Are GTR finished?

[coppercapped]

Hence my link to the Go-ahead share price.

If you read the franchise agreement then you will also see that if the profits are increased then so will the revenue to Govia. Also Go-Ahead is a shareholder so every penny it receives will affect the bottom line. People will also trade on reputation, hence the Ratners comment also posted.

The fact that the Go-Ahead share price is currently dropping and showing a downward trend can be seen as the market reacting to a potential loss of the GTR franchise.

If Govia drop the Guards Role and come 2018 the profit from the franchise increases and they do achieve their targeted revenue from the franchise then it is certainly going to increase the share price of Go-Ahead.

So yes I certainly believe that this is good time to take a punt on some Go-Ahead shares.

But share prices are falling across the board, the FTSE100, CAC40, DAX, Dow Jones, Hang Seng, the Nikkei are all down. For your argument to be valid you have to disentangle the effect of the GTR woes on the Go-Ahead price from general market movements.

The Ratners comment is also misleading. Ratners was a one product company directly responsible for its sales and marketing - Go-Ahead operates transport services in many places so the effect of difficulties in one area, where it anyway only has a 65% interest, will be diluted. The share price took a tumble from January to mid- February to a much lower value than now, recovered strongly and is now drifting slowly down.

I reckon you could take your punt on the shares of any company - the chances are there will be a general recovery at some point.

 

[3141]

This all raises some interesting further questions.

One is whether the other bidders for Thameslink plus Southern would also have planned to introduce DOO throughout the system, and if so, whether they would or could have gone about it differently.

Another is whether the two bidders for the South Western franchise will also be proposing more DOO, and whether that may partly explain why no other companies bid – they perhaps didn’t want to become involved in a labour dispute.

Thirdly, what effect this will have on the new Thameslink services. Staff have to be trained on the class 700s. For the service to operate effectively through the core, time-keeping has to be as near 100% as possible. That will be difficult to achieve if staff relationships are poor. If the Treasury sees that the £billions invested in Thameslink are not delivering the service, what impact might that have on future rail investment?

 

[jon0844]

If TL doesn't run smoothly, it will certainly give people a stick to hit the railway with.

I suspect the DfT will then put the TOC up for slaughter, and any immunity for said operator will end.

 

[Tetchytyke]

I suspect the DfT will then put the TOC up for slaughter, and any immunity for said operator will end.

GoVia will be sold down the river just as soon as they stop being useful for the ideologues like Wilkinson in DafT. Of course they will.

The question is whether the bigwigs will have filled their boots before they get thrown to the dogs. A quick look at Go-Ahead's annual report tells me the CEO was paid almost £2.2m and the Finance Director's remuneration went up by almost 12%, to almost £1.3m. I'd say they were doing very well, which is, after all, all that counts.

Of course, failure doesn't really impact on the bigwigs, they just climb right back into the trough for another snout. Look at Charles Horton, GTR's boss and the man who brought us Connex: his CV is a list of incompetent failure, yet he's right in the top jobs, filling his boots whilst his staff get a P45 for all their hard work.

 

[Deepgreen]

GTR - 'Government's Tool for Reform'. When they have served their purpose, away they'll go.

 

[ComUtoR]

But share prices are falling across the board, the FTSE100, CAC40, DAX, Dow Jones, Hang Seng, the Nikkei are all down. For your argument to be valid you have to disentangle the effect of the GTR woes on the Go-Ahead price from general market movements.

I would tend to agree but it would be remiss of anyone to dismiss what is happening on pure market fluctuation. If anyone was considering or held shares in the transport markets then they would look at the direct competition and see if its market or company that is affecting the stock price. I think a big problem at the moment with shares is the referendum.

The Ratners comment is also misleading. Ratners was a one product company directly responsible for its sales and marketing -

I'm not so sure the comment was misleading. Gerald Ratner made a rather disparaging comment about his company's products and both consumers and the market reacted accordingly. The reputation was pretty much permanently damaged. The same can be applied to GTR. Is the reputation of GTR now so bad that they will lose the franchise and will it potentially affect Govia from retaining Southeastern and gaining any future franchises ?

