Which heritage railways will do best financially in CY 2024?

Many who invest in equity markets know that financial performance metrics can be manipulated.

If a company doesn't invest in sufficient capital expenditure - airlines are a prime example, if the fleet ages every year without replacements - short term financial results can look good but at the cost of later.

Your financial year typically ends on 31 March 2024, so 'CY' analysis is mostly in FY 2025.

That said, which heritage/preserved railways do you expect to perform well (or at least OK) financially in 2024?

(I don't want in this post to cover the 'financial disasters' - that's already been covered to some extent).

Of the 10 or so in England on which I've travelled, my guess is North Norfolk Railway will be best.

Has its ducks in a row. Although expectations were low (it's relatively short), it exceeded them: I regret not having allocated time at its historic intermediate station, the appropriately named Weybourne.

NNR has already published the 2024 timetable.

Much as enthusiasts don't like the approach, I think the Ffestiniog will do OK, because the "railtour experience" sales approach seems to be working for them, allowing higher prices without seemingly losing custom.

The Keighley and Worth Valley seems to be doing well recently and I can imagine they will have a successful year. I read they have been very fortunate lately, managing to secure a £1m government grant for a bridge replacement and (I think) a further £5m for infrastructure upgrades which is a fantastic achievement.

They are also probably as close to the 'perfect' preserved railway formula as you can get, being in a well populated area, having a tourist destination en route (Haworth) and a well served main line connection. However being just under 5 miles long they will not have the heavy overheads of the longer lines.

I think it's doubly difficult to compare because a lot of railways like us at the Kent & East Sussex are not for profit companies owned by our members. No one is paid a dividend all the money we take in is invested in the railway. In theory our best result would be to neither make or lose. In practice we had a loss of around 200k last year and a much smaller loss this year. Our financial year ends with the main season in November.

12C said:

The Keighley and Worth Valley seems to be doing well recently and I can imagine they will have a successful year. I read they have been very fortunate lately, managing to secure a £1m government grant for a bridge replacement and (I think) a further £5m for infrastructure upgrades which is a fantastic achievement.

They are also probably as close to the 'perfect' preserved railway formula as you can get, being in a well populated area, having a tourist destination en route (Haworth) and a well served main line connection. However being just under 5 miles long they will not have the heavy overheads of the longer lines.

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Agree with this. I did some work with them over 15 years ago and they are cautious, but ambitious and know everything they do is subject to funding and they can wait. They also have some excellent funding bid writers.

A project mentioned way back then was the new diesel workshop which has now secured funding. The resignalling and reopening of Keighley box will enable them to offer a more varied experience.

The work to refurbish and allow public access to Keighley Water Tower is underway and should also be completed in the not too distant future,

How are you measuring financial success? Total profit, profit % vs turnover, total revenue, turnover, cash in the bank at the end of the year, surviving, investment, value of total assets?

Iskra said:

How are you measuring financial success? Total profit, profit % vs turnover, total revenue, turnover, cash in the bank at the end of the year, surviving, investment, value of total assets?

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The ability to keep running until the end of 2024 if the distress calls being issued by some of the major railways are an indicator of the general state of affairs.

railfan99 said:

Your financial year typically ends on 31 March 2024, so 'CY' analysis is mostly in FY 2025.

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As an aside, less than a quarter of UK limited companies have a March financial year end. It is the most popular month though, slightly ahead of December

SteveM70 said:

As an aside, less than a quarter of UK limited companies have a March financial year end. It is the most popular month though, slightly ahead of December

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Thank you. I didn't know that. As an aside, in my distant country, 90 per cent plus have a financial year ending on 30 June.

Iskra said:

How are you measuring financial success? Total profit, profit % vs turnover, total revenue, turnover, cash in the bank at the end of the year, surviving, investment, value of total assets?

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I was merely measuring by total profit (i.e. 'net profit after tax' that accounts for amortisation, depreciation and so on) but it's true some other items mentioned are important.

Those who get the largest legacies!

It’s probably a railway with a limited fleet size, simple infrastructure, short mileage but high footfall and in a tourist area so able to weather any domestic economic issues. So my guesses would be the Lakeside and Haverthwaite or to a lesser extent the Dartmouth Steam Railway.

An educated guess, based on ops criteria it will be a narrow gauge line. Probably the Ffestiniog and Welsh Highland, possibly the Vale of Rheidol.

paul1609 said:

An educated guess, based on ops criteria it will be a narrow gauge line. Probably the Ffestiniog and Welsh Highland, possibly the Vale of Rheidol.

