Swanage Railway Accounts 31 Jan 2018

Steam Rly Mag say its part of moves to recover from a £200k loss in the 2018 season! Not sure how much truth is in it, but with the advertised sale of the 108 DMU tough times it would seem.

 

Having to pay hire fees for locos that are in bits (not SL) does not help.....

 

I only know what a very quick look as a professional at the filed accounts tells me.

This appears to show that the '£200k loss' was for the 13 month period ended 31st January 2018. Hence, it effectively contained an extra month's costs but, that month being January, probably almost no extra income. Allowing for the £70k loss on the Wareham Shuttle, while the Profit for s straight 12 months would probably have been down, and costs have undeniably increased, the main reason for the 'loss' seems to be that extra month of costs. (Total 2016 costs were £2.695 million or £225k/month)

Steven

 

The balance sheet looks pretty ugly, with only £5k in the bank at the end of January after a £200k loan from the Trust. Presumably the Trust had to loan them some more to pay staff for the following few months? The £8.2m of future operating lease obligations seems extraordinary. I guess that will all come on balance sheet next year.

 

Again, impossible to know how either the cash position or loan differ from the usual 31st January position when previous Balance Sheets have been struck a month earlier - winter cash flow for any tourist business is pretty ugly and something I am really, really pleased to be rid of any involvement in or responsibility for - but I retain my understanding and sympathy for those still wrestling with that particular subject!

Steven

 

Glad to have this deconstructed a little, I've already seen the figure used as "proof" that seeking a mainline connection will automatically lose you money! Out of wry curiosity, did any of this make it to the steam railway article about the £200k loss?

 

I was thinking exactly that same thing Daddsie, the same thing happened at another Railway not so far away a few years ago.

Just a co-incidence of course .

Kind regards
Chris.

 

Deep breath, long post coming.
Steam Railway have never forgiven the railway for being given the T3 from the NRM and even managed to make some sort of machiavellian reference to it at the end of the article. The article draws heavily from the Swanage Railway Mag that goes out to members but in my opinion is sensationally written and not really balanced.

To fill in some information following on from questions in the Rolling Stock Forsale thread about why we are selling the RMB and the very good posts by @Bean-counter and @huochemi .............

The Swanage Railway Company takes about half its annual income in three months of summer. Santa’s are another significant chunk but these are mostly sold in advance so during the dark months of the year the income is negligible. On the expenses side the cost of sales like coal, shop & catering stock follows a similar profile, but the permanent wage bill, rent, insurance etc carries on relentlessly. To exacerbate the situation Major infrastructure work is normally done in the closed period. I imagine this highly seasonal profile is very similar to many other railways and tourist businesses.

To absorb this seasonality the Swanage Railway Trust acts as the bank for its wholly owned operating subsidiary, the Swanage Railway Company and maintains a standing loan facility for it. The size of this is reviewed in advance every year. This is cash that is permanently set aside by the trust and drawn down upon as the company needs it normally starting around December, and paid back to the trust as it is able through the summer, As the Trust charges interest on the loan it’s good practice not to draw down more than needed for longer than needed and so when the loan is in use it’s normal to keep the company’s bank balance as low as possible. Particularly at the point when it’s snapshoted for everyone to see in the annual accounts.

What you can’t see however (and I’m not about to blurt it out here) is the Size of the facility that the SRT makes available. This is adaquite and in recent years we have developed increasingly good budgeting and cash flow projections to avoid surprises.

The occurrence of two January’s in one financial year is a big component of the reported annual loss but does not change the normal cash flow cycle. It’s in effect a snapshot of the accounts at a lower point in the annual cycle. What has affected the cycle is the one off cash loss by operating Wareham using a contracted operator, hired rollingstock and traction. A decision we took reluctantly when it became apparent that the DMUs were not going to be ready. Having made commitments to our stakeholders we had little choice. Other costs, notably locomotive maintenance, also depened the cycle and ate in to the cash. General overheads also rose to an extent.

