vintage trains business plan november 2017 busine… · · 2017-12-01british publicly owned...
TRANSCRIPT
VintageTrains
BusinessPlan
November2017
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DisclaimerandExplanatoryNote
ThisbusinessplanhasbeenpreparedfrominformationprovidedbytheTrusteesandManagersofVintage Trains Charitable Trust to assist potential community subscribers to consider buyingcommunity shares in Vintage Trains CBS, a Community Benefit Society. This document is not aprospectusnorinvestmentadvertisement,financialpromotionorofferundertheFinancialServicesandMarkets,Act2000.
Consequently, neither the Trustees, Managers nor the advisers can accept responsibility for anylossesarisingtopersonsactingorrefrainingfromactiononthematerialcontainedinthisbusinessplan.
Personsconsideringafinancialcommitmentofanykindshouldconductsuchinvestigationsastheyconsidernecessarytosatisfythemselvesastotheappropriatenessofthefinancialcommitmentandtheriskoflossorsomeorallofanyfinancialcommitment.
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Contents
1.Introductionandbackground............................................................................................................4
1.1Purposeofthebusinessplan.......................................................................................................4
1.2AboutVintageTrains...................................................................................................................4
2.Theneedfortheshareoffer..............................................................................................................6
2.1Purposeoftheshareoffer...........................................................................................................6
2.2Whatwewillusetheshareofferfundsfor.................................................................................6
2.3Widerplans..................................................................................................................................7
3.ProjectPlan........................................................................................................................................8
3.1Projecttimelineanddelivery.......................................................................................................8
4.Legalstructureandgovernance........................................................................................................9
4.1Legalstructure.............................................................................................................................9
4.2Theboard...................................................................................................................................10
4.3Themanagementteam.............................................................................................................12
5.Businessmodel................................................................................................................................13
5.1Industryexpertise......................................................................................................................13
5.2Operationalstructureandtradingactivities..............................................................................13
6.Marketanalysisanddemand...........................................................................................................16
6.1Overview....................................................................................................................................16
6.2SWOTAnalysis...........................................................................................................................17
7.FinancialInformation.......................................................................................................................19
7.1Existingfinances........................................................................................................................19
7.2Costsandfunding......................................................................................................................20
7.3Sharecapitalandinterest..........................................................................................................21
7.4Alternativescenarios.................................................................................................................22
7.5Financialassumptions................................................................................................................22
7.6Forecastfinancialstatements....................................................................................................25
8.CommunityPlan..............................................................................................................................32
8.1Communitybenefits..................................................................................................................32
8.2Memberengagement................................................................................................................33
9.Marketingtheshareoffer................................................................................................................34
10.Risksandmitigation.......................................................................................................................36
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1.Introductionandbackground
1.1Purposeofthebusinessplan
ThisBusinessPlanhasbeendevelopedbyVintageTrainsCommunityBenefitSociety(“theSociety”).
ItprovidesanoverviewofourplanstoraisecommunitysharesbymakingthefirstpublicofferforaBritish publicly owned railway operating company running express steam trains on themain linerailwaynetworkforover100years.
FormoredetailsaboutourCommunityShareOfferpleasereadourShareOfferDocumentavailableatwww.VintageTrains.co.uk
1.2AboutVintageTrains
Ourvision
Expresssteamtrainsengineeringafutureforeveryone.
Ourmission
Tocreateamainlineheritagerailwaycompanyforeveryone,preservingtheskillsofthesteamageto enable our collection of express steam trains to have a sustainable future and a real purposeworkingineverydayserviceasatouristbusiness.
Ourachievements
We are amongst the pioneers promoting heritage express steam trains on the national railwaynetwork.
Over the last fifty years we have preserved a number of important express, mixed traffic andindustrial steam locomotives, Pullman cars and other carriages, Great Western Railway wagons,workshopequipment,tools,drawingsandspares.Inparticular,wehavepreserved:ClunCastle,thelastGreatWesternRailway-designedCastleclassexpressenginetooperateinregularservice;GWRpannier tank 7752, the last steam locomotive ever to run on a national network as LondonUnderground'sL94;EarlofMountEdgcumbe,asecondGreatWesternRailwayCastlerestoredfromscrap condition to becomea 21st-century recordbreaker in its own right; andmixed trafficRoodAshton Hall, restored to full running order by a team of young people in their 20s learning andputtingintopracticetheskillsofsteamlocomotiveengineering.
