Call Sign May 2009 - Page 4 - Reflections of the Chairman

More Good News!
No doubt you will remember that in last month’s Call Sign I endeavoured to point out some of the good things that were happening in the world, in complete contrast to the doom and gloom merchants that were talking everything down.
I think it’s probably fair to say that there is not one of you out there that has not heard of Goldman Sachs. Well, the Wall Street giants recently reported a $1.8bn (£1.2m in real money) net quarterly profit, beating all analyst’s expectations. That was in complete contrast to the previous quarter where Goldmans had posted their first quarterly loss since going public in 1999.
What’s also quite interesting is that Goldman Sachs has said it would reserve more money for staff salaries in the first quarter than it did last year. Not really sure what that means as Goldman have reduced their headcount by some 7%, so perhaps they are going to recruit? But what is perhaps more likely is that they will pay bigger bonuses to existing staff.

Is the worst of the recession over?
   Given the above results, some analysts are now saying the worst could be over for finance firms. What they are also taking into account is that another American bank, Wells Fargo, surprised investors when announcing it expected a record net profit for the quarter. Those two were then followed by JPMorgan, who earned around £2bn in that same quarter and then Citigroup, who pushed out $1.6bn in profit - although that amount left them with a small loss after dividend payments to preferred shareholders were taken into account.
   I have also noticed that the weekly trip figures at Dial-a-Cab seem to have bottomed out and if the above news on the four banks continues into other banks and indeed businesses, it could herald the beginnings of an upturn here at DaC House and bring into the market place yet another sign that things will soon begin improving everywhere. So let’s all hope that the worst is over.
   However, one thing is certain; we were definitely in a fairly small

minority at Dial-a-Cab in trying to promote an optimistic attitude from the word go. I said many times in the early days, when we thought we were still dealing with a minor slowdown, that I felt we were talking ourselves into a recession. And we did…

Back to the last recession…
I know how tough things are out there at the moment, so I was tempted to go back to the early nineties to see how we fared in the last deep recession that we experienced. That period was quite catastrophic for Dial-a-Cab, as we almost went out of business and lost nearly £1m in a two year period.
   I am led to believe that the BoM of the day had to inform the bank on a daily basis exactly how much money had been received on that day in order that the bank could decide whether or not Dial-a-Cab could continue to trade! I know it was a very nervous time for everyone involved, including members who were extremely uncertain as to whether or not Dial-a-Cab would survive.
   The situation was exacerbated by the fact that the BoM of the day decided to increase subscriptions by £20 per month and instead of paying everyone one week in arrears, that was increased to three weeks in arrears.
   You can imagine the situation with rumours about the Society’s survival being rife. There was also the problem with members being uncertain as to whether their money was safe. It wasn’t just their roller bond money invested in the Society they had to consider, but also the delay in paying their account work. Not only did DaC have nothing in the bank, we also had large debts to service and if the Society gone bankrupt then every driver would have experienced a loss, some members more than others.

   However, the situation was made even worse when one of our competitors within the taxi industry distributed our End of Year Report to all our large clients in an attempt to display and broadcast the terrible financial turmoil that Dial-a-Cab was experiencing.
   What a contrast to today, although we are experiencing a greater downturn than eighteen years ago, Dial-a-Cab is much better placed to weather the storm. In fact, being financially secure, we are far better placed than almost anyone within the taxi or private hire industry. In the early nineties, we had a downturn of approximately 17% and almost faltered, yet we are currently experiencing a 27% downturn and there is not any question that we will weather this storm. Not only are we far better placed financially, as we do not have any debt to service and due to good management in the past we are sitting on several millions of pounds in the bank, but of course our new building is also paid for.
   It’s a funny thing how the mind plays tricks as I would have thought the early nineties recession was worse than this one! However, when I look at the figures they actually state the downturn today is worse, certainly in terms of a reduction in turnover, but somehow I do not believe this recession will continue for as long as the last one. What we must also bear in mind is that although our turnover is running approximately 27% down on last year, for the previous two years our turnover had increased by 35%.
   So the point is that although the downturn this time is more severe than the early nineties, I do not believe it will be as prolonged. As for Dial-a-Cab, we will survive this recession without any problems to the Society as a whole and begin getting our house in order once again… so that we might weather the next downturn!

And finally…
Many of you will be going on your annual holiday shortly. I hope you all have a relaxing time and return to, hopefully, a much busier London…

Brian Rice
Chairman
Dial-a-Cab