If left unchecked this reduction in available cash would limit our 2018 - 2020 capital investment program unduly. We would like to maintain our rolling program of track renewals, continue working on the N class and have other strategic plans to keep on track. To rebalance the situation we are making a few disposals. Assets that aren’t really productively employed.

Being a Railway with very limited storage space, the 108 was always going to have to go when the restored Wareham DMUs returned. In the last few years we have outshopped 2 Bullied coaches and are about to outshop a Maunsel open third with another in the pipeline. With no undercover accommodation for coaches it simply doesn’t make sense to have unused Mk1s sitting around deteriorating and taking up space and so it is sensible to review our stock of these as well. The busy months are all about capacity and being limited to 5 coach trains we would simply be mad to let our precious TSOs go. Catering turnover from on train buffets is lower than the equivalent station.

So there you have it really, in an ideal world we would keep everything but we need to be pragmatic.

 

I am sure that Heritage Rail will write a balanced article, with interviews with the relevant people at Swanage, as opposed to the Steam Sun's hack job.
I personally did not see the article as I refuse to take the SS

 

Operating lease commitments are disclosure notes only and are not part of the balance sheet .

 

IFRS16?

 

Swanage Railway Company Limited report under FRS102, and that isn't due for revision, which could include bringing in the principle of IFRS 16, until 2019, so a little distance off yet!

The worked examples of IFRS 16 do seem to show a slight reduction in net assets (not quite, in the quick look I had, got my head round why) but the basic principle is that all leases will give rise to a 'Right of Use' Asset and associated liability and each year will see the former written down and an interest charge, like a Finance Lease or Hire Purchase. This shouldn't affect net balance sheets but could bring many more Companies into 'Medium' or 'Large' and mean more need audits!

(For those who aren't fluent in 'accountant', 'IFRS' = International Financial Reporting Standard. The IFRSs are adopted by many mulit-nationals but are not mandatory for UK companies. These now have to follow FRS102 (FRS = Financial Reporting Standard), which does include a number of IFRS principles but which, as noted above, is not due to be revised until 2019 and the current version pre-dates IFRS 16 on Leases, so it is currently unclear whether the changes included in IFRS 16 will be adopted for the revised FRS102. At present, 'Operating Leases' as disclosed as in the Swanage accounts but are not included in the Balance Sheet. The Lease in the Swanage accounts are, I suspect, the lease of the line from the Council).

Steven

 

Thanks for the clarification of the meaning of IFRS, Steven. So many threads have initialisms which appear in many instances and can be meaningless to many.

 

Can they afford to pay Eastleigh for the work done on the DMUs ? Will there be a Wareham Service in 2019?

 

My understanding (which is as an observer) is that this work is included in that funded by the Coastal Communities Grant package (and I seem to think that they may have had two separate such packages for the Wareham service). This won't be 100% funding - there will need to be some 'match funding' - but I would expect it to be largely, if not entirely, paid out on receipt of 'invoices' for the work done.

In turn, this probably does mean that, whether the SRST has had second thoughts about the service or not, it will happen - some of the grant money has been received and spent (on infrastructure and on the 'steam set').

The accounts discussed here are historic - effectively, despite the year end being January 2018, they refer to 2017. I make no apology for quoting my own post on the subject of their content:

2017 looks not to have been a good year, but nothing like as disastrous as the Steam Railway article and some posts on here imply. The current financial position will depend as much on 2018 trading (and I don't recall hearing any information on that). However, if, as the picture above seems to indicate, the work on the DMUs is now nearing completion, that suggests it has been continuing and hence Eastleigh must be happy that funding is available (and, indeed, I would be pretty certain that numerous stage payments will have been made - you don't pay for a job of this size entirely at the end!) Timings seem to have slipped (I seem to recall 'crew training' was mentioned as planned to start about a month ago at one point), and I suspect many long running contracts are so to match available funding to work undertaken, but the fact the work has continued would seem to show that both funding is available and the service continues to be planned to run next year.

Steven

 

Cough, cough......