Wehavebuiltawell-equippedworkshopandoperatingdepotatouroriginalGreatWesternRailwaydepot at Tyseley and gained an excellent reputation for our engineering skills. This enables us tocontinue the tradition of having working steam locomotives available for service every day incontinuousunbrokenservicesince1908.
Wepromoteexpresssteamtrainson thenational railwaynetwork toShakespeare'sStratford, theuniversityspiresofOxford,thewalledcityofYork,theundulatingcountrysideoftheCotswoldsandtheWelshMarchesand,occasionally,wepromotefastnon-stopexpressesrecallingthegreatdaysofthepast.WeholdtwoopenweekendsayearatourTyseleydepotwheneveryoneiswelcometocomeandlookatourcollectionatclosequartersintheenvironmentofaworkingsteamdepot.Wehaveachievedoutcomeswhichmanysaidwereimpossible.
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WehavedonethisthroughtheprowessofourTyseleyLocomotiveWorksandtheskillsofourteam,with good communication and by developing excellent relations with stakeholders in ourcommunity.
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2.Theneedfortheshareoffer
2.1Purposeoftheshareoffer
Weoffer a unique proposition.Wewill be the only publicly ownedmain line railway company inBritainoperatingexpresssteamtrains.
Vintage Trains and our founders areworld pioneers in promoting express steam trains and havebeensuccessfulindoingsoforover50years.Wehaveourownexpresssteamlocomotives,ourowntrainofcarriages,askilledworkshopandrunningdepotatTyseleyandatourpromotionbusiness,butwedonothaveourownlicencetooperateonthenationalrailwaynetwork,sowerelyonotherstohelpusout.
Wehaveappliedforanoperatinglicence,andtogetthisweneedtodemonstratethatwehavethepeopleandsystemsinplacetorunasaferailwayservice–whichwebelievewedo–andalsothatwehavethefinancialresourcetorunourtrainssustainably;thisiswherethisshareoffercomesin.Fundsraisedviathisofferwillallowustocreateatrainoperatingcompanyandtomaintainourfleetoflocomotivesandcoachestonationalrailwaystandards.
Wenowwanttotakecontrolofourowndestinyandrunexpresssteamtrainsourselves.Alongsidethis wewill maximise the amount of public benefit that we can deliver from our activities, bothnationallyandaroundourdepotatTyseleyintheCityofBirmingham.
Bydoingthiswewillbuildanexcitingfuture,andactdecisivelytoprotectBritain’smainlinerailwayheritage, before the skills disappear forever. To support these core activitieswewill run trainingcourses,undertakerouteconducting,triallingofnewtrainsandprovidespotdriverhire.
Asalicensedtrainoperatingcompany,wewillbeupthereatthetoptablewithallthefranchiseandfreightoperatingcompanies,abletohaveoursayinhowtherailwaysinBritainarerun.
We are launching this share offer at an exciting time. There is renewed interest in British-ownedcompanies tradingwithBritish-built equipment.Weareplanning todo just that!Also, theCityofBirminghamhas embraced tourism in its strategic economic growth plans.Greater Birmingham isexperiencinga15%perannumincreaseintourismwith10.2milliontripstoShakespeare’sEnglandand4.5millionvisitorstoBirmingham’sChristmasmarketeachyear.
2.2Whatwewillusetheshareofferfundsfor
VintageTrainsLimited (“theSubsidiary”),a tradingsubsidiarywhichwillbeownedby theSociety,willoperateourexpresssteamandheritagedieseltrainsrunningtopopulartouristdestinations.
WeneedtosatisfytheOfficeofRailandRoadthatwehave
a) theresourcesrequiredtoruntrainsreliablyandsafely;b) thequalifiedstaffweneed;andc) theworkingcapitalneededforaseasonalbusiness.
