Talyllyn Finances

And so it ought to be.

Someone has got to,take some awkward decisions sometime and the sooner the better as the likelihood of the wrong ones being taken will increase with time.

PH

 

At least some difficult decisions probably need to be taken, but after proper consideration and not just for the sake of showing 'things are different now' - just because one or two aspects may be 'broke' doesn't mean the whole thing is - yet people seem to assume that so often!

Many on here seem to think that the tackling the clear financial issues the Talyllyn has will automatically spoil its 'authenticity' or 'charm', mean large scale cuts or 'stopping doing things'. From the brief Steam Railway report, the line's Management seem to be looking at something rather less radical - steady, hopefully sustainable and realistic business growth targets, a recognition that passengers actually using services do matter and I am guessing a review of where costs can be saved without 'throwing out the baby with the bathwater' (which may be less 'shouted from the rooftops'!) 'Evolution', not revolution, which is very sensible (especially given how 'conversative - not the small 'c' - and suspicious of change the heritage railway world can be), and certainly not a common management 'bad habit' of 'to show things are different now, everything must all be changed so it is clearly 'ours' and not our predecessors'!

The technical term is really 'SWOT' (Strengths, Weaknesses, Opportunities, Threats) analysis and I am sure this has been or is being done and would identify that the rural 'charm' and authenticity of elements of the operation form part of the strengths, but may identify needing 2 sets of stock in use to provide a refreshment break that doesn't make any profit as a weakness! Greater encouragement to base a day or half day out around the Railway may be an opportunity, while the numbers of tourists in the area could be seen as a threat.

All good solid stuff but where it usually falls down in a heritage railway setting is when it identifies some necessary change that involves terminal damage to some revered bovine or other!

Steven

 

Most heritage railways live a hand to mouth existence. As a potential bequestor (if that is the right term) I'd live to see at least some of the money going into a ring-fenced pot for dire emergency use only. By all means spend any interest on it, but at least build a reserve for the future. How many of us don't try to save something for a rainy day, and how many railways do?

 

I've got a vague recollection that the SVR tried to do something like that, unless I have misremembered?

You do probably run into some complex governance areas though. As an example, most charities would have a reserves policy that effectively says that they will keep cash reserves to cover so many months of future likely expenditure, that policy being periodically reviewed. That makes sense when you have a spending profile that is potentially fairly even, but an income profile that can be quite variable, i.e. one or two significant bequests falling one side or another of a particular date can make a particular year look relatively rich or lean. Because all the spending is essentially discretionary, but may also have long lead times, keeping a certain reserve allows time to wind down commitments if there is a drop in income.

However - that policy is still only looking months ahead, not years, so any surplus cash is basically kept in a bank account and any interest accrued is a marginal benefit rather than being a specific objective. If instead you aimed to build up a substantial endowment with the aim of interest on that endowment being in itself sufficient to fund the charity's activities, you get into needing an explicit investment policy and investment management; and the place you make such investments is likely to also have significantly more financial risk than simply putting it in a bank if you want to generate more than a negligible interest. It's also likely that the management fees in such a policy may be substantial relative to the amount invested unless the charity is very large.

If instead you build up a substantial cash reserve but just hold it in low interest accounts, it will effectively depreciate in value over time. At which point it might be a legitimate question to ask that, within a prudent reserves policy, it is better spent now delivering something of value than spent in the future at which point the same amount of cash will deliver less!

Tom

 

It's not always quite as simple as "catering should be profitable" either. Perhaps people expect refreshment facilities, and so, since there are no non-railway cafes near the upper end of the TR, the TR must provide them. But perhaps people aren't prepared to pay enough for their coffee to pay for the costs of providing it in such a spot. But perhaps having it there persuades them to travel, and so pay for their ticket. Perhaps not having a refreshment stop would dissuade passengers from travelling at all (the round journey is long enough to get very thirsty in warmer weather or to get very cold and in need of a hot drink in cooler weather). I know some other attractions find this to be so.

 

That feels like putting the cart before the (iron) horse. I totally understand that there is a bare level of facility that any visitor attraction needs to provide, and that would probably include catering. But surely if the trains are subsidising the cafe, something is wrong?

Maybe we need to look outside the railway world to comparable visitor attractions that have high fixed costs of operation? I wonder how many stately homes or castles are subsidising their cafes through the entrance fee? Not too many, I suspect.

Tom

 

Maybe, but with good communications most folks should know what the projects and aspirations of the charity are: the charity I am involved with, as a treasurer, never has to wait long before we are able to allocate the restricted funds. But we do make it known what we wish to do with donations/legacies.