Go-Ahead operates transport services in many places so the effect of difficulties in one area, where it anyway only has a 65% interest, will be diluted. The share price took a tumble from January to mid- February to a much lower value than now, recovered strongly and is now drifting slowly down.

They have a robust share price and whilst it is taking a dip it is well worth a punt. It would be naive to believe that the share price will not be affected by what happens at GTR. There is revenue being generated by Govia and if that was to stop then the market will react negatively. Whenever a company reviews its forecasts the share price is affected. The question is how much revenue will be lost. As I'm not privy to their company accounts then I couldn't tell you specifically how much revenue could be lost.

Because they have more than one revenue stream makes them a good share to hold. They are less likely to go under; unlike companies who have a single source of revenue. It would be interesting to know how much revenue is gained from bus Vs rail.

If all the rumors are true then I think that GTR have a golden ticket. These new franchise agreements look to be a licence to print money. The risk is all the Government and the rewards are reaped by the TOC's

 

[TH172341]

Govia ran the first Thameslink franchise, they already had Southern and Gatwick Express, so there's very little they won't have known about it.



They are doing what the DfT are asking them to do, both those parties are happy because GTR is getting nearly £9bn for no real effort and no real concerns and DfT hide behind GTR being the "franchise holder".



They aren't pre-occupied, they won't end it because the DfT don't want the "franchise" to fail. Their manipulation of the targets goes to prove it.



They have no interest in getting staff relations back, they'll barely have any staff left by the time the contract ends.

Very true - I've read up more on the whole formalities behind the operation (as I was a bit sketchy on the topic beforehand) and certainly GTR seems a good smokescreen for DfT's work when it all goes wrong...

 

[coppercapped]

I would tend to agree but it would be remiss of anyone to dismiss what is happening on pure market fluctuation. If anyone was considering or held shares in the transport markets then they would look at the direct competition and see if its market or company that is affecting the stock price. I think a big problem at the moment with shares is the referendum.



I'm not so sure the comment was misleading. Gerald Ratner made a rather disparaging comment about his company's products and both consumers and the market reacted accordingly. The reputation was pretty much permanently damaged. The same can be applied to GTR. Is the reputation of GTR now so bad that they will lose the franchise and will it potentially affect Govia from retaining Southeastern and gaining any future franchises ?

<SNIP>

If all the rumors are true then I think that GTR have a golden ticket. These new franchise agreements look to be a licence to print money. The risk is all the Government and the rewards are reaped by the TOC's

One of the DfT's stated aims for the GTR 'conglomerate' was that in view of the uncertainties caused in forward planning by the Thameslink programme and the rebuilding of London Bridge it was felt that any bids for a conventional franchise would have had a mark-up for the risks involved. This being the case the DfT decided to carry the revenue risk and pay the TOC a management fee. It was always clear that once all these works are out of the way the DfT might well consider offering the various components either as separate franchises, or in some combination, again. This is one of the reasons why the the four 'brands' have been retained.

So it is entirely likely that the GTR arrangement will not be extended in its present form at the end of the current contract. This has nothing to do with the current issues.

The exact profit margin allowed for GTR has not, I think, been made public. But looking at the published figures it would seem to be about 3p in the £ of the management fee, that is of the part remaining of the payments made by DfT to GTR less the costs of train operation. It's difficult to be precise because so much of the detail has not been made public. Talk of a 'licence to print money' is nothing more than hyperbole - and if it were to be true the Go-Ahead share price should be rising, not falling.

 

[ComUtoR]

Talk of a 'licence to print money' is nothing more than hyperbole

Feel free to google "licence to print money" and "rail franchise". It is not hyperbole. Its a pretty common perception of the industry.

We have slowly moved away from subsidy as it was generally seen as the government funding private company profits and a taxpayer burden. Now subsidy is decreasing and the burden is moving towards the passenger.

