By Carole Dennett
The latest financial accounts from Red Funnel Ltd, published this week by Companies House, have revealed the company’s immense financial struggles.
Alongside the trading company’s accounts, which were published last week and included a Material Uncertainty related to Going Concern (MUGC), a similar red flag has now been raised for the parent company’s financial filings. This warning indicates serious concerns from auditors over whether Red Funnel can continue operating without significant investment, refinancing, or a sale of the business by September.
The looming deadline for repayment of a £48 million loan taken out in 2017 (and extended twice) adds to the pressure on the troubled ferry operator. It must be repaid in September or there is a threat that the lenders will call in the loan, and there will clearly not be enough money to repay it. Despite initiating a sale process in March 2024, no buyer or source of alternative funding has yet been found.
Directors claim to be in discussions with “several parties” and believe it is “very unlikely” that their effort will fail. However, whether this optimism is well-placed or sheer bravado in the face of dreadful results remains to be seen.
The numbers paint a bleak picture
The company reported a jaw-dropping £195.9 million loss for 2023, a sharp rise from its £27.7 million loss in 2022. This is primarily down to the write-down of “intangible assets” or goodwill, reflecting a stark decrease in the company’s value. The financial black hole was deepened further by the £224,000 purchase of the Hythe ferry, which has now been written off.
These figures mean the company is now technically insolvent, with its debts outstripping its assets.
Revenue increased by 10.4 per cent in 2023 to £61.1 million, driven by higher passenger numbers and additional sailings. However, despite this growth, profits plummeted by 21 per cent to £11.9 million, leaving £6 million in cash reserves at the year end. Further illustrating how strained their finances are, Red Funnel drew down an additional £2.6 million in July 2024, tied to an existing loan.
If Red Funnel manages to secure investment or refinancing by September 2025, it must be enough to ensure the company can survive another financial landmine in September 2026, when a further £30 million loan repayment falls due on top of the £48 million.
Compounding these challenges is the urgent need to replace their three ageing Raptor-class car ferries, an investment estimated at £100 million. These ferries are increasingly unreliable, with frequent breakdowns affecting cash flow while also harming Red Funnel’s appeal to potential investors or buyers.
The desperate financial situation and the need to have all paperwork in place in case a buyer or investor is found has seen all ships and properties placed under renewed charges. Curiously, Fran Collins, Red Funnel’s CEO, signed a property charge in the presence of Ollie Futter, head of operations at Condor Ferries. Why this important legal document was signed in front of an employee of a rival operator is unclear, with no explanation provided by either Mr Futter or Red Funnel’s chairman, Stephen Ridgway.
Mal Butler