Virgin and stagecoach net £51.2 M in dividends

[DynamicSpirit]

Any good company would be ploughing some of the profits back into it's business to improve the chances of more profits in later years and giving added benefit to their customers

A couple of points there: Firstly, to the extent that a company was ploughing profits back into the business, that money would no longer appear as profits: It would show up as expenses in the accounts. So, by itself, the fact that a company made £64M profits gives no indication one way or the other whether a company has actually invested. For all you know, maybe the company would have made £164M but they ploughed £100M back in, and reported the remainder as profits. Having said that, I just had a more detailed look through the West Coast Trains Limited accounts and I can't see any indication of any substantial investment.

And actually, that's arguably where there is an issue with the franchise system. Sure, in normal circumstances, a company would be well advised to invest a portion of its profits. But we're talking about a company whose entire income comes from a franchise that is due to expire within a couple of years, and which it will have to re-bid for. No amount of investment is going to improve its chances of getting the franchise again because (as far as I'm aware) previous investment in a route is not taken into account by the DfT during the bidding process. So from the point of view of West Coast Trains Limited, any reinvestment at this stage is just going to be money thrown away - unless it can get a return within a few months. That's not necessarily an argument for nationalisation, but it's certainly an argument against the franchise system as it currently works.

 

[dk1]

That doesn't matter to the last man in the street. The ownership split between stagecoach and virgin is unknown. People see one company: Virgin.

To see a nice dividend payment while chucking in one franchise will not play well

The man in the street needs to do his homework then.

 

[pdeaves]

The man in the street needs to do his homework then.

Or at least, the media outlets that report it do.

 

[dk1]

Or at least, the media outlets that report it do.

Totally agree. Dreadfully lazy reporting.

 

[HowardGWR]

Totally agree. Dreadfully lazy reporting.

You could argue 'poor PR by VTWC'. Put yourself in its position; it knows full well that the contrast is going to be made, so the PR department should be making its rebuttal in advance, before the misunderstandings are produced by the press.

 

[underbank]

With a combination of companies, subsidies, returns and profit, including where profit is made after subsidy has been paid, it becomes impossible for any ordinary person to be able to see with any certainty that the system offers value.

Surely, it's the job of the journalists to explain all that in layman's language. Trouble is, they can't, because usually they havn't a clue themselves and just lazily copy & paste whatever soundbites they're given. I despair at the loss of proper investigative journalism.

I still havn't forgotten the so-called "economics expert" at the BBC who dropped a right clanger after Gordon Brown Budget Speech. Brown announced he was increasing the upper limit for NIC and made it sound like it was a good thing in his speech. The BBC immediately accepted that at face value and their economics expert actually said it was good - i.e. he hadn't a clue and just believed Brown's comments. Of course, for anyone with even the slightest knowledge of NIC, it's blatantly obvious that increasing the higher threshold means more of your pay is liable to NIC and therefore you'll pay more NIC, i.e. bad for the employee! Doh!!

 

[DarloRich]

The man in the street needs to do his homework then.

Come on! Virgin and stagecoach wilfully allowed a quasi joint brand to be established. The layman only sees one company.

 

[Darandio]

The man in the street needs to do his homework then.

They really don't. They arrive at a station and travel on a Virgin train, why should they need to know any different?

 

[HH]

Surely, it's the job of the journalists to explain all that in layman's language. Trouble is, they can't, because usually they havn't a clue themselves and just lazily copy & paste whatever soundbites they're given. I despair at the loss of proper investigative journalism.

I still havn't forgotten the so-called "economics expert" at the BBC who dropped a right clanger after Gordon Brown Budget Speech. Brown announced he was increasing the upper limit for NIC and made it sound like it was a good thing in his speech. The BBC immediately accepted that at face value and their economics expert actually said it was good - i.e. he hadn't a clue and just believed Brown's comments. Of course, for anyone with even the slightest knowledge of NIC, it's blatantly obvious that increasing the higher threshold means more of your pay is liable to NIC and therefore you'll pay more NIC, i.e. bad for the employee! Doh!!

You're quite right. Unfortunately it's quite pointless trying to point this out - they just ignore it. This is the day of the soundbite - who cares about facts?

 

[DarloRich]

But @underbank the connection is going to be made in any event. People see one company and are unhappy with the finance situation on the railways ( many consider it a rip off designed to serve private companies or foreign governments) and this story, accurate or not, will play to that gallery

 

[3141]

Which is irrelevant given Virgin/Stagecoach, couldn’t afford the rest of their premium payments without a renegotiation in their favour .