If the government is taking all the risk then it is almost pure income for a TOC.

 

[Haig paxton]

Is GoVia Southeastern entirely DOO?

 

[ComUtoR]

Only Metro is DOO

 

[DarloRich]

GoVia will be sold down the river just as soon as they stop being useful for the ideologues like Wilkinson in DafT. Of course they will.

The question is whether the bigwigs will have filled their boots before they get thrown to the dogs. A quick look at Go-Ahead's annual report tells me the CEO was paid almost £2.2m and the Finance Director's remuneration went up by almost 12%, to almost £1.3m. I'd say they were doing very well, which is, after all, all that counts.

Of course, failure doesn't really impact on the bigwigs, they just climb right back into the trough for another snout. Look at Charles Horton, GTR's boss and the man who brought us Connex: his CV is a list of incompetent failure, yet he's right in the top jobs, filling his boots whilst his staff get a P45 for all their hard work.

Recent Signal Failures columns in Private Eye have made similar points especially about the relationship between GTR and DFT

 

[coppercapped]

Feel free to google "licence to print money" and "rail franchise". It is not hyperbole. Its a pretty common perception of the industry.

We have slowly moved away from subsidy as it was generally seen as the government funding private company profits and a taxpayer burden. Now subsidy is decreasing and the burden is moving towards the passenger.

If the government is taking all the risk then it is almost pure income for a TOC.

I'm not in the slightest bit interested in 'perceptions' or 'beliefs' - I'll accept and work with data.

In the case of GTR, the DfT/Government/taxpayers are carrying the revenue risk, the costs of operation, and the chances that costs will vary, is taken by the operator.

 

[Tetchytyke]

In the case of GTR, the DfT/Government/taxpayers are carrying the revenue risk, the costs of operation, and the chances that costs will vary, is taken by the operator.

GTR are being paid a fixed management fee, therefore the financial risk is entirely with the taxpayer and not Go-Ahead's shareholders.

 

[ComUtoR]

I'm not in the slightest bit interested in 'perceptions' or 'beliefs' - I'll accept and work with data.

I would say that the millions paid to the TOCS in terms of subsidy and no direct fees are not "perception" Yes, overall the cost is beginning to even out and some other posters on this forum have highlighted that the railway is finally breaking even but it is still seen as a cash cow for private companies.

The problem with data is that on paper the TOCs are meeting their agreements. Based on cold hard numbers and data then there shouldn't be any real reason for GTR to lose its franchise and that even though the DfT moved the goalposts it was still within its rights to do so under the franchise agreement. In fact, under this agreement they can string out the strike for as long as they want because the government is taking all the costs and it is already agreed that GTR will not suffer any penalty from strikes.

It's hard, if not impossible to quantify a companies reputation but there are numerous calls for GTR to be stripped of the franchise. The vitriol towards Thameslink can be seen on a daily basis.

Do you honestly believe that the public outcry against GTR is based on facts or perception ?

The only time where the Government is not propping up a private TOC will be when the TOC has to take all the costs and gets all the revenue. Which I doubt will ever happen. The fragmentation of the industry has lead to a giant money-go-round. That includes GTR and its management contract.

A question to anyone in the know. Historically and currently do TOCs regularly make profits or has there been a time where a TOC has been in the red ? (I'm talking baseline profit vs loss. Some are considered to be loss making but the TOC still makes a profit). I'm relatively new to the industry and I've never really looked into the details of privatisation etc. When I was an outsider all I saw was subsidy after subsidy being paid out. Now I'm on the inside looking out so I see the crazy way this industry is financed and how money is shockingly wasted.

Cheers in advance as always.

 

[Wolfie]

GoVia will be sold down the river just as soon as they stop being useful for the ideologues like Wilkinson in DafT. Of course they will.