The primary use of the £800k is to provide cashflow support to the subsidiary train operatingcompanythatwill incurcostsandliabilitiesfromFebruary2018.Thiscompanywillstarttoreceivetrading income later,whenweholdthe licencetooperateandstartrunningservices.Thesefundswillalsoenableustodevelopourtrainrefurbishmentprogramme.
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2.3Widerplans
Whilst£800kisenoughtogetusstartedsowecanruntrainsnextyear,ouroptimumandmaximumtargetis£3mwhichwillenableusto:
• CreateanewkitchencartohelpusservemorePullmanandFirstClassmealstoamuchhigherstandardofquality,makingeverytrainwerunmoreviable;
• Upgradecarriagestoofferincreaseddisabledfacilities,providingAccessforAll;
• Upgrade the safety and enviromental systemsonour carriages to surpass the currentrequirements;
• Createanon-traincafébarandshopforStandardClasspassengers;
• Improvetheambiencethroughoutourtraintoappealtothebroadestpossiblerangeofpassengers;
• Make further improvements to our Tyseley depot including creating a training,educationandheritagecentre,asdetailedinourCommunityPlan;
• Wewill develop a variety of other projects, from an observation and bar car, furtherPullmancarsandadoptsomeofthestationsontheShakespeareExpressroute.
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3.ProjectPlan
3.1Projecttimelineanddelivery
Themajorityoffundsthisshareofferraiseswillbeloanedtooursubsidiarytrainoperatingcompany(“theSubsidiary”).TheSubsidiarywillbeour licensedpassengertrainoperatorandwilldeliverthetrain services. In order to operate heritage express steam trains on the national railway networkourselves rather than rely on a third party, it is necessary to gain an operating licence from theOfficeofRailandRoad,whichrequires:
• Asafetymanagementsystem(alreadyprepared);• Confirmationthatwearea‘fitandproperperson’(ourannualturnoverandnetassetvalue
willsoqualify);• Public liability insurance (currently being quoted for and costed included in our financial
model);and• Qualifiedpersonnel(identifiedandtobehiredsubjecttoraisingworkingcapital).
Thesubmissionfor theoperating licencewillbesubmitted in late2017.Anoperatingsubsidiary isneeded because the Office of Rail and Road require that the train operating company has amanagement boardmade up of peoplewith industry experience. Thiswill not necessarily be thecasewiththeSocietyboardas itwill includememberswhodonothavethisexperience.Secondly,thecompanyformismostunderstoodbytheregulatorandthewiderrailsector,andsowebelievethathavingthesocietyastheparententity,ratherthantheoperatingentity,islikelytobeamoresensiblestrategy.
WeareinadvanceddiscussionswithNetworkRailforuseofthetrackandstations,andwithVintageTrainsCharitableTrustforsupplyofthetrainsandengineeringservicebackup.Oncethelicencehasbeen granted in the first quarter of 2018, the Subsidiary will then be able to enter into formalarrangementsforbothoftheseservices.
TheSubsidiarywillcautiouslybuild itsactivity levels fromagentlestart in2018,whenwewill runour existing summer Shakespeare Express programme, a small number of charter trains and aprogrammeof localChristmastrains.2019willseeareturntoourcurrent levelofoperationswithadditionalchartertrains,and2020willseeafurtherincreaseinthenumberoftrainstoalevelweperceivetobecomfortablysustainablethroughto2023andbeyond.
Inparallelwiththis,additionalnon-passengerserviceswillbeofferedtotherailway industry,bestutilisingtheadditionalstaffresourcestheSubsidiarywilltakeon.Mostofourpassengerservicesrunatweekends, so significantweekday resourceswill beavailable, allowinga small newoperator totakeontasksdeemednon-corebythebiggerplayers focusedontheirvolumeoperations,suchastestingnewrollingstockbeforeitcanrunasapassengertrain.
These activities will build at a sensible and manageable rate between 2018 and 2023. Withdevelopmentsplanned for themainline railwaynetworkovercomingyears, it isbelieved thatourSubsidiarywillhaveanamplesupplyofprofitablework.
