Which railways will still be with us in 10 years?

Hmmm, the Talyllyn believes that a GM is a luxury eh? I do hope the rest of the organisation is strong enough to withstand that sort of thinking. I would thought a more logical position would have been to keep in place an effective GM and charge them with finding the economies required. But the TR has always been a cat that walked it's own path. I wonder if the reality is that the board and council didn't want to delegate sufficient authority to the GM to let them get on with the difficult job at hand?

Regarding the NYMR and the comment that £200k of the loss was "paper". Depreciation is a very real cost. Fortunately for the railway it doesn't hit cashflow, so we can be grateful for that small mercy, but if the business isn't keeping pace with the delapidations of it's assets that is a problem in the longer term. Of course heritage railways are an unusual case where they can raise an appeal to cover some of these costs, but ideally the business should really wash it's face and leave the fund raising for the big capital expenditures and the "nice to haves". Actually as I think about it £200k for depreciation doesn't sound like enough - was that the total depreciation?

 

As far as I'm aware, depreciation is charged as a fixed cost, it doesn't take into account how much is being spent on maintenance. So it is quite possible to have a position where the condition of the assets is actually improved overall but are still depreciated in the accounts.

 

As the NYMR Finance Director, I have been planning to reply to the original comment about the loss reported in Heritage Railway but have been occupied somewhat with preparing for last weekend's AGM and my paid work to make a full reply.

Firstly though I must point out that our Civil Engineer Nigel Trotter has a very detailed Bridge Repair Programme. Nigel's "Asset Register" details the condition and maintenance plans for every bridge, structure and earthwork on the NYMR - other Railways may have as good but I doubt if it is possible to have better.

This does not, of course, mean that the funding is in place in advance. As already pointed out, few bodies would be able to assemble such large sums of funding readily out of cash flow. Commercial businesses would raise funds by issuing shares or bank funding, but Carities do have the option of seeking donations and grants (any business has at least some grants available to it).

Turning to the actual figures, the £355,000 ws the Operating Loss before "Charity" income. After donations, membership surplus, bequests and grants, the loss was £78,000. However, because the NYMR is a Charity, this Charity income includes grants spent on Capital Items - in the case of 2008, this included Pickering Carriage Restoration Shed and preparatory work on the Pickering Lottery project. Bequests received are also allocated against future capital expenditure.

The Depreciation Charge is just under £200,000, reduced from earlier years as a review of the rates of write off of assets was reviewed and, whilst the old rates might be appropriate for an organisation with modern assets, the heritage nature of much of the NYMR's asset base means that value and worth to the busiess diminish more slowly than for modern, disposable items. The depreciation is a reflection of the write off of past expenditure - in practice, it provides a pool of cash towards current capital expenditure but is it calculated by reference to past actual expenditure rather than expected future requirements. Even for a business replacing modern plant with more modern examples would expect to pay more for the newer equipment than they have written off those purchased at the price a few years ago.

The actual repair and maintenance of existing infrastructure and equipment is charged as a cost in the accounts and was £390,000 in 2008 for materials and contractors, plus a large part of the wage bill. The Capital expenditure (£418,000 in 2008) does include much "capital maintenance" - i.e. work necessary to repalce or renew worn assets but where the replacement is not just on a "like for like" basis or significantly extends the life of the asset. The £418,000 includes over £100,000 on the overhaul of 45428. Accounting Standards require that such work be treated as fixed asset and then written off via depreciation once the asset is in use (over 9 years is the NYMR policy for a 10 year boiler ticket to allow for any problems leading a slightly early withdrawal).

As I stated at the AGM, if the NYMR (or any similar organisation) did not need top undertake capital expenditure, then it could "afford" to make a loss equal to the depreciation each year and cash balances would stay the same. Obviously, in the real world, this isn't ever going to happen but nor is it realistic for any organisation in our sector to hope to be able to pay for capital developments entirely from funds generated from operations. Balancing the finances of an organisation the size of the NYMR is never easy. As with all railway undertakings, the cost of having the infrastructure, rolling stock and people to tun a single train is massive. Out of total expenditure in 2008 of just over £5 million excluding depreciation, £1.25 million related to trading (Shops/Catering/Diner) and the variable costs of running trains (those that would vary depending on timetable or not be spent at all if no trains ran) were around £1 million, so the vast majority did not directly vary depending upon volume of business.

The 2008 result is of course of some concern. However, overall, Expenditure was just £41,000 more than 2007 except for Fuel and Hire, which were over £1/4 million up due to fuel prioces and the costs of locos hire and haulage, the LNER Festival in Spring 2008 being a major cost (although only about 1/4 of the increase and the event ws profitable). Hire costs are in part driven by past failure to overhaul our own locos as they came out of service.

