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Looking Brighter at Llangollen


steve W
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2 minutes ago, andyman7 said:

Hopefully they will recover - it looks like from a legal perspective the trading company had no other way forward given liabilities and the inability to meet them,

Yes, I agree. It also suggests that the banks etc. have been doing their best to find a way forward.

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It was running at a significant loss pre Covid. If the trust were to take it over they would have to find sufficient cash to buy the company’s assets and also run the railway for a year or two at a loss. Theyy will need cash from external sources to do this.

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1 hour ago, Nearholmer said:

What does the PLC own? And, who, other than the trust, would want to buy it?

 

 

 

 

 

Not much. A few Mk.1s and I think some wagons. Denbighshire Council owns the land, and the lease and LRO and TWAO are held by the Trust. 7754, 'Austin No.1,' and 'Jennifer' are also Trust owned. 

 

Good Mk.1s are now hard to find and expensive so under normal circumstances any which did have to be sold would find a ready market. These are not normal circumstances, sadly.

Edited by papagolfjuliet
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25 minutes ago, PenrithBeacon said:

Who owns the locomotives?

 

All owned by the Trust, other societies or individuals.

 

I think the locomotives owned by the Trust are ones which were donated such as 7754 which was owned by the Museum Of Wales after being donated by the NCB.

 

ISTR Austin No 1 was donated by Burtonwood Breweries after being originally purchased for use as a pub sign in the same way as one of the Terriers was.

 

 

Jason

Edited by Steamport Southport
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Its surprising that this doesn't happen more often.  It was great for enthusiasts when the railway revivals occurred years ago when disused lines and stock became available but suddenly it evolved into fully fledged little railways.  More track to more places,  bigger engines and more stock, probably more than was ever needed if the amount of rusting stock on unused sidings is anything to judge by.  Great progress was made by various lines and success seemed guaranteed, but  was it sustainable?  As long as supporters dug deep, amazing things happened but every page in the mags concerning these railways always had a tag line requesting contributions, etc.  Obviously things were not that rosy and when a source of revenue was interrupted, as with covid, it was a dilemma unseen and hard to overcome.  The LR had just spent a fortune to get to Corwen, a large capital investment which may have been better spent, even before covid.  

       It doesn't bode well for the industry  and the investment that has been made in newbuilds and rebuilds must be protected for a more happier future.  All this on St Davids day, too!:o

      Brian.

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20 minutes ago, brianusa said:

Its surprising that this doesn't happen more often.  It was great for enthusiasts when the railway revivals occurred years ago when disused lines and stock became available but suddenly it evolved into fully fledged little railways.  More track to more places,  bigger engines and more stock, probably more than was ever needed if the amount of rusting stock on unused sidings is anything to judge by.  Great progress was made by various lines and success seemed guaranteed, but  was it sustainable?  As long as supporters dug deep, amazing things happened but every page in the mags concerning these railways always had a tag line requesting contributions, etc.  Obviously things were not that rosy and when a source of revenue was interrupted, as with covid, it was a dilemma unseen and hard to overcome.  The LR had just spent a fortune to get to Corwen, a large capital investment which may have been better spent, even before covid.  

       It doesn't bode well for the industry  and the investment that has been made in newbuilds and rebuilds must be protected for a more happier future.  All this on St Davids day, too!:o

      Brian.

 

The problem AIUI was not with the extension, although extensions are a regular cause of financial/maintenance/motive power crises on heritage lines, but with the engineering business. The Llangollen appears to have taken on too much work too quickly, and moreover underquoted for jobs. As a result, work was either done at a loss, or done badly, or not done at all, saddling the railway with major liabilities. Combine that overreach with the distraction and expense of an extension and you have a perfect storm. My major concern now is for loco and coach owners who have found themselves either owed large sums of money by an organisation with very few assets, or with an unfinished vehicle which the contract repair industry has no spare capacity to complete. On that note I gather that 3814, whose owner has suffered years of disappointments, left Llangollen this week.

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It's not only 3814. The Patriot project and the SRPS have both been hit hard. Not only that but the Llangollen's home fleet appears to have suffered: I gather that when 4806 moved to the NYMR you would not have wanted to stand on the tender tank, and during the loco's current boiler overhaul Riley's have identified large build ups of mud and scale which are - quote - 'definitely pre-NYMR.' Why set yourself up as a centre of engineering excellence when your own engines have serious problems? Why operate a hire fleet of small industrial engines when you barely have enough locos of sufficient size to cover your own services? The whole PLC business model appears to have been flawed for years now, to the detriment of the Llangollen Railway and of the movement as a whole.

