Llangollen Railway appoints receivers

[2HAP]

The Llangollen Railway has appointed receivers, with debts of about £1/3 million

Llangollen heritage railway operator goes into receivership

Llangollen Railway PLC says there is "no prospect" of paying its liabilities of more than £250,000.

www.bbc.co.uk

The company which runs a heritage railway in Denbighshire has gone into receivership.
Llangollen Railway PLC said it could not "legally continue to trade", with the company insolvent to the extent of about £350,000.


The company said it intended to restart operations "in due course", depending on legal and regulatory approvals, but warned this would "take time".

 

[221129]

Llangollen Railway PLC – Press release 1st March 2021

Formal announcement:

It is with great regret the directors of Llangollen Railway PLC have had to take the reluctant step of inviting the bank to appoint a receiver.

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.

The directors would like to acknowledge the considerable support of the Welsh Government through two significant grants, and NatWest Bank which, together with furlough payments, have enabled the company to continue to meet its commitments over recent months until now.

The Trust’s balance sheet remains solvent and there is some cash in hand. The Trust board will need to take steps to negotiate with the receiver to try to secure the line and preserve rolling stock and infrastructure to the extent possible. It is intended to recommence operations in due course but this is dependent upon legal and regulatory approvals, including licencing, all of which will clearly take time.

The directors very much regret the impact this will have on our staff and employees, customers, suppliers, locomotive owners and their organisations, and anyone else with connections to the Railway. It is hoped to rehire many of our staff and employees and that it will be possible to maintain connections with many longstanding friends.

Customers who have purchased tickets in advance, including driver experiences, deposits for weddings and gift vouchers, will either be refunded (the monies have been reserved) or will hopefully be able to travel at a future date.

Where shareholders have ongoing annual ticket entitlements, these will continue to be met through the Trust.

From https://www.llangollen-railway.co.uk/

 

[fairlie]

That's very sad to hear. I hope that some kind of recovery plan manages to be worked out.

 

[swanhill41]

I am sorry to say that through a contact I was aware of their financial plight 8 weeks ago...Note the charitable trust is still solvent.Its the operating side that has gone bust.
Interesting to see that the amount of debt is what in most trading companies is a small amount of £350.0k?

 

[John Luxton]

I am sorry to say that through a contact I was aware of their financial plight 8 weeks ago...Note the charitable trust is still solvent.Its the operating side that has gone bust.

The finances have been dodgy for over a year - it was this time last year they sent begging letters out to plc shareholders.

Something went seriously wrong there. Hope things get sorted as with Corwen almost completed it would be a shame for it to fall at the final hurdle.

 

[swanhill41]

A question;

Are there any other heritage lines in a financial bind,or is a one off special situation.?

 

[steamybrian]

A question;

Are there any other heritage lines in a financial bind,or is a one off special situation.?

South Tynedale Railway are (or were) in a similar dire financial position.

 

[Mcr Warrior]

In simple, more easy-to-understand, terms, what exactly has happened at the Llangollen, other of course than the cashflow drying up because of COVID-19?

 

[HST43257]

A question;

Are there any other heritage lines in a financial bind,or is a one off special situation.?

Many have received generous sums of National Heritage Lottery funding I’m pretty sure

In simple, more easy-to-understand, terms, what exactly has happened at the Llangollen, other of course than the cashflow drying up because of COVID-19?

They’d made significant losses in 2018 and 2019 by the sounds of it

 

[AndrewE]

They’d made significant losses in 2018 and 2019 by the sounds of it

The press release says

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.

 

[John Luxton]

In simple, more easy-to-understand, terms, what exactly has happened at the Llangollen, other of course than the cashflow drying up because of COVID-19?

It goes beyond Covid. The begging bowl was passed around plc shareholders February 2020. It appears that there was some mismanagement particularly concerning contract engineering.

 

[Ianigsy]

There were also some fairly tight timescales for getting the Corwen work done to comply with their grant funding, if I remember rightly, the last slice of which was covered by a loan.

 

[ainsworth74]

The thing that's confused me is why is there a Trust and a PLC?

 

[JonathanH]

The thing that's confused me is why is there a Trust and a PLC?

Presumably to avoid the railway being ripped up and sold off to the highest bidder (ie scrap) if the plc goes bust - eg scrap value of the track, rolling stock and locomotives used to pay the plc debts.

Of course, creditors could seek to look through to the Trust to seek to recover money if they feel that the operation of a separate plc and Trust was not how it actually functioned

 

[simonw]

The thing that's confused me is why is there a Trust and a PLC?

usually to avoid the situation where if the plc goes bust the assets of the railway are protected as they are owned by the trust.

not sure what the set up is here, however.