This leads us neatly to the question of management - and I had to smile at cctman's comment as would fellow NYMR members. The reason is that there is plenty of talk on the NYMR is that we have too many managers and the Talyllyn seem to have taken the same view of their organisation. It is a very easy, "club/society" view to take but is totally wroing. You cannot control an organisation big enough to loose £100,000 without having at least a small number of people in day to day charge. We did not control expenditure (where we could) on the NYMR without departmental, financial and the General Manager controlling what could be done and whether it could be afforded. Good managers (and the quality is an issue in our industry as many threads on here will confirm) don't cost at all - there are plenty of areas on the NYMR where even those who say we have too many managers will readily admit that the performance and results of that area are down to the leadership and control provided by the manager. Obviously, as part of "the management" (along with the rest of the volunteer officiers and directors as well as paid managers), I could be said to be biased but I don't believe the NYMR results are due to poor management now, although poor, short term decision in the past have, with the benefit of hindsight, contributed.

Finally, and purely on the NYMR finances, a few short years ago, the NYMR had to find a considerable sum to buy a steam loco, a diesel loco, 4 Pullman and a number of other carriages from one of our beneficators, albeit at around half their true value. This had to be done almost entirely on bank borrowings and fundementally changed our finances. We are still working to recover from this (and will be for many years) and it is major part of why Bridge 30 needs to be funded from grants and donations and we haven't been able to produce a reserve of cash towards the work.

I wish the Talyllyn luck but do fear they have taken the route of cutting a large, obvious cost. If you looked at the NYMR's accounts, fuel is one of the largest costs £370,000 in 2008) - an "easy" saving - but then, how would you run trains? I hope the Talyllyn don't find the same is ultimately true of not having a full time manager in charge of the business.

Steven Hogg
NYMR Finance Director

 

Speaking from a purely personal point of view, but on the basis of having gained a far more informed view of traffic potential on my railway, the Welshpool & Llanfair, since coming to live in Llanfair a couple of years ago, I find aspects of the Talyllyn's operation surprising (and I hasten to add it has always been one of my most liked lines).

Both our main stations are sited very visibly on a main through route into mid-Wales, yet our timetable starts at Easter and apart from school holidays runs only at weekends, midweek running not starting until June. Even then we don't run Mondays and Fridays, that starts three weeks into July. By September we are again shut on Mondays and Fridays, October is weekends only and we close at the end of that month except for Santa Specials. We monitor very closely our traffic figures and the timetable we have is the one that works.

You don't pass by the Talyllyn - you specifically have to "go to it", as it is located not that obviously in a seaside town, not on a main Welsh trunk route, and where on a nice day the tourist is rather more likely to go to the beach. Yet the Talyllyn timetable sees two trains each way through the week of February half term, Sundays in March, and then a daily timetable from the first weekend in April right through to 1 November. With the exception of two weeks in April and three in October, the timetable calls for a minimum four departures a day from Tywyn Wharf and two locomotives in steam (I know you can't directly compare any railway but for info at Llanfair we only have a two loco in steam service on bank holidays and a couple of special weekends a year). From what I can see looking at the Talyllyn timetable the high season service requires three locos in steam minimum. Just one weekend of Santa Specials plus Christmas Eve, but then a two trip service in the week between Christmas and New Year - does that really get the takeup?

I admit I'm by no means an expert but I find it surprising that a detailed analysis of traffic figures would justify such an intensive timetable. Obviously I'd be very interested if someone in the know at the Talyllyn could come on and tell us if they get the takeup for so many trains.

Andrew C

 

Thanks for a full and detailed reply, Steven. It's a pity more posters on this Forum don't have a grasp of multi-million pound business otherwise some of the stupid comments would not be made. Still, it makes for good comical reading!

With apologies to those posters who do have experience of such business!

 

it's an intersting argument. Do you run more trains or do you run less trains? Keeping it simple, you essentially only have an income when you are running trains so you can argue that the more trains you run, the greater your income. In reality it is not like that, but every railway has fixed costs, which are to be met whether you run the trains or not. Whether to run a train service on a particular day depends on the variable costs, generally fuel and oil, etc, in the case of a heritage railway. If you're train operations are covered entirely by volunteers there is arguably no additional staff cost. You can argue that there is a notional cost of a volunteers time and expense but is this a valid cost? Most volunteers do so as a hobby and want to run trains and, certainly from the point of view of a loco crew or signalman, it makes no difference whether there are any passengers, or not so needn't be considered. I believe that most of the Talyllyn's train operations are covered by volunteers so the argument is simple. Does the income from running trains on a particular day cover the marginal cost of those trains and make some contribution to the fixed costs? If the answer for a particular day/week is generally yes then it is worth doing.

