West Somerset Railway General Discussion

Yes - it is a new share offer, and subject to the regulation that surrounds such offers. Whether or not strictly appropriate in the case, the law presumes that companies raising funds by issuing shares are doing so on the basis of an investment prospectus, and require investors to be properly informed before their money is taken. I have lost my copy of the prospectus for the Bluebell's extension share issue, but it was a very robust piece of work shedding a great deal of light on the prospects of the business I was being asked to put my money into as an investor. There may be some scope to reduce the quality of a prospectus if not seeking funds from retail investors or if persuading associates to invest in untaken shares, or by purchasing holdings off existing shareholders, but those are marginal cases.

However, I strongly suspect given the rapidly shifting messages around the state of the plc's finances that the process of pulling together a prospectus, let alone publishing it, would shed a great deal of light in some very dark corners of the plc's finances. The scale is vastly different, but considerable parallels with the outcome of issuing the WeWork IPO prospectus seem strong.

 

In most places, this would cause these two bodies to get together and use their combined shareholdings to force structural changes which would improve things for the WSR. But this is Somerset, they do things differently there. Maybe the WSRRT should look into moving to the MHR, before they're cuckooized? (Not serious... Also, unlike the SDRT, the WSRRT does have some leverage, so they're pretty safe from cuckooization.)

Considering the recent output from the PLC management (and particularly the way the financial situation is said by them to have gone from 'much improved' to 'fairly dire' in a modestly short time), I wonder how the morale of the staff and volunteers is faring? This is making me feel upset, and I'm a long way away. The effect on them must be immeasurably greater. Needless to say, I feel for them...

Noel

 

While I guess that is possible, it's worth noting that in the last 40+ years, all of the WSR Plc shareholders have raised ~ £2m. So it is a leap of faith to believe that they will suddenly contribute about half as much again in one year. (And that assumes that they are all still traceable - of the 8,000ish shareholders, how many of them were £5 subscribers from 40-odd years back? Is every single one still in contact with the railway?)

The last time the Bluebell issued a share prospectus, ca. 2007, the regulatory authorities were all over it with a fine tooth comb. I think the crowning glory was a statement in the prospectus that the then chairman of the railway had been born in one of the Station Houses along the line, and the FCA wanted a birth certificate to prove it. From memory, it raised ~ £750k but cost getting on for £100k to mount. It is ultimately a very expensive way of raising funds - without considering the ongoing requirement to keep in touch with shareholders.

Most supporters may consider such investments tantamount to a donation, but from a regulatory point of view that is very much not the case: you are offering shares in a public limited company and are subject to all the rules that come with it. Donating via a charity is considerably more cost effective, plus has the option of Gift Aid for many donors: a change to that structure would pay for itself very rapidly.

Tom

 

would the MHR want them though? Is everything still secured to the bank by bank loans ? if I were the manager of the holding bank , holding the assets of the WSR plc, I would be very concerned about the ability to repay those loans, seeing as the company is saying its in dire straits, any bank manager must be getting very concerned, and would be thinking about protecting the banks finances, taking about the WSRRT, is this what was behind the PLC not wanting change, and others gaining access to whats going on behind the scenes? new trustees might have started asking to many questions, such as, what are you doing!!
How is this going to end, I can only see one ending, and its one, no one wants, and i fear that its only a matter of time before the bank says, enough, and asks the PLC to appoint a receiver, I think the current board, have lost the plot completely, but its not just this board who are at fault, rather than stamping down on dissent with in the supporting organisations, they have fanned the flames, the leadership of both support organisations are equally to blame,

 

This is exactly what I have alluded to. The lawyers have an easy time of it - they will go through a 40 page prospectus, underline just about every sentence and write "prove it" alongside - write "water is a clear, colourless liquid" and you will find "justify this statement" written alongside! (and pay probably several hundred pounds an hour to wield the underlining pen then review your answers! On your side, someone has to provide and collate all the responses. And, as has been said, the legislation does not distinguish between shares being sold as donations and those being offered for genuine investment purposes so there's no easy (or easier) way out. There's usually weeks of work for a team of people if you are doing it full time, doing it in one's spare time would be a nightmare!

 

Not to put too fine a point on it, Noel, a considerable number of volunteers and staff are openly contemptuous of the so-called leadership, especially the chair ....
This farce will not, I suspect, have a happy ending.

 

It is weird. We raised £1.4 million, we didn't get £432,000 now we need another million.

This is the problem - the PLC sends out such mixed messages that it is hard tell if the WSR is at death's door or if it is a case of the sniffles or somewhere in between.

 

The prospectus etc not only cost £100,000 but also delayed every thing until there was a downturn. I vividly remember all these delays and their cause being explained at the time and then thinking: “If only the funding drive had been able to be launched 18 months before”. And it possibly could have been, not to mention that with gift aid into the charity £100,000 would have become £125,000. All over the weir and East Grinstead mercifully connected but to learn from.

 

I think looking back that was really the point at which the focus for fundraising shifted from the plc to the Trust. But I agree that the delays launching the share issue were nerve wracking at the time.

Tom

 

Nerve wracking is exactly the right phrase. For the West Somerset Railway to contemplate a large share issue is well behind the times arguably like half a generation.

 

The PLC still thinks it's an ordinary company.

Noel

 

I seem to hear the sound of some nails being hit on heads in the above comments.

If the WSR really does need to raise such very large amounts of money over a sustained period, then it surely must proceed with a restructure along the lines proposed by Mr Bailey if it is to maximise any potential for success. It also needs to acquire the services of the most competent people available (and affordable) to lead a fund-raising effort.

I have seen the WSR described as a "£3M business". For the record, the most recent annual report and accounts (2019/20) quoted an annual turnover of £2.85M. This compared with £2.75M in 2010, the turnover having flatlined during the intervening decade. Adjusting for inflation, turnover had actually declined (although how much depends on which inflation index is used), reflecting a reduction in passenger numbers over the decade. Other major heritage railways have done much better. I don't know whether there has been a decline in tourism in the West Somerset area to explain the poor results, but they are certainly worrying and suggest much needs to be done to get the WSR back onto a sound commercial footing.

It is unclear whether the stated £1M additional income requirement is a calculated figure or simply plucked out of the air. Whatever the true figure, it could be achieved through a combination of business growth, cost cutting and increased donations. Potential donors might be more willing to contribute if they could see a broader business plan and have more confidence that the WSR will survive.

 

The call by the WSR plc board upon the funds of the WSRA and what was the WSSRT is misplaced, as the WSRA doesn't have a controlling interest in the PLC, and neither does what was the WSSRT with it's disparate collection of minor museum venues and decrepit collection of rotting old coaches except for 2 examples.

The alarm call of impending insolvency by the WSR PLC Chairman in the last few days publicly is equally alarming in the implications of making public predictions of failure to comply with auditors' warnings and basic accountancy principles to avoid going into administration/ liquidation.

Rather than a call for donations, it seemed to me to indicate the vultures are already hovering above to pick upon what is left of a carcass for their pence in the pound on a distribution of what little is left.

 

That's why they didn't get the CHF money second time around most likely.

 

£2.75m turnover with around 180,000 passengers (I can't find any numbers for the last few years) is roughly £15 per person. Is it just me or is that a really poor return? Especially if that includes all other incomes.

 

A clear aim and reason to have confidence in how the management will spend the money.

 

Is that 180,000 full fares?

If it's just overall passenger numbers then I suppose one could hypothesise with the seaside angle that the WSR *might* have a lot of children in that figure. Not that it moves the needle massively probably.