Lynton and Barnstaple - Operations and Development

Ok, so they’re not actually accurate for the L&B then.
Yes these bridges will be expensive, but there’s no point in throwing around numbers that are plucked from the air or from other projects.
Let’s keep things factual!

 

Yeah just another Colin comment, just like the one he made many years ago about knowing of some old carriages for sale, carriages that not only set up the Lynbarn railway at the Milky Way which paid the mortgage on Woody Bay at the time but others that were refurbished to give Woody Bay rolling stock to actually get open and start taking fare paying passengers so a 'Colin comment' actually helped get the L&BR up and running in those early days when they had no money yet achieved so much, without guys like Colin there easily could not have been a reborn L&B.

 

Are there not major engineering works required south of Blackmoor Gate as well though? Deviation round the reservoir, rebuilding the public road currently occupying part of the trackbed, and a missing viaduct spring to mind. Any cost estimates for these to compare with the other works mentioned?

 

for many years the average number of voters has been around the mid 700's, this years numbers were around the mid 400's, I also think part of the reason may have been because seats were uncontested and because re-election was inevitable members had lost interest, incidentally one of those up for re-election achieved the lowest amount of votes 'for' and the highest amount of votes 'against' which although makes no difference does suggest members are unhappy, but I think another part of the reason for low votes and a very concerning one is because of the significant drop in members over the last 3 years or so and that also equates to just over 25%

 

Those are all works that would have to be addressed should the railway ever extend that far, it was stated that at present no costings were available for the options that were mentioned at the AGM.

 

The whole line is a challenge. However, some bits are easier than others and earth moving for what is a pretty narrow strip of graded land is not as expensive per foot as bridge building.

 

The financial situation and tie up between the Trust and the Company is in the public domain, being accessible from the Companies House website and, to members of the Trust, in its accounts. The Trust owns all the £50,000 controlling A shares (which makes LBBC a subsidiary) and about £538,000 B shares, representing 38% of them. Access to the L & B Blackmoor Company (LBBC) information is also on the website but its 2024 accounts are restricted to its shareholders until posted on the website since Monday's AGM. There are two common directors.

The debt @lynbarn is referring to is the £444,000 in loans that the L & B Blackmoor Company (LBBC) had at 31.12.2024 in its balance sheet, consisting of £225,000 from the Trust and £219,000 from a private lender. £160,000 has been paid off the latter in 2024 in reaching this figure and a similar amount is due in 2025, as is £25,000 off the loan from the Trust. And, of course, there was interest of £28,452 payable on both debts in 2024. The Trust was allotted £165,000 shares by LBBC in 2024, so it seems clear that the funds for these debt repayments came from the Trust and there will probably be a similar transfer this year.

The Trust is a charitable Company and LBBC a commercial trading subsidiary of it. My rhetorical question at the Trust AGM (which will be on video to be issued shortly) quoted the Charity Commission website where it says: 'A parent charity must not settle the debts of a trading subsidiary'. I received an answer from the Accountant that the money used to make these repayments came from donations, which is irrelevant to what is happening here.

 

The L & B Blackmoor Company 2024 accounts sent to shareholders value its fixed assets - mainly the land and buildings - at cost of £1.9m. If the auditors have passed them this will be the final version and doubtless will have been approved by shareholders at the Company's AGM on Monday. In view of the asking price for North Devon pubs for sale these days I would like to have seen these assets stated at a professional valuation. (as they are in the Trust accounts). Especially as there are plans for a sitting tenant in the house (the Trust). I would then agree that the accounts would show 'A true and fair view' of the Company's state of affairs and the Trust could consider the value of its nearly £600,000 investment. (£800,000 plus with it's loan)

 

Very expensive

 

I listened with interest to this exchange at the AGM. The recording of the proceedings may confirm this but I understood the “top table” to say that it was entirely a matter for the Board of the LBBC to determine how any funds they received were allocated. As a layman, that sounded right to me. On the other hand, whether this was a wise or prudent thing for the Trust to have done looks like a different question and one which doesn’t seem, to me, to have been really answered, at the AGM or elsewhere. Maybe I have missed something but in the new spirit of openness it would be nice to have a better understanding.

 

As a layman in such matters, I find this situation something of a 'play on words'.

It would appear that, over time, the Trust loaned £X to the LBBC and the LBBC also acquired £Y from donations. The Trust has been 'paid' back £Z in the form of shares. That £Z came out of the LBBC's overall 'pot' of money, thereby leaving them with less funds than previously. The fact that any individual physical pounds (as it were) came from Y rather than X seems irrelevant to me - how could anyone prove that anyway - what matters surely is that the LBBC might not have been able to afford to give those shares to the Trust from their Y funds if they did not have the X funds from the Trust to help tide them over (I hope that's clear-ish !).