 

[Stroud Valleys]

Interested to hear about these purported contractual issues which appear to be the main point. Significant liabilities.

 

[Ianigsy]

I think a lot of preserved lines are structured like that nowadays and precisely for reasons like this- it allows the trading and operating side of the railway to make a loss without it taking down the whole operation. There may also be sources of funding open to a charitable trust which aren't available to a PLC, or vice versa.

 

[DB]

Presumably to avoid the railway being ripped up and sold off to the highest bidder (ie scrap) if the plc goes bust - eg scrap value of the track, rolling stock and locomotives used to pay the plc debts.

That's certainly the way it normally works with many charities (not just preserved railways) - trading / commercial operations will be carried out by a limited company with the assets owned by the charity.

 

[ainsworth74]

Interesting. Thank you

 

[mind the gap]

That's certainly the way it normally works with many charities (not just preserved railways) - trading / commercial operations will be carried out by a limited company with the assets owned by the charity.

Regarding preserved railways I assume that locos, rolling stock and infrastructure would come under the charity? What sort of assets would the PLC have? Shop and catering stock? Loco fuel? Anything else?

Just wondering what would be available to the receiver to allocate to creditors?

 

[DB]

Regarding preserved railways I assume that locos, rolling stock and infrastructure would come under the charity? What sort of assets would the PLC have? Shop and catering stock? Loco fuel? Anything else?

Just wondering what would be available to the receiver to allocate to creditors?

I don't know in the case of railways, but in non-railways cases I know of it's basically just operating stock - so shop stock, catering stock, etc - i.e. basically no capital assets.

 

[6Gman]

That's certainly the way it normally works with many charities (not just preserved railways) - trading / commercial operations will be carried out by a limited company with the assets owned by the charity.

I think there are also taxation benefits (if I recall correctly some taxation liabilities can be avoided if the PLC commits to paying any surplus (i.e. profit) to the charity, but I may be misremembering what I was told).

 

[Titfield]

I think there are also taxation benefits (if I recall correctly some taxation liabilities can be avoided if the PLC commits to paying any surplus (i.e. profit) to the charity, but I may be misremembering what I was told).

I think something like that is stated in the Swanage Railway Accounts (both Trust (charity) and Ltd Co).

 

[Bletchleyite]

That's certainly the way it normally works with many charities (not just preserved railways) - trading / commercial operations will be carried out by a limited company with the assets owned by the charity.

Part of the reason for this is that charity trustees have unlimited liability, so this is avoided by operating through a limited company.

Smaller charities deal with this another way, e.g. Scout Groups (each of which is its own charity) have charity trustee liability insurance, though this lilkely wouldn't cover costs arising from negligence.

 

[DB]

Part of the reason for this is that charity trustees have unlimited liability, so this is avoided by operating through a limited company.

Smaller charities deal with this another way, e.g. Scout Groups (each of which is its own charity) have charity trustee liability insurance, though this lilkely wouldn't cover costs arising from negligence.

Yes, that's part of it - but protecting the assets if things go wrong with the trading company is the biggest reason.

 

[paul1609]

It also used to be the case that the Charity Commisioners would object if there were large parts of the organisation that was subsidiary to the charitable aims. At the K &ESR we have the Kent & East Sussex Railway Co Ltd which is the main charitable trust company limited by guarantee and then we have Colonel Stephens Railway Enterprises Ltd which is a wholly owned subsidiary that donates its profits to the Ltd Co and runs things like the cafes shops dining trains thomases and driver experiences etc. I believe that the charity commissioners have changed their stance on this since the majority of the preservation societies were formed but many like ourselves have just stuck with the arrangement.

 

[kje7812]

Regarding preserved railways I assume that locos, rolling stock and infrastructure would come under the charity? What sort of assets would the PLC have? Shop and catering stock? Loco fuel? Anything else?

Just wondering what would be available to the receiver to allocate to creditors?

A lot of the rolling stock is either Trust owned or by private groups.

 

[Tynwald]

This has been coming for quite a few years, largely down to very poor management. the contract engineering side was wound up recently, due to an appalling product. Unfortunately a lot of this railway is tarred with the same brush. Clean sweep needed here, if is not too late.

 

[Meole]

Llangollen built a good reputation for contract engineering attracting rebuilds etc but seemingly lost key personnel and apparently failed to deliver satisfaction on several contracts which resulted in locos being removed mid work with consequent final implications, a far cry from the successful galas early this century.

 

[pdeaves]

I suppose in simple terms, the Trust is analogous to Network Rail and the plc to a TOC, yes? (even if the track access fee is £0)