The question is whether the bigwigs will have filled their boots before they get thrown to the dogs. A quick look at Go-Ahead's annual report tells me the CEO was paid almost £2.2m and the Finance Director's remuneration went up by almost 12%, to almost £1.3m. I'd say they were doing very well, which is, after all, all that counts.

Of course, failure doesn't really impact on the bigwigs, they just climb right back into the trough for another snout. Look at Charles Horton, GTR's boss and the man who brought us Connex: his CV is a list of incompetent failure, yet he's right in the top jobs, filling his boots whilst his staff get a P45 for all their hard work.

my bold

A certain poster (see link) will be along in a while to lambast you for that comment...

http://www.railforums.co.uk/showthread.php?t=129551&page=197

 

[coppercapped]

GTR are being paid a fixed management fee, therefore the financial risk is entirely with the taxpayer and not Go-Ahead's shareholders.

No - you obviously misunderstand what is included in the 'management fee'.

Out of the 'management fee' - which as you say is fixed - the TOC pays:

• the staff employed by GTR their wages and salaries, National Insurance and pensions
• the ROSCOs the leasing costs of the rolling stock
• the day-to-day maintenance and cleaning costs of the leased rolling stock
• it will pay Cross-London Trains for the supply of train diagrams (the Class 700 deal)
• NR for the electricity it consumes for traction
• for diesel fuel for its DMUs
• NR for all the fixed and variable access charges for the rolling stock and infrastructure
• for day to day building maintenance for those stations for which GTR is leaseholder
• and so on and so forth.

There are chances that some of these costs will not pan out the way they were estimated when the bids were made. Govia does carry the risk that the margin will not be as high as hoped, so to suggest that the risk lies only with the taxpayer is not correct.

 

[tony6499]

When GTR become so toxic and they are nearly there that the Government take all the flak then there will be an abrupt u turn and the DfT will wash their hands of them

 

[physics34]

can see refranchising early in 2018/19 when the Thameslink core stuff is complete and all 700s are in service.... or Government interference before then (like with East Coast).

 

[Coolzac]

I am surprised, given the level and scale of disruption of the train services to a well populated region of the UK that it hasn't been given more publicity in the national press. Does anyone else think this?

Secondly, I think this situation is the main reason why governments are so reluctant to re-nationalise. The DFT still take all the major decisions but the private franchises take most of the flak for those decisions and how the railways are run.

 

[physics34]

I am surprised, given the level and scale of disruption of the train services to a well populated region of the UK that it hasn't been given more publicity in the national press. Does anyone else think this?

Secondly, I think this situation is the main reason why governments are so reluctant to re-nationalise. The DFT still take all the major decisions but the private franchises take most of the flak for those decisions and how the railways are run.

Im surprised the passengers havent protested.

 

[Tetchytyke]

No - you obviously misunderstand what is included in the 'management fee'.

No, no I really didn't, all the "variable" costs you mentioned are anything but variable.

GTR's management may be many things, but they're not stupid enough to sign a management contract that doesn't cover their costs.

 

[hairyhandedfool]

No, no I really didn't, all the "variable" costs you mentioned are anything but variable.

GTR's management may be many things, but they're not stupid enough to sign a management contract that doesn't cover their costs.

I imagine some of those costs will go down with fewer trains running about anyway.

 

[MikeWM]

I am surprised, given the level and scale of disruption of the train services to a well populated region of the UK that it hasn't been given more publicity in the national press. Does anyone else think this?

I think the majority of the disruption so far has been at weekends. It seems to take quite a while for the press to notice things that only happen at weekends, unfortunately. Though I imagine after this past weekend that someone will have it brought to their attention soon.
--- old post above --- --- new post below ---

Reliability on Great Northern has never been so bad, regardless of what was or wasn't left in order by First, it's clear GTR has a terrible relationship with its staff, performance has badly slipped since FCC finished.

I agree entirely. FCC had a number of issues but they were a lot more reliable than the current situation.