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Interesting prediction: as one not from your group of nations, I (maybe incorrectly) consider the first 'remote' so am intrigued how it (Ff) gets so many travellers. Perhaps it has legendary status.

railfan99 said:

Interesting prediction: as one not from your group of nations, I (maybe incorrectly) consider the first 'remote' so am intrigued how it (Ff) gets so many travellers. Perhaps it has legendary status.

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It’s in a very popular and scenic tourism area and it’s a great way of seeing that scenery as it runs away from the main roads and up into the hills. Plus it’s long established of course.

Bessie said:

Those who get the largest legacies!

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Being somewhat cynical legacies, donations and grants (see recent amounts awarded to Keighley and Worth Valley, NYMR) are becoming a far more important income stream than fare box revenue.

railfan99 said:

Interesting prediction: as one not from your group of nations, I (maybe incorrectly) consider the first 'remote' so am intrigued how it (Ff) gets so many travellers. Perhaps it has legendary status.

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It's in Snowdonia which is one of the UK's most prominent tourist destinations, and is itself quite famous.

Bletchleyite said:

It's in Snowdonia which is one of the UK's most prominent tourist destinations, and is itself quite famous.

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Speaking of Snowdonia, I suspect that the Snowdon Mountain Railway does pretty well financially.

The Severn Valley Railway has luckily done very well with its recent Steam Winter gala.

Definitely a good start to the year for them.

Trainlog said:

The Severn Valley Railway has luckily done very well with its recent Steam Winter gala.

Definitely a good start to the year for them.

Severn Valley Railway’s first Winter Steam Gala is a runaway success

On 6/7 January, the Severn Valley Railway held its first-ever Winter Steam Gala and has declared it to have been a runaway success.

www.railadvent.co.uk

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Did very well with its end of season one day diesel running day too with over 1,000 persons turning up to travel.

More events like this are planned apparently

I’d expect that the Middleton Railway will be on a fairly sound footing. Short line, small locos, running slowly and pulling relatively small loads (max 3 converted parcel vans), only steam once per week except galas and santas. Large catchment area, no competition within 45 mins drive really.

Trainlog said:

The Severn Valley Railway has luckily done very well with its recent Steam Winter gala.

Definitely a good start to the year for them.

Severn Valley Railway’s first Winter Steam Gala is a runaway success

On 6/7 January, the Severn Valley Railway held its first-ever Winter Steam Gala and has declared it to have been a runaway success.

www.railadvent.co.uk

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The Winter gala counts towards the 2023 season. The 2024 season will start February 10th.

paul1609 said:

I think it's doubly difficult to compare because a lot of railways like us at the Kent & East Sussex are not for profit companies owned by our members. No one is paid a dividend all the money we take in is invested in the railway. In theory our best result would be to neither make or lose. In practice we had a loss of around 200k last year and a much smaller loss this year. Our financial year ends with the main season in November.

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Aren't practically all preserved railways in that position? I've had a few shares in one since the mid 70s when a share issue was used as a means of raising money to purchase a line (or unfortunately as it turned out only part of a line). I never expected to ever receive a dividend, nor have I ever done so. As for losses, as far as I can see 2022 was a bad year all round what with the aftermath of covid, cost of living crisis etc.

As far as who does best, I think particularly for smaller railways, how interesting they can make an afternoon out for the general public will be a big factor. Look at Swindon and Cricklade, not the sort of line I as an enthusiast would particularly want to spend a day (although I might be being a bit unfair as I have never visited) but they haven't half got a lot of special events going on over the course of the year which, if they provide people with a good day such that they return in the future, and at the same time act as a source of additional revenue, will give them a good source of income.

Bedpan said:

Aren't practically all preserved railways in that position? I've had a few shares in one since the mid 70s when a share issue was used as a means of raising money to purchase a line (or unfortunately as it turned out only part of a line). I never expected to ever receive a dividend, nor have I ever done so. As for losses, as far as I can see 2022 was a bad year all round what with the aftermath of covid, cost of living crisis etc.

As far as who does best, I think particularly for smaller railways, how interesting they can make an afternoon out for the general public will be a big factor. Look at Swindon and Cricklade, not the sort of line I as an enthusiast would particularly want to spend a day (although I might be being a bit unfair as I have never visited) but they haven't half got a lot of special events going on over the course of the year which, if they provide people with a good day such that they return in the future, and at the same time act as a source of additional revenue, will give them a good source of income.