Why do you think what I said is irrelevant? News should be reported accurately, not in a way designed to cause readers to reach particular conclusions.

 

[LNW-GW Joint]

And actually, that's arguably where there is an issue with the franchise system. Sure, in normal circumstances, a company would be well advised to invest a portion of its profits. But we're talking about a company whose entire income comes from a franchise that is due to expire within a couple of years, and which it will have to re-bid for.

VT is actually on its 4th direct award since the 2012 debacle.
The DfT cannot/will not offer a direct award for more than 2 years, and have not sought any significant change in West Coast services.
So the franchise has been "steady as you are" for 6 years, with the declared aim to maximise premiums/profits to DfT/VRG.
If the West Coast Partnership competition ever reaches the award stage, we should see something more positive for the period from 2020 until HS2 comes in.
I should think the DfT is more than happy that one big part of the network is behaving itself operationally and financially.
Meanwhile, the "fat cats" brigade just continue to poison the well for private sector franchising in principle and in practice.

On "no investment", the shareholders have to pay for the Pendolino refurb programme and the free wifi which never seems to arrive, as well as some station upgrades.

 

[Kite159]

Surely, it's the job of the journalists to explain all that in layman's language. Trouble is, they can't, because usually they havn't a clue themselves and just lazily copy & paste whatever soundbites they're given. I despair at the loss of proper investigative journalism.

I still havn't forgotten the so-called "economics expert" at the BBC who dropped a right clanger after Gordon Brown Budget Speech. Brown announced he was increasing the upper limit for NIC and made it sound like it was a good thing in his speech. The BBC immediately accepted that at face value and their economics expert actually said it was good - i.e. he hadn't a clue and just believed Brown's comments. Of course, for anyone with even the slightest knowledge of NIC, it's blatantly obvious that increasing the higher threshold means more of your pay is liable to NIC and therefore you'll pay more NIC, i.e. bad for the employee! Doh!!

Was that the same budget where Mr Brown announced he was dropping income tax to 20% from 22% glossing over the fact he had also removed the 10% 'starter' rate which made the benefit only kicking in if you were earning above ~ £20K (so for the lower paid it was actually a tax increase until they bumped the personal allowance up to cover for the tax increase after some media outlets kicked up a fuss about it)?

 

[dk1]

They really don't. They arrive at a station and travel on a Virgin train, why should they need to know any different?

If they just travel then yes. I understand that the layman isn't always on top or interested in such politics but when the facts are explained to them & still they argue, that's when it grinds my gears. I would never continue to shout the odds when I'd been put in my place & was obviously in the wrong.

 

[LNW-GW Joint]

I can't find a link to it now, but a recent ORR set of statistics showed that VTWC paid out (I think) £19 million in delay repay compensation last year.
This is the highest of all the TOCs (VTEC, TPE and GWR came close behind), and is much greater than a few years ago before automatic claims became possible.
Presumably the VT profits would be that much higher if all their trains were on time.
What we don't know is what compensation VT received from Network Rail for the same disruption.

 

[ForTheLoveOf]

I can't find a link to it now, but a recent ORR set of statistics showed that VTWC paid out (I think) £19 million in delay repay compensation last year.
This is the highest of all the TOCs (VTEC, TPE and GWR came close behind), and is much greater than a few years ago before automatic claims became possible.
Presumably the VT profits would be that much higher if all their trains were on time.
What we don't know is what compensation VT received from Network Rail for the same disruption.

Almost certainly far more; where Network Rail are deemed at fault, compensation starts far before the 30 minutes where passengers get compensation (though admittedly sometimes even small VT delays may lead to missed connections and lengthy resultant delays, especially on infrequently served branch lines etc.!).

 

[pemma]

I thought the West Coast franchise was supposed to be on a 'management only' contract as the previous award to Virgin/Stagecoach expired and the re-awarding of the franchise went very wrong.

 

[pemma]

That doesn't matter to the last man in the street. The ownership split between stagecoach and virgin is unknown. People see one company: Virgin.

To see a nice dividend payment while chucking in one franchise will not play well

And people think of Stagecoach as an economy brand, which is why they don't want the Stagecoach brand plastered over Intercity trains whichever mainline they are running on.

 

[Journeyman]

Agreed. There's always people anxious to criticize Virgin, or Stagecoach, regardless of whatever they do.

