Severn Valley Railway to launch £4,000,000 share issue.

Ok , however that 70 percernt was based on us having not seen plan B. That statement cannot now be true as certainly of the people I know up and down the railway I can think of only 1 who likes plan A.

 

Followed this with interest, and I have to say I have not been impressed with your style of PR here Neil, causing antagonism and resorting to personal insults and jibes which in your full disguised persona has masked the underlying serious issue at play here. Even now you cannot resist making multiple personal insults. People who get driven into a bunker mentality will not usually then engage in serious debate with what they are unlikely to consider to be like minded individuals, and I'm not convinced it needed be a full civil war situation which is what you have now created. You say you have 66.000 shares? Well that is a long way from what is needed here, do you have any confidence (and/or plan) on how you are going to get the other shareholders?

It's clear the SVRH are misguided in what the membership want to see happen at Bridgnorth. I want to know what valid reasons they had in getting rid of the heritage buildings committee, and yes perhaps too much has been hidden under the carpet. I just cannot agree that you General Custer tactic of coming riding over the horizon all insult guns blazing was the best way forward here, particularly when you don't seem to have the ammunition to support such an approach.

Personally, I hope everyone takes a deep breath here and steps back. The SVRH needs to present the revised plans for consideration (especially in light of the admirable Plan B) not as a fait accompli, and as a minimum should invite and involve key members of the heritage building committee onto a larger more meaningful steering group. In the medium term the heritage committee needs to be reformed and have some clout when it comes to these type of decisions.

I have no shares, just a lifelong member with the SVR's best interests at heart. I believe we share that principle, I just think you have caused un-necessary hurt and drawn battle lines way before that needed to happen. It's going to be a painful few months now,regardless of the outcome.

 

In fairness, Duncan is not alone in having been deeply offended by what I say, and what GF-G said before me. He is not just speaking for himself – there are a cohort of working and armchair members who would like us all to be as genteel and courteous as they are. The SVR is their “happy place” and they would prefer that no-one – least of all me - is nasty about it. I understand that, but they need to understand that I am not here to be liked. You and others find me offensive, Duncan, but I think risking bankrupting the railway, as they are, is a bit worse than flinging a few insults about.

He has two fundamental difficulties with his argument. The suggestion that I have started a "civil war", and that "the pain will take months to heal", flattering though it is, assumes that I have been able to instruct people what to think. That implies that I am intensely Machiavellian, which would be odd – this is the first time in 35 years of railway service that I have ever spoken out in public against anything. There are 15,000 people in the family, and one of me. I don’t instruct anyone. I get to read my emails every morning and they are all from thoughtful people with their own minds as well as a passion for the railway. They have varied views, but would all like it to stay in existence.

The second difficulty he has is that if being nice and letting senior staff perform unquestioned was the answer, yes, you would have got Plan A without debate, and no-one can show me –or Duncan – that it would not have led in the most direct way to the catastrophic financial failure of the SVR . On a personal level I am less moved by architectural nicety or heritage themes than I am that SVR builds something it can afford, in preference to committing financial suicide. .

If the emails I have received are even partly representative of the broader SVR Church, there is £1 million of new money from shareholders and members waiting to back Plan B. The incumbent management – aided by the silence Duncan and others would prefer – have got stuck at £1.25 million for their Xanadu, and want to incur even greater administration and marketing costs (already well into six figures) by relaunching the wretched thing in the Spring.

So Duncan, thank you for taking the trouble to express your view, but for now I will stick with being rude, insulting, grumpy – and hopefully when it comes to hard facts, approximately right more often than I am exactly wrong.

Best regards

Neil
militarytrain2012@gmail.com

 

Hi Neil,

I never mentioned silence as an option, and I will be quite honest I think it is the publication of Plan B and the coming into the light of the defunct heritage committee that has caused the most concern about the way forward. You have brought some other critical facts to the party but I'm sorry your style is causing as much issue as the problems in hand, in my humble opinion. Can I ask for an honest opinion form you? Do you you think you are really going to get another 230,000 + shares from shareholders to create the call for an EGM? If not, then something else does need to be organised now and quickly bacause I do agree that once the bandwagon is rolling it will difficult to stop. The members/shareholders weekend is clearly a critical time point, if there is no sign of an EGM do you have anything else to bring to the table?

