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West Somerset Railway General Discussion

Discussion in 'Heritage Railways & Centres in the UK' started by gwr4090, Nov 15, 2007.

  1. Lineisclear

    Lineisclear Member

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    My apologies Bayard.
    I'm sure we agree that is not always understood by the average reader of the accounts, especially as the word "provision" implies reasonably that cash has been provided/allocated or , as you point out, that magic cash has been generated at the year end.
     
  2. 5914

    5914 Member

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    However, there is an inherent issue in under providing in that the liability that is being provided for will eventually crystalise - and it provision has not been made there will be a sudden shock rather than an event that has been recorded as it emerged. Whilst provision in itself does not provide the money, it does provide the management information to allow for the planning of cashflow.

    The danger is when the liability flips over from 'liabilities falling in more than 12 months' and into the category of 'liabilities falling due within 12 months'. At this point the business runs the risk of suddenly finding itself without the cash to meet its liabilities and therefore ceases to be a 'going concern'. Therefore, deliberately under-recording a known future liability makes the books look better in the short term, but increases the risk of unexpected liabilities impacting on cash flow and the ability to trade in the future as it removes the information relating to the emerging liability.

    (The same is not only true of locomotive costs, but of any costs - as James has noted elsewhere the costs of infrastructure and carriage overhaul are equally important in terms of recording emerging liabilities rather than just waiting for the maintenance deficit to grow to the point where it can no longer be ignored, or a single failure takes place that will precipitate a crisis)
     
  3. Snifter

    Snifter Part of the furniture

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    Has anyone seen the latest position on the £1m appeal ? Are we any nearer to the 5% / £50k milepost ?
     
  4. John Palmer

    John Palmer Member

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    Insolvency practice is not my strong suit, but if I have correctly understood this part of @5914's post then the date on wich the WSR plc's obligation to overhaul 53808 crystallises may have significant implications for the plc's ability to remain in business.

    I don't know what other substantial future liabilities to third parties the WSR plc has, but I imagine that there will be few, if any, of the same magnitude as the locomotive's overhaul cost. That liability is different in kind to the company's other liabilities such as the cost of infrastructure renewal. Up to a point the company retains control over when such renewals get carried out because their timing is an internal matter, but in the case of the 2-8-0 the company either has the funds to meet the cost the cost of overhaul when it falls due or it doesn't. In the latter case, according to @5914's post, it may find itself “without the cash to meet its liabilities and therefore ceases to be a 'going concern'.”

    If that is the case then it seems to me that the date on which the overhaul falls due assumes a hitherto unacknowledged importance, and I'm still uncertain as to when that might be. I understand it to have been said that 53808 was retubed and its 10 year boiler ticket renewed in 2013, so fixing the likely date for overhaul as 2023. However, it is quite clear from reading the S&DRT's journal 'Pines Express' that the boiler was lifted and work carried out to the locomotive in 2015, in time for 53808 to be returned to service in 2016. I cannot understand why the locomotive would have come out of traffic for work requiring a boiler lift only two years into a 10 year ticket, so if the ticket was in fact renewed in 2013 I'd be grateful if somone could explain the reason for the work in 2015. If, on the other hand, that 2015 work was undertaken for the purpose of securing a renewal of the boiler ticket, is there any reason to believe that it will expire after only 8 years in 2023, rather than running a full 10 year term with the implication that the overhaul will not fall due until 2025?

    If the overhaul falls due in 2023 then the WSR plc has only a short period in which to turn its financial fortunes around and place itself in a position to fulfil its obligation to carry out that overhaul. However, if a 10 year boiler ticket for the locomotive was secured as a result of the work carried out in 2015, then that points to crystallisation of the overhaul obligation in 2025 and a two-year additional breathing space in which the plc might surmount its financial woes.

    Of course, there is always the possibility that some other factor will intervene between now and 2025 that persuades the plc board that the company no longer remains a viable concern. The response so far to the existential appeal for funds suggests that the cost of the 2-8-0's overhaul may not, after all, prove to be the final straw.

    Some clarity on the anticipated overhaul date would nonetheless be welcome.
     
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  5. Pete Thornhill

    Pete Thornhill Part of the furniture Staff Member Administrator Moderator Friend

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    I do think that the boiler lift in 2015 might be a bit of a red herring, if there was still potentially eight years left it might of been felt that was sufficient, although, I do know the SVR did get a new ticket on 43106 when the drag box required renewal, but that was roughly four years in which might of tipped the balance.
     
  6. D1039

    D1039 Well-Known Member

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    Two quick points.

    Your comments on crystallisation concur with what I'd heard: the SVR's FD at their AGM in circa 2013 confirmed that for better or for worse under the SVR's historic 'run and repair (sometime) agreements' the liabilities only become 'live' on the accounts when they agree to overhaul it.

    In the WSR's case I'd in mind a potential date of (or nearer) 2030 when the agreement expires as I'd assumed they were under no obligation to overhaul it immediately, as long as it was done by the 2030 date - but I haven't seen the agreement and there's many better placed to comment.

    Patrick
     
  7. martin1656

    martin1656 Resident of Nat Pres Friend

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    If by chance, the PLC fails between now, and 2030, Will the agreement to overhaul 53808 become null and void , as the company would have ceased to exist , In such a scenario, Would the S&DJRT then be classed as a creditor as there is a liability to fund the loco's next overhaul, or would the liability be non enforceable due to the company having ceased trading?
     