 

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Coming from someone who thinks ignorance is bliss, I would say this is the pot calling the kettle black wouldn,t you?

Still they say tht sarcasm is the lowest form of wit.

Regards

 

I'm sure the Talyllyn, as one of the first and premier preservation lines, has a very large pool of volunteers, but whether this extends to such areas as the tearooms is another matter - serving teas and coffees is not the same as driving steam locos. We at Llanfair for example have to employ casual staff in the tearoom when we have a shortfall of available volunteers, especially on midweek days.

While I don't know the figures for the Talyllyn and appreciate its fuel use is somewhat less than ours, coal, and to a lesser extent water, is hardly a 'marginal cost'. If volunteer crewing of all those trains makes their cost marginal, where has a near £100,000 loss two years running come from?

Andrew C

 

For them that are interested in these things the ELR trust 2020 Developement Strategy has been published this month and among other things, compares profit and loss of the ELR with other major preserved railways including the NYMR.

The Locum Consulting report says that the NYMR employs 135 people either full or part time and they made a loss of £426,000 in 2006.

The report can be found on the web with a Google search for 'ELRT 2020 developement strategy' and the Bury Corporation web site covers the full details.

 

Good question! Perhaps someone should have seen this situation coming, you might say? But at least now measures are being taken to try and ensure financial stability going forward, even if this does mean regrettably losing the General Manager. As I understand it, the Railway Company has been making a loss for some years and the books have always been balanced by financial help from the Preservation Society each year.

It is generally accepted that we run more trains to satisfy our members and volunteers than the traffic figures would require, however the Society simply does not have the funds to bail out the Railway Company if it continues to make a £100k loss each year. That is why changes are being made. The timetable has been trimmed a fair bit already, and we can now run our high summer service with 3 locomotives instead of 4. As Steve suggested, cutting the number of trains only makes us marginal savings when we have fairly high fixed costs (staff) compared to the W&L.

As Andrew C also pointed out, Tywyn is a tucked away on the almost forgotten Mid-Wales coast. We are a fair distance from everywhere and you can pass at least one other preserved railway (such as the W&L) before you reach us. Us volunteers know what a little treasure we have running in the Fathew Valley, but we are now realising how difficult it is to sell our charming little narrow gauge line to joe public. A bit of a kick up the backside really, after sitting quietly at the back all these years. And with staff cuts being necessary, we now need to call on more volunteer help than ever (not just in operating roles) to ensure we fill the seats on our trains.

 

The Locum Consulting report for the ELR was an amazing read, I have just spent the best part of an entire morning reading this, just as an overview, I have to say I agree with 90%+ of what it says and IMHO this is a very unbiased critical review of the ELR by professionals with no direct interest in the "railway" hobby. They have some excellant observations, reccomendations and a very good analysis of the ELR's current situation and their potential for the future.
I think many other railways could sit up and take note of this report, it gives many good considerations and reccomendations that could apply to many railways in the UK.
I really hope this report is actioned upon, not just by the ELR but by the local authorities who "feed off" the potential benefits of the ELR.

 

I fully agree with ADB..., and there's also a page of 2002-2006 visitor data sourced from a tourism industry monitor, showing which preserved lines gained visitors over that period and which lost. It would be interesting to see their updates for 07 & 08, as I'm pretty sure we could answer the thread's title with more accuracy then.
The 2006 figures don't correspond in every case with the subjective comments in here about the visitor experience, but there are many significant "coincidences", on both the good and bad sides.

 

Two issues from that:

Correct, good managers are worth far more than their wages, but a poor one can do immense damage.

I don't think anyone seriously doubts that the NYMR needs effective heads of department, a finance manager and a general manager. The questions raised have been about what is a layer of middle management. There is a view that there are an awful lot of professional people amongst our supporters, who could perhaps help with a lot of this type of work; but maybe we are not particularly effective at involving them.

The TR may have decided to manage without a GM during a period of difficulty; we did that ourselves, as you will well remember Steven. OK for a short period, but you do need someone to take the long term, strategic view for the organisation.

To move this back onto the topic, no railway has a god given right to survive, and there is a limit to how long you can run at a trading loss for. Infrastructure & loco projects will get ever more expensive. The railways that survive will be the ones that keep their fixed costs, esp wages, under control.