I have already written to the chairman, gm and project manager to make my views clear on what I feel about Plan A, as I am sure have many other stalwarts in the 15,000 strong family. Family is a choice word to use, do you really expect your brother to take your argument seriously if all you have done is insult him for three months?
Tolerance for rude, grumpy behaviour is usually in short supply. I had hoped for passionate, logical argument once you had put a name to your persona, sadly it appears you have decided to follow a different course.

Martin, I'm certainly not suggesting sitting back, and there are too many other respected voices, yours included and other SVR people I know who clearly want to see a different route forward. I've just never found throwing verbal sticks and stones to produce anything constructive, it usually just gets in the way. I'm grateful the issue has come into the light and I want to see a different route forward, I'm just not prepared to stand on the barricade with GFG throwing verbal hand grenades. I wish him luck with the EGM, but we need a plan B of action, never mind a Plan B of a building.

Cheers

Duncan

 

Excellent point.

This, I think, is probably some of what GFG's alluding to - although I think his reading of the situation is that the magnitude of what he (and many) feel is an error is such that it will cast the overall financial health of the railway into question, which is a level beyond your point about the longevity of mistakes.

Noel

 

Martin I am in 100% agreement with you on this part, it is time to let our views be known and take action, I just want to find a constructive way of doing that.

Cheers

Duncan

 

Noel, I agree with you, there are a number of issues which go beyond the building style and which have becoem clearer to me as the debate has rumbled on which are troubling me with the whole scheme.

Firstly, the style of the buildings, my initial objection - they just dont fit and are nothing to do with preservation or heritage.

Secondly, the fixed cost that is going to be associated with these buildings and thier staffing is going to be considerbale and will have to be met somehow. What I havent seen is any detail as to what this fixed cost will be, nor more importantly any detail on how it will be covered by increased revenue. This is very worrying to me. If the project doesnt pay for itself then it will be a drain on the railway. The railway makes only a modest c£50k profit curently, it would be quite easy for Xanadu to swallow this up and more, thus placing longer term viabiliy in doubt. If I can see some clear costing and revenue projections then Im willing to listen, but I just havent seen them.

Thirdly, the undue haste and the ends justifying the means. It seems that the Steamworks team have been seduced by the availabiliy of grant money and have decided to see what they coudl build with that, rather than seeing what was required and then sourcing the money to pay for it. The chasing of such grant money has placed the undue haste on the scheme and has not allowed for proper consultation.

Fourthly, and this has only come to my attention during the last few months discussions, is the arrogance and contempt that the SVR has shown to its members and volunteers, they simply have not listened, they have wasted good money on consultants when all along there was the basis of a scheme within the ranks - plan B. They have communicated so badly with everybody that discussions such as this have flourished, and positions on both sides have become entrenched. This has diluted my confidence in the mangement.

To me the most important people involved in the railway are is supporters - the members, and they havent been listend to so far.

 

Noel, thanks, that is exactly what I am saying, but with a shade less ambiguity. For the avoidance of any doubt, Plan A is too big, too ambitious, too dependant on expensive consultants, and imports such a tsunami of new costs that it will propel the railway directly into bankruptcy.

I think we all now realise, through the Engine House experiment, that HLF funding can be toxic when mis-applied.

There are two options on the table for Bridgnorth that SVR can afford, and both would win sufficient support from shareholders that the railway can develop while continuing to trade. One is Plan B, which only requires the shareholders to stump up another £400,000 and it is done. The other is to simply build a new buffet using some of the cash they have raised, and use the rest to bring down bank borrowings/restore cash reserves.

Either of those gives the railway a future. Plan A just robs it of one altogether.