Edited by papagolfjuliet
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1 hour ago, brianusa said:

Its surprising that this doesn't happen more often.  It was great for enthusiasts when the railway revivals occurred years ago when disused lines and stock became available but suddenly it evolved into fully fledged little railways.  More track to more places,  bigger engines and more stock, probably more than was ever needed if the amount of rusting stock on unused sidings is anything to judge by.  Great progress was made by various lines and success seemed guaranteed, but  was it sustainable?  As long as supporters dug deep, amazing things happened but every page in the mags concerning these railways always had a tag line requesting contributions, etc.  Obviously things were not that rosy and when a source of revenue was interrupted, as with covid, it was a dilemma unseen and hard to overcome.  The LR had just spent a fortune to get to Corwen, a large capital investment which may have been better spent, even before covid.  

       It doesn't bode well for the industry  and the investment that has been made in newbuilds and rebuilds must be protected for a more happier future.  All this on St Davids day, too!:o

      Brian.

 

They make pennies from enthusiasts. 

 

It's the paying public where the money comes in. A bad year with next to no tourists has hit the area badly. Not just the railway.

 

Here's Llangollen at the weekend. This would normally be packed with tens of thousands of tourists on half term trips.

 

image.png.cd989736269fc8625bb3e869c9c1523c.png

 

https://www.bbc.co.uk/news/uk-wales-56229815

 

 

 

Jason

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This does seem to be a perfect storm of events; financially "extended" by the Corwen extension, the costs of the failed Engineering business and almost a complete loss of income.  The first was actually a good investment, extending to a location that should provide new journey opportunities to a genuine destination and probably generate more traffic than required to cover the increased infrastructure.  The second is a result of poor management (over-extending risks to the business), the third out of their hands and predicted by no-one.

The Llangollen seems to have been quite well run over many years (mistake mentioned above is an exception) although they have done one thing repeatedly which I am always guarded about: Big Galas.  They get a huge amount of attention in the enthusiast press, generate lots of publicity to people who will probably visit them anyway, but cost very large amounts for what amounts to a big party for a few days.  Huge sums spent transporting large locos (with large hire and running costs) around the country to satisfy additional passenger numbers often measured in the low thousands.  I remain to be convinced that for most preserved railways, big steam galas are a cost-effective way to generate income or productive use of management time.  But I can appreciate that for many, they are a very enjoyable event, including for the railways' own volunteers.

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10 hours ago, Northmoor said:

This does seem to be a perfect storm of events; financially "extended" by the Corwen extension, the costs of the failed Engineering business and almost a complete loss of income.  The first was actually a good investment, extending to a location that should provide new journey opportunities to a genuine destination and probably generate more traffic than required to cover the increased infrastructure.  The second is a result of poor management (over-extending risks to the business), the third out of their hands and predicted by no-one.

The Llangollen seems to have been quite well run over many years (mistake mentioned above is an exception) although they have done one thing repeatedly which I am always guarded about: Big Galas.  They get a huge amount of attention in the enthusiast press, generate lots of publicity to people who will probably visit them anyway, but cost very large amounts for what amounts to a big party for a few days.  Huge sums spent transporting large locos (with large hire and running costs) around the country to satisfy additional passenger numbers often measured in the low thousands.  I remain to be convinced that for most preserved railways, big steam galas are a cost-effective way to generate income or productive use of management time.  But I can appreciate that for many, they are a very enjoyable event, including for the railways' own volunteers.

You would be surprised, being on the opposite side of the fence at the GWSR steam gala's normally bring in 5 figure profits, as long as transport is budgeted carefully, whilst steam gala's have high startup costs, the profit is normally very good, diesel galas on the other hand are exactly the opposite low start up costs but lower overall profit.

 

There is a long and documented history of the failings of the engineering business, and that has not helped by any shot, the final nail in the coffin has been covid19.

 

Most railways which have a trust and plc setup will have the ownership of the infrastructure and assets transferred to the trust which are then leased back to the PLC at a nominal cost, they will then have set up the trust with an all assets-debenture over the assets of the railway, this means that in the event of a failure of the plc, the trust is the preferential creditor.

 

Llangollen however in order to raise capitol, had a fixed and floating charge over the companies assets with the bank, which makes them a preferential creditor.

 

Note that this receivership NOT administration, they are two different things, administration protects you from your debts while the administrator attempts to sell the running business as a going concern with the aim, of keeping the company going. Receivership is purely to sell assets to collect the debts owed to the creditors. \

 

The more assets you sell the less you have to run a railway with.... when you start back up again....so if you sell all of your mk1s.....what are you going to run with....yes mk3s are abundant...but there are not many steam engines that can pull them!!!!

 

None of the diesels were owned by the railway they are privately owned. Its carriages and infrastructure that are the assets.

 

The next step will possibly be to negotiate how much of the debt can be paid off at this point in time, and then in the future. Obviously the receivers would like the debts to be paid...and if there's no chance of making a profit in the future they may well allow a stay of execution so the railway can potentially get back to profit at some point in the future...so if you sell all the assets to recover 50% of the debt....you then diminish the chance of recovering the remaining 50% in future...whereas if you are patient you may get 100% of your debt back in time...