VintageTrainsCBSwill also fundupgrades toour trainsover thenext six years.Thesewill enableimproved revenue generation by enhancing the customer experience,while achieving compliancewithnewlegislationandenvironmentalstandards.
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4.Legalstructureandgovernance
4.1Legalstructure
The group legal structure is comprised of the following entities. The operating arrangements foreachlegalentityarefurtherdescribedinSection5.
7029ClunCastleLimited
7029 Clun Castle Limited, a charitable company, owns and leases the steam locomotives used byVintageTrainsCharitableTrust.
7029ClunCastleLtd
Co.No:00910443CharityNo:505793
Owneroflocomotives&rollingstock
KEY
£4,056Knetworth exis tingactiveenti ty
newenti ty
legal control by100%shareholding
legal control throughparentrole&
appointmentofmajori tyofboard&
majori tyvoteatgenera l meetings
influencethroughexclus iveprovis ion
ofservices
VintageTrainsCharitableTrust
TyseleyLocomotiveWorksLtd
Co.No:02848449100%subsidiaryby
shareholding Co.No:02253445CharityNo:1010904 Hireoflocomotives&
rollingstockCharityNo:1010904
£1,326Kturnover £1,273Kturnover£876Knetworth £4Knetworth
ParentofCBS ContractforRighttoappoint
majorityofDirectorssupplyoftrains&
engineeringservicesRighttomajorityvoteat
generalmeetingsEntityinchargeofmaintenance
VintageTrainsLtd100%subsidiaryby
shareholding Co.No:10436785ProposedTrain
OperatingCompany
VintageTrainsCBS
Loanofoperationallocomotives&rolling
stock
ORGANISATIONALCHART
7029CLUNCASTLELTD&VINTAGETRAINSCHARITABLETRUST
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VintageTrainsCharitableTrust
VintageTrainsCharitableTrust(charityregistrationnumber1040904)isacharitywhichencouragesandpromotespublicinterestinthepreservationofsteamandotherrailwaylocomotivesandrollingstock,machineryandequipmentofhistoricalinterest.
ToensurecontinuityoftheseaspectswiththeproposedoperationofexpresssteamandothertrainsbyVintageTrainsLimitedandfulfilmentoftheoverallbusinessplanandCommunityPlan,VintageTrainsCharitableTrustwillbetheParentoftheSociety,entitledtoappointamajorityoftheboardofdirectorsof theSociety, tobe joinedbyotherselectedbyand fromourMembers.WhilsteachMemberwillhaveonevote(regardlessofthenumberofsharestheyhold),VintageTrainsCharitableTrustwillbeentitledtohaveamajorityvoteonallmatters.
Memberswillbeabletoelectupto3membersoftheBoardoftheSociety,withthefirstelectionscomingatthefirstAGMoftheSocietyintheautumnof2019.
TyseleyLocomotiveWorksLimited
VintageTrainsCharitableTrustcarriesoutitsobjectivesthroughitswhollyownedsubsidiary,TyseleyLocomotiveWorksLimited,whichwillalsoprovidedepotandmaintenanceservicestoourproposedlicensedtrainoperatingcompany,VintageTrainsLimited.
VintageTrainsCBS(“theSociety”)
Vintage Trains CBS is a community benefit society registered in 2017 under the Co-operative andCommunityBenefitSocietiesActwiththeFinancialConductAuthority(registrationnumber:7668).Itisacommunity-ownedsocialenterpriseandbysubscribing forshares issuedbytheSociety in thisshareofferyouwillbecomeaMember.
Vintage Trains CBS has exclusively charitable objects and a charitable asset lock, preventingMembersfrommakingacapitalgainbysellingorclosingthebusinessforaprofit.Therefore,itwillneverbeabletobecomeprivatelyownedandtakenoutofcommunityownership.
Itsobjectsare“forthepublicbenefittoencourageandpromotepublicinterestinthepreservation,repair, operation and maintenance of steam and other railway locomotives and rolling stock,machinery,equipment,buildings,depotsandrailwaylinesofhistorical interestownedormanagedbytheParent.”
VintageTrainsLimited(“theSubsidiary”)
VintageTrainsCBSisthe100%parentorganisationofVintageTrainsLimited,whichisintheprocessofapplyingtotheOfficeofRailandRoadforalicencetorunpassengerchartertrains.