Neil

 

Im sure a constructive dialogue would be welcomed, but the wall of silence from the Steamworks team just isnt condusive to any sort of constructive debate and amicable way forward. The silence is leading to entrenchment, which is dangerous.

 

I don't think GFG ever "alludes" to anything

Tom

 

One problem I haven't seen discussed much is this notion of a £50k profit. Essentially that is just an accounting sleight-of-hand; it would be possible to make that go up and down relatively easily (within limits, and for a period). Which means that it is entirely conceivable that it would be possible to open Project Xanadu and then say "hey look, we're still making a profit", provided you strategically averted your gaze elsewhere.

For example suppose on the balance sheet, you have about £4million of assets tied up in P/Way. These depreciate at 5% p.a., which means you are making a charge of £200k per year on the accounts, and assume you will have to replace every 20 years. But suppose you actually said replacement took place every 25 years - so you depreciate at 4%, which means a charge of £160k per year. Suddenly, the profit and loss account looks a net £40k p.a. better. Which isn't far removed from the annual profit. In other words, a small change in accounting policy can suddenly move a line from profit to loss or vice versa, even though on the ground, precisely nothing has changed.

The situation with locos is potentially even more scary: As heritage assets, it is common to believe that they have indeterminate lives and therefore not to depreciate them, but just charge maintenance to the profit and loss account. I'm sure in a museum, the engines do have essentially indeterminate lives...

Now, we all know that an engine at the end of its ten-yearly spell is worth much less than it was at the beginning (in other words, it has depreciated!) for the simple reason that to get it back into working order, you have to spend a few hundred thousand pounds. So you had better hope that the profit and loss has had that amount taken out over the last ten years. Over a couple of years you might not particularly notice, but if after, say, ten years you have been making a profit each year but end up with fewer serviceable locos than you had ten years earlier, then you haven't been setting enough aside.

I'm not alleging that the SVR (or any other railway) is doing anything illegal or immoral in its accounts. But what is clear is that without a very close reading of the accounts (and at the SVR, that means the whole "family" accounts as a whole, just in case there are flows of money between G company, H company and Trust), it would be entirely feasible to do a large project like Steamworks and, on paper, make it look like there had been a positive or no negative impact on the overall profitability. It is a particular problem in an organisation (like a heritage railway) that has assets that wear out slowly; assets with a historical value that makes them hard to give a cash value to; but where when maintenance eventually happens, it is expensive. A bit of deferred maintenance somewhere or other can do wonders for the balance sheet.

Tom

 

The 'steamworks' steering group have met to view and discuss the revised designs.

They are concerned now to take on everyone's views, though not necessarily those who shout loudest.

The meeting was told that extensive consultation with communities including volunteers will be required as part of the HLF application process.

The steering group agreed on design versions to show the board meeting next Tuesday, with the emphasis that this is all a work in progress.

The board will be requested to give approval in principle for the core group to continue to discuss the timetable to incorporate considerable consultation.

The steering group members are a lot more comfortable with where the project is going - it has come a long way from the images which upset everyone.

 

I fear Jamessquared has just taken us all for a very accurate MIC through the accountancy practises that have been in use at SVR, missing out only that eventually all the sources of funds dry up. (See Enron for an example). If we accept that the railway has been falling short of 10 yearly overhauls at the rate of one per year since at least 2008, which is why there is an ongoing and increasingly dark set of conversations with disgruntled owners and a series of expensive hire engines, it is not making a profit of, say £50-100k. It is actually losing £300-400,000 a year. And that is just on the kettles.


This is why I have bored so many people with my 250,000 passengers figure. 200,000 is not enough. It does not make all the problems go away, but it makes the gap less harmful. If you bang in the new operating costs that will hit the railway; cleaning, staffing, insuring, heating and lighting, the annual test on two disabled lifts, and depreciating Steamworks, pretty soon all the book-keeping ruses (sorry, legitimate accounting practices) Jamessquared has laid out expire, and you join Woolworths, Jessops, Comet, and the Overend & Gurney Bank; remembered with great affection but not actually in business any more...