A lot of it is because people seem to hate Branson. Personally I've got no strong feelings about him one way or the other. Whichever way you look at it, he's not that closely involved in most Virgin businesses these days, he mostly licences the brand name.

Agreed that West Coast is pretty well run. The only thing about Virgin I find particularly grating is their incredibly cheesy "LOOK HOW MUCH FUN WE'RE HAVING!!!!!11!!1!!" marketing and corporate culture, and I won't miss that if it eventually disappears.

 

[LNW-GW Joint]

I thought the West Coast franchise was supposed to be on a 'management only' contract as the previous award to Virgin/Stagecoach expired and the re-awarding of the franchise went very wrong.

That was for the period immediately after 2012.
I think they went back onto a franchise basis (ie VT having revenue targets and risk) during the 2nd award, and the last two have been on a full franchise basis.

 

[Carlisle]

Why do you think what I said is irrelevant? .

As almost any contractual agreement can ultimately be terminated if either party is unable to meet the agreed payments, unless there was some sort of clause giving a right to negotiate a lower rate that wasn’t honoured, then it’ll not be much different for Mr Branson/ Souter or a single parent unable to pay their phone bill .

 

[pemma]

That was for the period immediately after 2012.
I think they went back onto a franchise basis (ie VT having revenue targets and risk) during the 2nd award, and the last two have been on a full franchise basis.

Surely as it's not gone through a proper tendering process since, it should still be on a management contract, otherwise haven't DfT effectively given Virgin/Stagecoach a new contract without following the tendering rules?

 

[LNW-GW Joint]

Surely as it's not gone through a proper tendering process since, it should still be on a management contract, otherwise haven't DfT effectively given Virgin/Stagecoach a new contract without following the tendering rules?

The whole point of direct awards of less than 2 years is that it avoids EU rules on triggering open competitions.
DfT always intended to compete the next ICWC franchise, but some crisis elsewhere (SWT, GW, VTEC) meant they just kicked the can down the road for another 2 years.
But it also meant no significant investment.
It could happen again if they don't manage to award a contract for WCP in the next year.

 

[Dr Hoo]

I can't find a link to it now, but a recent ORR set of statistics showed that VTWC paid out (I think) £19 million in delay repay compensation last year.
This is the highest of all the TOCs (VTEC, TPE and GWR came close behind), and is much greater than a few years ago before automatic claims became possible.
Presumably the VT profits would be that much higher if all their trains were on time.
What we don't know is what compensation VT received from Network Rail for the same disruption.

Perhaps time for another reminder that the normal* Schedule 8 performance regime in the track access contract only covers the expected loss (or gain) of future revenue if performance is worse than (or better than) agreed targets. It is nothing to do with Delay Repay or other direct costs, such as taxis or staff overtime. The TOC takes these on the chin, even if the underlying incident was down to Network Rail or another operator.
*i.e. not including the particular provisions of the Sustained Poor Performance arrangement.

 

[HH]

Perhaps time for another reminder that the normal* Schedule 8 performance regime in the track access contract only covers the expected loss (or gain) of future revenue if performance is worse than (or better than) agreed targets. It is nothing to do with Delay Repay or other direct costs, such as taxis or staff overtime. The TOC takes these on the chin, even if the underlying incident was down to Network Rail or another operator.
*i.e. not including the particular provisions of the Sustained Poor Performance arrangement.

Definitely time for another reminder. It seems that people's memories are shockingly short on this.

 

[Robertj21a]

And people think of Stagecoach as an economy brand, which is why they don't want the Stagecoach brand plastered over Intercity trains whichever mainline they are running on.

I've certainly never heard of Stagecoach as being an 'economy' brand.

 

[dk1]

I've certainly never heard of Stagecoach as being an 'economy' brand.

Maybe because it's synonymous with buses in certain parts of the country.

 

[Carlisle]

Except that, believe it or not, the Virgin Brand actually increases sales. Possibly by as much as 5%.

Whereas other media reports over the years have rated Mr Branson as a contender for the most hated person on the railway

 

[HH]

Whereas other media reports over the years have rated Mr Branson as a contender for the most hated person on the railway

Irrelevant. The brand sells - and that's not an opinion.

 

[Journeyman]

Irrelevant. The brand sells - and that's not an opinion.

True - it does. Virgin is clearly synonymous with quality for a lot of people, and Branson has made his cash by giving people what they want, (generally) at a good price.

Personally, though, I find Virgin's ZANY AND WACKY!!!!11!!! schtick to be so annoying that I'll avoid them wherever possible.