4.2Theboard
The board members of Vintage Trains CBS will retain strategic oversight and managementresponsibilityfortheproject,overseenbytheboardofVintageTrainsCharitableTrust.OperationalresponsibilitywillbedelegatedtotheSubsidiarymanagementteam.
TheboardofVintageTrainsCBSiscomprisedof:
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MichaelWhitehouse(Chairman)
Michaelisalawyerwithover40years’experienceofadvisingonanddeliveringmajortransportandPublicPrivatePartnershipprojectsintherailway,maritimeanddefencesectors,formerlyapartnerinWragge&CoLLPandpartofthatfirm’smanagementteam.Hehasconsiderableexperiencewiththe political, economic, regulatory and contractualmatrix relating to the operation of railways inBritainandensuringthatheritageexpresssteamtrainsaresafeandviablewithinthatmatrix.
Michaelhasbeeninvolvedwithheritagerailways,nationallyandinternationally,forover45years.He ledthe initialdevelopmentofthemain lineexpresssteamtrainprogrammeforVintageTrains,designedTheShakespeareExpressprogrammeandspearheaded thepublicaccesspolicies for theTyseleyCollectionandtheirimplementation.
He is a past Chairman of the Ffestiniog Railway, theworld’s oldest independent railway, and theWelsh Highland Railway and advised on the groundbreakingWelsh Highland Railway re-creation,includingdevelopingaMemorandumofUnderstandingbetweentheFfestiniogRailwayand IndianRailwaysrelatingtothetouristdevelopmentoftheDarjeelingHimalayanRailway.
Heisalsothecontrollingpartywithin7029ClunCastleLtd,acharitablecompany,whichownsandleasesthesteamlocomotivesusedbyVintageTrains.
Michael is responsible for leading Vintage Trains’ strategic development andwill be Chairman ofbothVintageTrainsCharitableTrustandVintageTrainsCBS.Hewill also represent theSocietyontheboardofVintageTrainsLimited.
AdrianShooter
AdrianwasformerlyfounderandChairmanofChilternRailways.AdrianjoinedBritishRailwaysasanEngineeringManagementTrainee in1970and spent12 years as anEngineeringManager runningvarious trainmaintenance depots and helped to launch the Inter City 125 train. He later becameManagingDirector of Red Star Parcels, BritishRail's Courier division competingheadonwith TNTandFedEx.He ledamanagementbuyout forChilternRailways, increasing the turnover tenfold to£150m,whilstoperatingasandmakingitthemostpunctuallinewiththebestpublicperceptionformanyyears.
He is a trustee of Vintage Trains Limited. He also Chairs Vivarail Limited which is a producer ofinnovative new passenger trains, both diesel and battery powered, and owns a 2 foot gauge ex-DarjeelingHimalayanRailwaysteamlocomotiveNo.19,builtin1889.
AdrianwillChair theboardofVintageTrainsLimited,thetrainoperatingsubsidiary,sobringingtobearhis very considerableexperienceoperating trainson thenational railwaynetwork safelyandcommercially.
MichaelGilbert
Michael has been a director of Vintage Trains Charitable Trust and Tyseley LocomotiveWorks forover25years.HeisaCharteredAccountantandaretiredPwCpartnerwhereheprovidedauditandadvisoryservicestoacrosssectionofentrepreneurialsmall-andmedium-sizedbusinesses,includingduediligence,businessacquisitionanddisposalactivity.HehassatontheCouncilofTheUniversityofBirminghamasTreasurer.HehasalsoservedasTrusteeonanumberofothercharitablebodies.He is currently adirectorof a small engineeringgroupbased in theMidlandsandalsoapropertymanagementcompany.
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RobinCoombes
RobinisadoctoralstudentattheUniversityofBirminghamCentreofRailEducationandResearch,researching governance of heritage railways. He was recently the Independent Chairman of thegovernancereviewoftheWestSomersetRailwayAssociation.