And that is why I am always so rude about Steamworks and the spendthrifts who peddle it.

Aye

Neil

 

The last time this level or arrogance and contempt towards volunteers, members and shareholders was shown - was the Nabarro debacle. On that occasion it took a strike by volunteers to get rid of him

 

I was being diplomatic... Not my native style, but several years spent herding volunteer cats some time back left it rather ingrained!

Noel

 

At this lateness of hour, I will make a brief comment that there is an element of Accountancy being an art form - with more than one "right" answer - than a science - only one right answer. This doesn’t mean there aren’t numerous wrong answers too!

The auditors must be convinced that accounting policies, including rates and methods of depreciation, are appropriate before they sign a clean audit report.

Accounts must comply with Accounting Standards and these actually have a couple of sections which could have been designed for steam locomotives (but "heritage assets" means something precise under accounting rules too!). In fact, the accounting standards was a reaction to how airlines accounted for planes they owned (probably quite rare now - most are leased) but applies just as well to steam locomotives. In essence, the value of an out of ticket locomotive is depreciated over a long period as it really doesn't loose value much and probably actually gains it. The overhaul is depreciated over an appropriate period - should be no more than 10 years and 9 may be seen as more appropriate. This still doesn’t take account of a major overhaul reducing the work (and cost) of the next one and of course things like tyres last for a different period. In theory, each element is depreciated separately based on its “life” but in practice the financial effect is not significant enough to make this necessary in many cases. However, this all just applies to locomotives owned by the body drawing up the accounts.

When it comes to liability for overhaul of somebody else's loco, another Financial Reporting Standard (FRS) requires provision to be made where legal liability exists. Hence, you don't make provision for locos you own - see previous paragraph for how they are treated. The amount provided should be revised as new estimates or information are available and the cost of the work set against the provision instead of profits of the year in which it takes place.

That is probably quite enough advanced accounting theory for this time of night!

Steven

 

The 'steamworks' steering group have met to view and discuss the revised designs.

They are concerned now to take on everyone's views, (though not necessarily those who shout loudest).

The meeting was told that extensive consultation with communities including volunteers will be required as part of the HLF application process.
(click on link for more info re HLF grants: Heritage Grants)

The steering group agreed on design versions to show the board meeting next Tuesday, with the emphasis that this is all a work in progress.

The board will be requested to give approval in principle for the core group to continue to discuss the timetable to incorporate considerable consultation.

The steering group members are a lot more comfortable with where the project is going - it has come a long way from the images which upset everyone.

 

Everyone has a price. Since all the SVR websites, even the Volunteer Liaison Office, are a bit reticent about the cash value of the unwashed, I have had a crude stab at seeing what they are really worth in actual money, and how they compare to other sources of income.

To operate the railway on a traffic day – just the train crews, signalmen, platform despatching staff, and support technicians for when a track circuit drops out or a loco becomes distressed on the road, would cost north of £6000 if you had to hire them for a day (based on a mean of West Coast Railway Co casual daily rates for operating grades).

There are roughly 200 traffic days. Thus the operating unwashed alone are worth £1.2 million per annum to the company. Who else is donating or investing £1.2 million every year? The shareholders aren’t, although they have been kind enough. If you adjust previous take up for inflation (shares have been a pound a pop since 1971, and 5.6 million are out there) they have chipped in about £12 million at today’s prices, over 40 years (a 1971 pound is a fiver today). That makes it around £300,000 a year from them. Remember the £1.2 million is only the operating unwashed, it doesn’t count everyone else.

The SVR Charitable Trust says it will be able to provide £450,000 per annum in donations once it is up to speed and let us hope it will but it hasn’t yet, and even if it does it still doesn’t come close to the unwashed contribution. The passengers don’t count for this purpose because they are being subsidised by everyone else (but mostly since 2008 by distressed owners of worn out engines awaiting overhaul).

Who should have the final say in whether or not to gamble the farm on a £5 million punt ?

Neil