 

Just a few remarks on the recent postings ...

Firstly it is nice to see a senior member of the NYMR management actually engaging in conversation with the enthusiast community; would that the same was true of 'my' railway, the Bluebell. Although the 'visitor experience' is not quite the same thread, I have to say that the NYMR offered me a very poor experience on my only visit in August 2006. The trains were fine although the substitution of steam for a very poorly turned out Cl24 on the last Friday of the month, still in school holidays, was an odd thing to do. Still it was timetabled! What was a good deal worse was the attitude of the 'ancillary' staff at both Goathland and Gosmont stations. When I asked for a bacon butty in the cafe at Grosmont at 3pm there was a shriek from the kitchen of 'Finished kooking! Finished kooking!'. It was 3pm and the railway's services continued until around 5. It was noticable that none of the cafe staff were actually working, they were just standing around waiting for 'home time'. After the return journey to Goathland in a very nicely restored LNER teak carriage hauled by 'Gresley', I tried to buy something from the tourist trap at Goathland Station but my way into the shop was blocked by a large aggressive woman who refused to stand to one side. She was the shop's manager; she had already cashed up and so was preventing customers from entering. The railway was still open but she had decided it was 'home time' and bugger her employer and its customers. The NYMR lost a few tens of pounds in retail sales and an enormous amount of goodwill. I am unlikely to visit again, its a long way from London just get treated like that.

On the question of W&LLR, I visit relatives in Manchester quite often (I was there yesterday after the KWVR gala) and I have often thought that a diversion to the W&LLR on the way home to north-west London would be nice, but apart from gala events the railway puts on so few trains that it just isn't worth going, I tend to go to the Ffestiniog instead. The journey to Porthmadog extends a 200 mile trip to one of 340 miles (!) but I see so much it's worth it. Yesterday I chose to go the Peak Line. No trains running at all! And this the last week of June and the Dales absolutely swarming with tourists! Crackers, absolutely crackers.

The point surely about the W&LLR is that it is on an 'A' road that is the main road from the Midlands to mid Wales. It could promote itself as a stopping off point in a journey if it chose to. I get the impression that the railway continues in its friendly but insular way where the customer is a 'nice to have' rather than an essential; that it is driven by the needs of the enthusiasts who volunteer their labour and there is no perceived need to develop the railway as a business. Shame, it has such potential.

I'm sorry that the Talyllyn is in trouble, nice line, but firing the GM seems a little Stalinist. Was he the problem or the potential solution?

Many of the railways are now multi-million pound businesses and need to have managers and management structures which reflect that fact. I feel that the days of enthusiasts running the business as opposed to providing 'free' technical and commercial services are coming to an end. Those railways that are multi-million pound businesses need properly paid and experienced professional managers who are free to manage and lead the railways without day-to-day meddling by the enthusiast community.

Regards

 

It is disappointing to read your comments about the NYMR but, alas, I don't think that you have got it wrong. It is not the good impressions that remain with you but the bad ones.

 

Have to completely disagree with you there, as of course you would expect me to. The fact is that our timetable has been designed following very close monitoring of potential traffic levels to fulfil the need for the traffic that is there. Yes we are by an A road but that A road does not get constant streams of tourists going down it every day of the week - many for example get to Shrewsbury and head up to Oswestry on the A5 to the north Wales hot-spots – I know, I live in the small town at one end of the line, take my wife to and from work most days in the market town at the other end of the line, and get to see traffic levels on the road at first hand. Today for example I was on the loco, it was a warm day, our trains were reasonably patronised but not full.

We consider our customers essential and have very much developed the railway as a business, by providing the level of service to suit what our catchment area can provide. The cold business sense of the railway has in fact at times in the past caused irritation amongst a minority of the enthusiasts, one or two of which might want to return to a time when the railway had no money and needed whip rounds to buy the next coal load. But the fact remains that we are holding firm in the current downturn and not making big losses - which some others with far more complex timetables are.

Need to add that these views are very much my own in a personal capacity.

Andrew C

 

Sorry, forgot to add - do try to pay us a visit - I'd be interested in your comments after seeing the line first hand.

Cheers

Andrew C

 

The WLLR has a charm that the other Welsh lines can't quite match. Have had some enjoyable visits in the past and look forward to more. Also looking forward to an all WLLR train with Countess and three Pickering carriages.

 

You know something I don't? Seriously, yes it would be nice but we only got the second one thanks to a very generous legacy so don't hold your breath...

Andrew C