The shipping industry offers neither an easy nor a consistent means of earning a living; always peaks and troughs, a Beaufort Scale of a business, with rare periods of calm weather between storms of varying intensity. Throughout the Bibby Line’s history, major strategic decisions have been in response to external changes – whether in technology, such as the introduction of steam power, diesel engines, air travel, containerisation; to changes in British government policy, or to world events such as the annexation of Burma, the opening of the Suez Canal, assorted wars, globalisation, or the Asian crisis. Add in the cyclical nature of the shipping industry – cycles that can take decades to work through, or turn almost overnight.
Internal pressures are harder to analyse – personal ambition and interests, family and shareholder issues can exert considerable pressure on strategic decision making. For instance, Sir Derek Bibby wrote in 2001 of the relationship with his father, noting one of the successes of his tenure as ‘standing up successfully, to my father.... If I had not won, I feel certain the Company would have folded in 1971 when the trooping contracts ended and the Burma/Ceylon trade packed up.’
The company nearly foundered 10 years later, too, after Bibby left Seabridge. Michael Bibby explains the company’s crisis in the early 1980s: ‘With high inflation and the high corporation tax rates of the 1970s, plus 100% writing down allowances (which could be sold to other companies), a ship could be ordered and on delivery two years later would be worth 50% more – and 50% of its value could be offset against tax. The new ships therefore seemed certain to make money and many were ordered. But all that changed after Margaret Thatcher came to power in 1979: inflation was quickly reduced and the tax breaks were removed. At the same time the freight markets crashed, so Bibby Line’s income fell dramatically, causing ship values to plummet. The company had overextended itself on the new ships, and was forced to sell to pay back the banks. No new vessels were ordered between 1977 and 1989 (the only addition to the fleet was the little 2,500 ton dwt ethylene carrier Leiv Eriksson, acquired in 1985) as the company struggled to survive. Cost savings were paramount and the high cost base and high quality standards of a UK ship owner/manager was threatened by low cost operators from overseas competing in international markets.
‘The company was on its knees, unable to ride the cycles in shipping, says Michael. ‘Shareholder funds were down to £13 million and unless my father could find ways to diversify the business, he knew the Bibby Line would be finished.’ The next stage of the company’s evolution began, with the start of Financial Services and Distribution, specialising in higher value LPG and chemical tanker vessels, the development of marine activity through ship management, and finding niche opportunities in the coastel, jackup and offshore industries.
Costs were mitigated by flagging the vessels out (ie registering ships outside the UK) and moving the seafarers on to offshore contracts thereby avoiding national insurance tax contributions. Foreign crews were also introduced. A major shift for the company and, at the time, difficult to sell to Bibby Line employees, the move offshore helped the company survive and the manning operation on the Isle of Man has since been turned into a profitable business in its own right.
The LPG story ended with the highly profitable sale of the three LPG carriers in the Exmar pool – Cheshire, Oxfordshire and Lancashire – in February 2005, almost at the top of the market, proving that there is always a time to sell. This has given Bibby Line a substantial injection of funds which are to be invested in new shipping opportunities.
‘Looking back, the 1970s was about survival, the 1980s about change and the search for new markets, and the 1990s saw consolidation and organic growth,’ says Michael. ‘In the 2000s, the businesses started in the 1980s are maturing, so we are now having to be more creative and more professional to deal with stronger competitive pressures. Our risk management is improving – we understand better what we do, and how to minimise the risks while still developing people to deliver more ambitious ideas.’
As the company enters 2007 the strong balance sheet, new acquisitions, expanding international presence and raft of new products across the business means that the company is entering yet another growth phase. Whether the lessons of the past, to back the winners and quickly to limit the losses from experiments that don’t work, has the desired effect on the company’s fortunes, no doubt the seventh generation will make very clear to the sixth, in due course.