 

the only concern is who owns the WTO which is not transferrable to another entity, if its the PLC that owns it, then a new company will have to start from scratch with the ORR, in order to obtain a license to operate....something which will not straight forward and take a great deal of time.

 

 

 

 

 

 

Edited by pheaton
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Assuming I've found the right order, the TWAO is held by the Trust - https://www.legislation.gov.uk/wsi/2010/2136/contents/made

 

Section 2(1) - "the undertaker” (“yr ymgymerwr”) means the Trust and following any sale, lease or underlease under article 17 (transfer of railways by undertaker) this expression shall mean or include the transferee within the meaning of that article;"

 

Section 13.—(1) "The undertaker may operate and use the extension railway and other authorised works as a system, or part of a system, of transport for the carriage of passengers and goods."

Edited by Wheatley
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I'm not sure that the big galas were the problem. I think it's more a question of not having enough operational home based engines. I think I'm right in saying that on an ordinary peak period running day the LR needs two engines of power class 3 or above to operate its scheduled steam services. In order to do that and cover for boiler washouts, failures and so on, that really means that you need at least five working biggish engines. Fewer than that and you're essentially squeezing a damp rag; the fewer engines you have, the harder you work them and the more they fail. For the past few years the LR has usually had no more than three suitable machines,  and much of the time one of those engines has been out on hire. So, if you take on a contract job which requires, say, twenty hours' work a week with the usual penalty clauses, and one of your home based working engines suddenly requires twenty hours' work, you've got two choices: do the work you're being paid to do and substitute a diesel or cancel some services, leading either way to reduced income and nasty reviews on Tripadvisor, or prioritise the work on your own engine and hope that you can catch up the contract job later. Now imagine that you're in that position and you don't have one contract loco overhaul/build on but eight, and a few coaches too, and they're all having to be sidelined on a regular basis.

 

It is notable that other lines which perform regular contract jobs, such as the Severn Valley and East Somerset and Ffestiniog, either have very large operating loco and carriage fleets or only need very small ones. The Llangollen appears to have tried to become a major player in the contract engineering field without first doing the necessary groundwork or, put another way, to have tried to run before it could walk.

Edited by papagolfjuliet
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Could I respectfully suggest that those who do not know what is happening try and avoid speculation?

 

That the operating company and the asset owning trust are separate entities is all people need to know for now. I wouldn't go writing this railway off just yet.

 

 

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My thought entirely. Had anyone read the railway's statement, they would see it is the operating PLC that is in trouble mainly due to problems with the engineering department.

 

It is common in most industries to have several companies under the umbrella. A couple of railways I belong to have the main operating company, usually a plc or a charity who then wholly own various subsidiaries, such as the catering or engineering departments. That way should catering have a bad year such as the previous one, or engineering has some claims against it, then the whole entity is unlikely to fail.

 

The only railway I'm aware of that owns everything from the track, grounds, buildings, locos and stock is the IWSR. But even there the charity own a trading company as the charity as such is not allowed to trade.

 

With the Llangollen as the stock and locos appear to be owned by others and hired in by the company, they should all be ok where they are. 

 

I've not been to that railway so can't say with any authority what they've got or what happened, but it seems to be common business practice whatever it was!

Edited by roythebus1
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1 hour ago, papagolfjuliet said:

think I'm right in saying that on an ordinary peak period running day the LR needs two engines of power class 3 or above to operate its scheduled steam services. In order to do that and cover for boiler washouts, failures and so on, that really means that you need at least five working biggish engines.

That seems pretty conservative. Needing 3 to cover 2 diagrams I could buy, but 5? What are the other two doing?

 

Perfectly reasonable to have diesels on standby for unplanned unavailability - necessary anyway unless your going to literally burn money by having an extra loco in steam at all times. From what I've seen as a volunteer on a couple of railways, most steam loco failures can be fixed in a day or two, and anything more serious is rare enough that having a spare loco on standby is an unnecessary expense.

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The link to the railway's own website in the first posting gives the reasons for the financial difficulties.

 

Quote

 

The company’s accounts show pre-tax losses of £330,601 in 2018, £329,175 in 2019 and £258,804 in 2020 (pre-audit).  A number of significant engineering contract disputes, all of which arose in the years prior to the current board taking over in October 2020, have crystallised in the last few days.  The claims against the company are compelling and are in excess of £250,000 in total.  There is no prospect of meeting these liabilities, even over an extended period.

 

As a result the balance sheet is now insolvent to the extent of £350,000 approximately, adjusting for intangible assets also.  In such circumstances the company cannot legally continue to trade.

 

 

 

LMS Patriot Project was just one of the locos they were working on. It is reported that parts were lost and needed to be replaced or were not manufactured to the correct specification. A detailed report is in the link below - note the date December 2018 and so long before the effects of Covid.

 

https://www.lms-patriot.org.uk/engineering/2018-12-20/engineering-date-december-2018

.

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