RobinisaretiredCharteredArchitectandConsultant.HewasaRailManagerfor8yearsatNetworkSouthEast and partner with a national architectural practice for 25 years, the last ten years asChairman.HewasfoundingpartneroftheenvironmentalandeconomicconsultancyERES.Robinhasservedasamagistratefor29years.
Hehasa lifelongpassion forsteamrailways, travellingoveronemillionmiles,and isperhapsbestknown for his innovative photography for which he has won several awards and been widelypublished.
RobinwillbearepresentativeforMembersoftheCBS.
4.3Themanagementteam
ThemanagementteamoftheSubsidiary,VintageTrainsLimited,iscomprisedof:
AdrianShooter(Chair)
AdrianShooterwillChairourtrainoperatingcompany.Wehavesecuredaveryseniormanagerwithexperience in British Rail,NetworkRail and a TrainOperating Company to becomeourManagingDirector.OurmanagementteamwillalsobeaugmentedbyanOperationsStandardsManagerfroma Train Operating Companywho has previous experience as a Railway Safety Inspector andwhoholdssteamanddieseldriverandguardqualificationsonaheritagerailway.
JimKirkman
JimistheCompanySecretaryandTreasurerandaformerCharteredAccountant, isresponsibleforall our financial reporting, budgeting, compliance and accounts. He is also the Secretary andTreasurerof theparentcharity,VintageTrainsCharitableTrust.HewillalsoserveontheboardofVintageTrainsLimited.
BenMason
Ben is the Business and Catering Manager, responsible for the promotion and delivery andpassengerexperienceonallourchartertrains,openweekendsandpublicevents.Hewaspreviouslyinvolved in the US telecoms sector and has brought his considerable experience to bear indevelopingourwebsiteandon linebookingsystem.BenmanagesourPullmanrestaurantcarandcateringservicesandliaiseswithVintageTrainsSociety’svolunteers.
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5.Businessmodel
5.1Industryexpertise
ThebusinessmodelhasbeendevelopedbythetrusteesoftheSocietyandthemanagementteamoftheSubsidiary,whohaveextensiveexperienceof the industry through their involvementwith theSociety’sparent,VintageTrainsCharitableTrust.
VintageTrainsCharitable Trusthasmanyyears’ experiencepromoting trains and contractingwithWestCoastRailwayCompany,whohaveprovidedtheservicesofatrainoperatingcompanytodate.We understand all the elements thatmake up the financial model and the safety and economicregulationswhichapply.
WealsohaveaTrustee,AdrianShooter,highly respected in the rail industry,whohas runa trainoperating company and has significant experience of the other train services we plan to offer.Specialist guidance has been received with regard to the safety case and necessary formalitiesrelatingtothelicenceapplicationwiththeOfficeofRailandRoad.
The Vintage Trains Charitable Trustmanagement team has built a budgetmodel for the existingcharitywhichhasbeenrefinedovermanyyearswithdetailedsupportforboththeengineeringandtrain operations. It is therefore a very strong team that has provided the input and developed ahighlydetailed6-yearmonthlyfinancialspreadsheetmodelforthesubsidiary.
It is supported by a programme of train services,whose routes, timings,mileages, revenues andcosts,havebeenitemisedindividuallybasedonsuccessfulpastexperience.Oursophisticatedonlinebookingsystemprovidesawealthofinformationonpassengerfigures,occupancy,etc.
Wehaveanenviablereputationforouractivities,thequalityofouroutputandreliabilityoperatingon the national railway network. It is paramount these are sustained togetherwith access to thenational railway network. We are the only entity (apart fromWest Coast Railway Company andLocomotiveServicesLimited)whichpromotestrainsoperatedandownedbythesameorganisationfromitsownbasewhichhouses,repairsandmaintainsitsassets.
WehavereceivedlettersofsupportfromkeystakeholderssuchasMarketingBirmingham,NationalRailwayMuseum,theOfficeofRailandRoadRegulationandBirminghamCityCouncil.
5.2Operationalstructureandtradingactivities
Thecurrentandfutureoperationsofthelegalentitiesinthegroupstructureareasfollows:
7029ClunCastleLimited
7029ClunCastleLimitedownsandlendstheTyseleyCollectionofsteamlocomotives,rollingstockandequipmentusedbyVintageTrainsCharitableTrust.Theoperationalassetsare lent toVintageTrains Charitable Trust under a formal loan agreement, with conditions such as maintenanceincludedintheagreement.