I've basically abandoned travelling at weekends now (despite having paid for a season ticket) as the service is now badly unreliable

I'm in the slightly more fortunate situation of travelling from Cambridge. For the last few months I've been taking AGA services whenever possible - they're a little slower, but at least they manage to run the trains they are supposed to be running most of the time. And sometimes you get a 379 and free wifi If I didn't have that option I think I'd have given up by now too.

and it now seems cancellations are occurring in the week too.

I count 14 on the GN side listed at this moment for today, no doubt with more to come

 

[jon0844]

Im surprised the passengers havent protested.

I don't think they all realise. Don't forget, Southern was implying all the drivers were off sick, and that it was an exceptional level of sickness.

I've not heard what GN is saying, but people may be believing that it's just bad luck.

Eventually they won't believe it, but it might take a while. With leisure travellers, it may not be the same people travelling week in, week out so that also helps GTR. After all, the worst of the cancellations are at weekends.

The railway already has a bad reputation for running trains at weekends, and I think a lot of people accept a poor service because they expect it.

 

[TheEdge]

I agree entirely. FCC had a number of issues but they were a lot more reliable than the current situation.

There has been an awful lot more cancellations on GN of recent. It used to be relatively uncommon but now there seems to be almost daily CSL2 activation from GTR fro AGA to carry their tickets from Cambridge to Ely.

 

[bramling]

I think the majority of the disruption so far has been at weekends. It seems to take quite a while for the press to notice things that only happen at weekends, unfortunately. Though I imagine after this past weekend that someone will have it brought to their attention soon.
--- old post above --- --- new post below ---


I agree entirely. FCC had a number of issues but they were a lot more reliable than the current situation.



I'm in the slightly more fortunate situation of travelling from Cambridge. For the last few months I've been taking AGA services whenever possible - they're a little slower, but at least they manage to run the trains they are supposed to be running most of the time. And sometimes you get a 379 and free wifi If I didn't have that option I think I'd have given up by now too.



I count 14 on the GN side listed at this moment for today, no doubt with more to come

Nothing becomes politically sensirive until commuters become involved.

It's a bit like off-peak or weekend overcrowding, the industry and its political overseers don't really seem to care.

Coverage can always be juggled so that the cancellations occur at weekends, as no matter how bad management/staff relations are, most staff will always be happy to trade a weekday rest-day in favour of having a day off at the weekend. Where I am is the same - Saturdays are always worst for coverage being at the end of the railway rostering week.

GTR seem now to be managing weekday cancellations too however! Weekday "no driver" cancellations have been *very* rare over the last 10 to 15 years. National Express really turned round WAGN after Prism went, now it seems we're back to the bad old days.

 

[ScotGG]

Im surprised the passengers havent protested.

True. Passengers on many of the routes seem weak as p*** and take anything.

Elsewhere people stand up and get something.

 

[jon0844]

People do of course need to know why it's happening.

Shortage of train crew can be explained as being down to sickness (seems to be the line staff are told to give, or are choosing to give) and you can't really moan about that.

If people knew what the real reason(s) were, they might start kicking up a fuss and the local press could even get involved - or the mainstream media.

Bear in mind that if the official line is staff sickness, it will probably put off most media from daring to suggest otherwise without having cast iron proof. So GTR is quite clever here, keeping the story out of the press because nobody will spend the money to do some proper digging.

 

[coppercapped]

No, no I really didn't, all the "variable" costs you mentioned are anything but variable.

GTR's management may be many things, but they're not stupid enough to sign a management contract that doesn't cover their costs.

Where did I write or imply or that Govia would sign a contract that wouldn't cover its costs? I would be obliged if you didn't suggest that I made statements that I clearly did not make.

If you are implying that all the costs I listed are fixed over the period of the contract, then words fail me. :cry:

Some costs will pan out higher than estimated and some, no doubt, will come out lower. The gains and losses may cancel each other out; if all the costs come out lower then GTR, and Govia, will be happy. If they all come out higher then GTR, and Govia, might not be so happy. But those are the risks one takes when running a business.