  8. nanstallon

    nanstallon Well-Known Member

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    Perhaps the WSR could seek donations to be sent to the S&DRT for the repair of 53808; might get a better response.
     
  9. Sidmouth

    Sidmouth Part of the furniture Staff Member Moderator

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    Martin and maybe @1472 too . As loco custodians at the sharp end of operation , the model can't be sustainable longer term . Beyond the obvious much higher steaming fees what needs to change to enable loco owners and railways to operate to each others benefit but give loco owners more comfort that money earned can cover expensive future costs ?
     
  10. garth manor

    garth manor Member

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    Riley locos appear to cover their costs through earned revenue.
     
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  11. Premier.Prairie

    Premier.Prairie New Member

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    Trust and mutual respect that one is not trying to 'rip off' the other. Pretty basic stuff. I remember being very impressed with a railway where we hired 5542 who started the discussions with the statement that 'we pay a sum that allows you to maintain and operate the loco and have sufficient cash available to overhaul it at the end of the 10-year ticket'. They took a big interest in how many locos were available and in ticket and how many were due in and out of use. That at least gave them an idea of the bigger picture. We had a 5-year agreement with them and in conjunction with other hires, we managed to turn the loco around in less than 9 months and no red on the bank balance. We did put a fair amount of volunteer labour into the routine maintenance and overhaul work though.
     
  12. Miff

    Miff Well-Known Member Friend

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    Quite possibly both. If the company is insolvent that means it doesn’t have enough money to pay all its liabilities. In a liquidation or sale unsecured creditors might then get paid a proportion of what they’re owed but only if there’s some money left after higher priority debts are paid. Additionally if the agreement does not very precisely define the meaning of a ‘ten year overhaul’ then it may not be very easy to prove the financial value of such a debt in the first place.
     
    Last edited: Aug 5, 2021
  13. jma1009

    jma1009 Well-Known Member

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    53808's agreement crystallises much earlier than John Palmer and Patrick Hearn might be aware of.

    As I understand the time line some 8 years ago the boiler was done and the ticket started before the chassis etc was ready by some 2 years or so. Happy to be corrected on this.

    The WSR PLC EGM the other year and the 2 sets of accounts with the significant qualifications by the auditors was not a good state of affairs.

    And then the sleight of hand becomes something that can't be avoided - except it could have been by not serving a Notice to Quit over Washford on the SDRT and retaining them as part of the "family", and with a loco based on the line for 45 years!
     
    Last edited: Aug 5, 2021
  14. Snifter

    Snifter Part of the furniture

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    As I understand it, a boiler can be given a new ticket but the clock only starts when it is next steamed.

    Still no update to the appeal total so let's hope that the delay is caused by preparations for a big reveal moment.
     
  15. 5914

    5914 Member

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    I am not sure that is correct. My own understanding is that the day of inspection is the day that the ticket starts to tick - hence the desire in many overhauls to have the frames/pipework etc ready and test fitted before the final hydraulic and steam tests. (Taken to an extreme, the alternative would mean that a boiler may remain unsteamed for several years before the mechanical overhaul is complete - indeed, in theory, such an approach could allow for a boiler to be ticketed for a decade or more before being fitted to a loco and steamed - unless I have misread the intent of Snifter's post)
     
  16. nick813

    nick813 Well-Known Member Loco Owner

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    The clock stars ticking the day the boiler is inspected and passed.
     
  17. 61624

    61624 Well-Known Member

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    And you know this for sure? Can you be sure that they're not cross subsidised by the profits from his engineering business?
     
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  18. Snifter

    Snifter Part of the furniture

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    Happy to be corrected on boilers. The discussion I had at the time aligns with 5914's post where the ticket may be issued some considerable time before the loco is ready to run. The mess room chat was on the phasing of overhaul activities such that the maximum useful period was achieved.
     
  19. martin1656

    martin1656 Resident of Nat Pres Friend

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    the ticket, only becomes live, when the boiler inspector signs it off on the live steam test, A boiler can in theory be repaired, retubed hydraulically tested, then test steamed , before the boiler inspector does the official test, to ensure there are no defects prior to the official test, the boiler is also subjected to yearly tests, as even though a boiler may have an ticket valid for ten years, it also has to pass an yearly inspection, and then is signed off for 12 months, from that date, the ten yearly isnt actually a legal requirement, but the boiler insurers will insist on an out of the frames test, ten years from the date the boiler was inspected and will want to see tubes out, and a through exam of the firebox, tube plates etc, see an hydraulic test, followed by a steam test, before giving the boiler a new ten year certificate,
     
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  20. D1039

    D1039 Well-Known Member

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    November 2022 is a published date and I've more or less taken that as a given.

    The question upthread is the timing issue of at what point between 2022 and the expiry of the agreement does the overhaul liability fall to be crystallised in the WSR's accounts. @John Palmer thought it might be an early date, I mused that it might be possible that the WSR PLC crystallised it nearer 2030, particularly if the overhaul wasn't immediate. I don't know there's an exact answer, and if there is I don't know it!

    Patrick
     

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