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Yes as you say a majority of the preserved railways operate this way which is why the OPs definition of most sucessful railway doesnt equate to whats considered to be a succesfull railway within UK heritage Railway Circles!

Ownership has little bearing on performance. To the best of my knowledge, no heritage railways pay a dividend but those that are PLCs are that because until comparatively recently that was the only way that shares could be sold to the public. One advantage of railways being PLCs is that they produce annual accounts in a format that is easy to analyse and compare.

Essentially, there are three elements: sales, cost of sales and ‘administrative expenses’. In general, ‘Cost of Sales’ covers direct expenses associated with with operations and the difference between the two is Gross Profit. If you aren’t making a gross profit, then you’re stuffed.

The killer is ‘Administrative Expenses’ because this is the cost of everything else and usually covers the costs of keeping the fleet running and - double killer - keeping the infrastructure in good order. Most heritage railways make a gross profit but the Administrative Expenses take them into a loss.

I took the time to analyse the results of thirteen heritage lines that are also PLCs that had their financial years finish in early 2023. Most finish on 31st January but a couple deviate from this. Out of the 13, four (all biggies) didn’t make a gross profit, while only one made an overall profit. Aggregating all thirteen numbers, total turnover was £39m with a gross profit of £8.5m. However, allowing for collective administrative expenses, the total loss was £4.1m.

In my view, any business that loses money overall has a problem. Heritage railways rely on ‘funny money’. They use volunteer labour unlike ‘normal’ businesses and also benefit from the largess of their supporters. Their saving grace is the passion and belief of their shareholders, combined with their seemingly bottomless pockets.

I think the crucial thing is for a heritage railway to be able to cover its cost of sales sufficiently to ensure their operating loss is minimised. What this shows is that the underlying business needs to be sound and the cost of infrastructure upkeep needs to be funded externally, whether that be through grants, appeals, or supporters.

nferguso said:

What this shows is that the underlying business needs to be sound and the cost of infrastructure upkeep needs to be funded externally, whether that be through grants, appeals, or supporters.

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Yes, but that in itself is risky because it’s unearned income and therefore largely - if not totally - outside the control of the business.

I spent 11 years on the board of a small charity (in a totally different industry) and during that time my priority was to reduce the dependency on grant income, which we reduced from about 65% of total income to about 30%. All it would’ve taken was a change in Arts Council policy and the charity would have been insolvent overnight.

So you might then argue that multiple smaller grants are lower risk than one sizeable one, but then the cost and effort involved in securing them will be higher

I’m really not sure there’s a single, simple answer to any of this

SteveM70 said:

Yes, but that in itself is risky because it’s unearned income and therefore largely - if not totally - outside the control of the business.

I spent 11 years on the board of a small charity (in a totally different industry) and during that time my priority was to reduce the dependency on grant income, which we reduced from about 65% of total income to about 30%. All it would’ve taken was a change in Arts Council policy and the charity would have been insolvent overnight.

So you might then argue that multiple smaller grants are lower risk than one sizeable one, but then the cost and effort involved in securing them will be higher

I’m really not sure there’s a single, simple answer to any of this

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Yes, absolutely. As I say, heritage railways rely on 'funny money' and this is, inherently, risky. Somehow, they keep going but, in some cases, for how long?

nferguso said:

Yes, absolutely. As I say, heritage railways rely on 'funny money' and this is, inherently, risky. Somehow, they keep going but, in some cases, for how long?

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Heritage railways will continue as long as the dwindling supply of volunteers lasts. I expect to see a reduction in operating days, greater use of diesel traction burning bio diesel and the operational steam fleets reduced to one or two locos whilst the rest sit on display. There will be a greater emphasis on the value added events such as dining, themed days etc. Those lines that are the shortest are more likely to remain rather than those with miles of track and many structures. I certainly wouldn't be thinking about extending any in the current circumstances. It will of course be interesting to see who is the first to throw in the towel. A number are struggling at present and it wouldn't take much to tip the balance. A depressing assessment? Well it's difficult to see many bright spots.

D Williams said:

A number are struggling at present and it wouldn't take much to tip the balance. A depressing assessment? Well it's difficult to see many bright spots.

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It's not set in stone that England will have an infinite recession.

Some preserved railways are good at marketing.