 

And speaking as the husband of a Church treasurer, such restricted legacies (the classic is for the "Fabric Fund") can be a real headache by tying up money in one place, that can't then be used for other greater priorities. My will includes provision for a number of charities (some railway, some not) as residuary legatees; if I were not content that the trustees would be able to make an appropriate decision on how to use that legacy, I simply would not have that charity in my will.

 

Such a reserves policy can be quite challenging, as Charities Commission advice is that there should always be a minimum of 3 months in reserves, which would exclude anything held in restricted funds. Given that reserves may be held in illiquid form, and individual assets assigned across funds, the cashflow feast and famine of a railway must be a particular challenge. No wonder Santa is so popular...

 

These arguments reproduce almost exactly, those which were advanced during a previous bout of loss making several years ago. They were no more valid then than now.

Years before that, prior to the Nant Gwernol Extension being opened, I recall someone, I forget her name, arguing that it was foolish to build the Abergynolwyn cafe as the station shortly would no longer be a terminus and problems would result. Cassandra like she was ignored and Cassandra like she was right.

PH

 

Yes, it's been a forty year disaster, hasn't it...?!?!?
Get some perspective.
Other attractions, like NT, in the same sort of category for price and demographic of visitor, have until recently heavily relied on volunteers in cafes and home-made cake. I believe others which couldn't attract volunteers were indeed run as loss leaders. Now most NT cafes are run professionally, at least in the busier places, and the prices have increased markedly as a result - but if the coffee and cake is good quality, people will pay for it (at least in an NT property they will - of course many visitors to NT properties are NT members and hence haven't paid entry fees that day). It is all presented as high quality and well sourced and so on. Most railway tearooms are not quite in this category (subject of another thread recently).
Of course, making the catering profitable would be the best option - but is not possible, it might do more harm to close it than to subsidise it. Certainly I have known analogous mistakes made in other industries.

 

It has been a forty year managerial problem. Get some reality

The first thing to get real about is that it is the Talyllyn Railway which is being preserved, not the Abergynolwyn cafe.

PH

 

how many locos does the TR actually need? 6 steam locos seems excessive perhaps, maybe costs could be cut here by selling one to a neighbouring railway?

 

I dont think we need to worry about TR finances because the TR has always been subsidised by the TRPS! However many preserved railways are not in so fortunate a situation.

My principle 'gripe' is that the TRPS membership need a 'reality check', but arguably this is unnecessary if the TRPS continues to have well heeled members with deep pockets and considerable (commendable) generosity to subsidise a railway that attracts great affection from a few in a part of mid Wales that cannot possibly be in the same visitor envelope as the Ffestiniog, or match it's stunning location, and excitement.

Cheers,
Julian

 

It was Sonia Rolt

 

Thank you. I had a feeling it was but as an "outsider looking in", was not sure. Glad you confirmed my recollections.

Paul H

 

Presumably this is analogous: many visitors to Abergynolwyn will be TRPS or FRS members who won't have paid any train fare.

 

Sonia Rolt objected to the building of the "new" Abergynolwyn station because the TR Council had rejected her husbands bizarre proposal for a two-tier station at Nant Gwernol with a "Swiss style" restaurant on the upper deck which spanned the platform and loop. It would have been impractical and totally out of keeping with the railway and its surroundings. She changed her view when the Aber station was finished.

 

The reserves policy required by the charities SORP is quite an interesting subject. It is obvious from a perusal of the annual report of charities that many don't take it that seriously and/or the reserves policy is simply dictated by the charity's financial circumstances. I think the CC's interest in reserves is driven by the general principle that charities should spend their income within a reasonable time of receipt, so the reserves policy is there to explain why the charity is holding back cash rather than spending it. This concept works better for one of the groups collecting on the street, rather than for a charity which owns significant assets and runs a business such as an educational establishment or a heritage railway. It also raises issues as to what reserves policy an entity such as Talyllyn Holdings Ltd can reasonably adopt within the rules, as it has limited operational needs itself. The stated policy is "The Board has resolved to adopt a policy to accumulate funds adequate to cover expenditure which could not [sic] accurately be predicted, taking reasonable account of the TR Co's strategic plans for renewal and enhancement". IMHO, this is not well presented, as the reserve policy should also make clear to potential donors why, with c. £700,000 of cash and rather vague potential applications, a donor should give them any more.

As to your other point, I would have thought that if a charity has liquid funds of more than say £200,000 which it does not need immediately, it is probably worth exploring hiring an investment manager, but as you say, once you decide to put some of it in equities, then you are taking on risk (although there is a significant risk with the capital value of tradable fixed income instruments at the moment because of the upside in interest rates).

 

Perhaps a solution is to "close" the Nant Gwernol extension; or, have Abergynolwyn as the Terminus, with a shuttle to Nant Gwenol as an added extra attraction, this would perhaps find employment for the supernumerary locomotives in the fleet.

Cheers,

Alan