT

Mr Cannon presented his report. He noted that it had been a significant year for the Company in media relations and public affairs. The Parliamentary Reception had offered an opportunity to focus on what relationships would be advantageous to cultivate.

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Mr Cannon noted that the integration of Marketing and Public Affairs had worked very well. He paid tribute to the naming of the Susan Paterson Caledonian MacBrayne Trophy, which had been well received at the Mod.

Mr Cannon noted the new appointment of an Internal Communications Manager, Mrs Elaine Dyer.

5. PROGRESS FOCUS

Marketing – strategic discussion

Mrs Craig presented the paper.

Mrs Craig noted that the Company was the only transport operator to be part of the Homecoming 2014 campaign and was pleased to note that it would be a prolific promotion. Also, the Ferry Firsts campaign was to be developed in conjunction with the service timetable.

Referring to the issue of an e-newsletter, Mrs Craig noted that the Company would be highlighting that it was developing new ideas; for example advertising Campbeltown as a new destination in a circular tour.

Mrs Craig noted that a Retail Plan had been developed and that 2015 would be a themed year. In addition, a Food & Drink plan for this year had been put together.

A Mood Film was played on the projector and Mrs Craig indicated that there were further Mood Films. The Board discussed the presentation and content of the Films, with favourable comments.

[FOISA Status - Exemption under Section 30 (Prejudice to Effective Conduct of Public Affairs)]

Contracts

HAA/HOA Mr Drummond noted that the revised Harbour Access Agreement and Harbour Operators Agreement had been finalised with CMAL and they had been submitted to Transport Scotland for approval. In respect of the property hand-over, it was intended to invite CMAL to act as SME in the matter.

MV Loch Seaforth

Mr Drummond note that CMAL had signed off a Contract lease for the vessel with Lloyds Bank, but as the terms for the Bareboat Charterer were onerous, the Company would be seeking various indemnities.

6. SUBSIDIARY

Caledonian MacBrayne Crewing (Guernsey) Ltd

The Board noted the Minutes of the Board Meeting held on 25 September 2013.

7. ANY OTHER BUSINESS

MNRPF Mr Drummond noted that MNRPF liabilities post-2006 for Caledonian MacBrayne Crewing (Guernsey) Ltd and CalMac Ferries Ltd had moved to CMAL and it was unclear exactly where the liability rested.

The Board discussed the MNRPF liability and the contribution level. It was agreed that Mr Drummond would bring a paper on the matter to the David MacBrayne Board for discussion.

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Appointments Mr Dorchester congratulated Ms Roberts and Mrs Craig on being respectively appointed as HR Director and Commercial Director. He welcomed their appointments in what had been a difficult transition period for the Group.

Board Committees

Mr McGibbon confirmed that Ms Stark had agreed to chair the Audit & Risk Committee and was also the Senior Non-Executive Director and Mr Stirling had agreed to chair the Safety Committee.

Mr Quirk

Mr McGibbon commented that this Board meeting was Mr Quirk’s final meeting, noting that he had joined the Board six years ago, bringing a lot of skills to bear. He warmly thanked Mr Quirk for his contribution. Mr Quirk responded by saying that it was refreshing to see a lot of change progressing within the Group and that there was a significant alteration to what was discussed now, with a focus on strategy and not trivia. He thanked the Board Members for their camaraderie and offered good wishes for the future.

8. NEXT MEETING

To be arranged.

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