 

That's correct Michael.

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I think the suggestion is that the situation is that the Trust received donations which it gave to LBBC and received shares in return. This could explain how the interest due and the loan repayment to the private lender were met.

I am unclear whether a donation received by the trust can be simply transferred to an operating company even if the donor specified that this be so, whether the transfer is cash or share purchase.*

It may also be that the Trust accepted shares in lieu of cash it was owed by the LBBC.

Why does this matter? Well a charity cannot settle the debts of a trading subsidiary. Also that the original loan by the Trust to LBBC is somewhat doubtful. In all of this it matters what the pub is worth.

Of course, most people who invested in the pub probably did so altruistically as a way of benefiting the long term aims of the L and B. It is to be hoped that the pub continues to trade and that it does well enough that it’s future is self sustaining.

I think people are concerned though that a) pubs are not a great investment b) money spent on supporting LBBC is not available for the core aims of the Trust and c) good governance is practised

hopefully that’s a summary that makes sense? I don’t claim any insight into the substance of the concerns.

*I am not sure that money given on the basis that a charity make a specific investment can be taken and used that way without the said investment passing all due diligence tests like is this in line with our objects or represents a sound return on our money with an appropriate organisation such that in the future we are able to better deliver our objectives. It’s very possible such a gift might have to be declined.

 

Indeed, and were it all to go wrong it could become very awkward for Trustees - many of whom are probably blissfully unaware of their personal liability in such matters.

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My impression from the comment from the LBBC's Accountant, as relayed by Michael B, was the donations had been made by donors direct to the LBBC. Is that not in fact the case then?

I thought that - in simple terms - the whole point of the LBBC was to protect the Trust and its heritage assets from any fall-out in the event that the OSI failed and went bankrupt. Whilst I wish the OSI every success, I'm not sure that I would be happy as a potential donor to give money to the Trust - with the aim of helping it to achieve its aims of rebuilding the L&BR - only to learn subsequently that in effect it had been invested in a pub. OK, one can argue about the extent to which the success/failure of the OSI and the LBBC would contribute to the rebirth of the L&BR, but I would see that as the financial equivalent of clutching at straws.

 

The way the accountant explained things came across to me that monies had been left to the Trust for them to purchase shares in the LBBC which they then did, the question is even if a legacy/donation is made specifically for that can it actually be done due to the charitable status of the Trust

 

If donated money was used to purchase shares (and whether or not that itself was within the rules) how could that substitute for the loan repayments and interest that were due from the LBBC to the Trust?
Edit: corrected a typo.

 

Indeed. And something that may raise questions about the tax treatment of those donations if routed via a charity to a business.

 

As I understood it someone left/donated £X to the Trust to buy shares in LBBC which it did,LBBC gives the Trust £X worth of shares, LBBC now has £X cash in the bank to do with as it likes, that is how I understood the explanation from the accountant

 

Had the pub been a similar pub elsewhere in North Devon, but not in a former station building, the calculation for the Trustees would be quite clear. Essentially they would just have to ask "does this investment meet our documented investment policy?", which is really a question of risk and reward: is investing the Trust's surplus cash in a pub business a suitable place, given the likelihood (or not) of losing capital against the potential profits. I suspect the answer in that case would be "no - we are better putting spare cash in a high interest savings account".

However, OSHI isn't just a pub business: it is also one of the (few) surviving former L&B station buildings, and therefore having the building within the fold can absolutely be justified on charitable grounds alone - because owning it is an integral part of delivering the Trust objective to recreate the Lynton and Barnstaple Railway. You can do another thought experiment here: suppose the building had come on the market as a derelict building with no proposed use - would the Trust have been justified in buying it? I think you could easily argue that such a purchase would have been appropriate in that it would materially further the Trust's objectives - even though in such condition, it would inevitably be a significantly loss-making asset, unless a use could be found.

The question to me then - and one I don't know the answer to - is therefore less about the investment, and more about the precise business structure. (Not my area of expertise). A lot of that comes down to "who actually owns the buildings and what would happen if the pub business collapsed financially?" If the answer to that is that, in the event of a collapse, the Trust would nonetheless retain ownership of one of the key structures on the railway, then I think investment in the pub is probably appropriate - better to get some tickover revenue (even if it doesn't completely wash its face in business terms) than to own a vacant building, given that ownership of the building is integral to the Trust's mission. On the other hand, if in the event of a collapse the Trust risked losing the building, then it comes more into the line of a risky investment that probably wouldn't meet criteria for investing the charity's funds.

Tom