This loan agreement will remain in place if this share offer is successful and the passenger traincharterlicenceissecured,withanotheragreementbeingsetupbetweenVintageTrainsCharitableTrustandtheSubsidiarytohiretheassetswhichwillbemaintainedbyTyseleyLocomotiveWorks.TheSubsidiarywillbetheuseroftheassets,onalong-termbasiswiththesameconditionssuchasmaintenance.
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VintageTrainsCharitableTrustandTyseleyLocomotiveWorksLimited
Vintage Trains Charitable Trust encourages and promotes public interest in the preservation ofsteam and other railway locomotives and rolling stock, machinery and equipment of historicalinterest.Thisisachievedby:
• Maintainingandrestoringthecollectionsofassetsonloanfrom7029ClunCastleLimited.• Operating heritage rail tours to a variety of interesting and well-known destinations
(currentlyapproximately40peryear)throughathird-partytrainoperatingcompany.• Providingengineeringservicestotheheritagerailwaysectorandmodernrailwayoperators.
TyseleyLocomotiveWorksLimitedistheEntityinChargeofMaintenance,meaningthatitisestablishedtocarryoutmaintenanceontrainsoperatingonthenationalnetwork.
• LeasingasitefromNetworkRailincludingtheengineeringdepotatTyseley.Alllocomotives,carriagesandequipmentarestoredatthedepot,andalltheengineeringworksarecarriedoutthere.
• Holdingopendaysatthedepottoshowcaseanddemonstratethecollectionoflocomotives.
Iftheshareofferissuccessfulandthepassengerchartertrainlicenceissecured,thenthefollowingchangeswilltakeplacetotheseactivities:
• The Subsidiary will enter into a long-term hire agreement with Vintage Trains CharitableTrust to lease theworking assets in the Tyseley Collection, andwill contractwith TyseleyLocomotiveWorkstoundertakeallrequiredmaintenance.
• TheSubsidiarywill takeoveroperationof theheritage rail tours. Itwillhave itsown trainoperatinglicenceandsowillnotbereliantonathirdparty,althoughit is likelytocontractwithothertrainoperatingcompanies.
• Tyseley Locomotive Works will continue to provide engineering services, to both theSubsidiarytoenableittomaintainthehiredinassets,andtotheheritagerailwaysectorandmodernrailwayoperatorswhenappropriate.
• VintageTrainsCharitableTrustwillcontinuetoleasethedepotfromNetworkRail.ItwillbeusedtocarryoutengineeringworksfortheSubsidiaryandexternalcustomers,andpartofthe rent and rates will be recharged to the Subsidiary to house the leased collection ofassets. Pursuant to the Community Plan, parts of the depot will be available for publicactivitiesandparticipation.
• TheSocietywillpromoteopendaysatthedepot.
VintageTrainsCBS(“theSociety”)
TheSocietywillberesponsibleforraisingsharecapitalviaacommunityshareoffer.Oncetheofferperiod has closed, the majority of funds (approximately £2.8m) will be lent to the Subsidiary toenableittocommenceoperations.
Theremainingfunds(approximately£200k)willberetainedintheSocietytoenableittocarryoutitsprincipaltradingactivity,theCommunityplan.
Theopendayshavebeencarriedoutforanumberofyearsandoftenwithguestlocomotivessuchas Tornado and Flying Scotsman, and have been extremely successful with local and regionalresidentsandenthusiastscountrywide.Peopletravellongdistancestoattendthem,andhavegiventhemexcellentfeedback.
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ThesewillbecarriedoutbytheSocietyratherthantheSubsidiaryastheyareacommunityactivityrather than a train operating activity.We aim to build onwhatwe already deliver, to givemorepeopletheopportunitytointeractwiththebusinessandlearnabouttheheritage.WewillthereforedevelopaCommunityPlan toenable anexpandedprogrammeof activities. Thiswill enableus toofferavarietyofactivitiestosuittheSocietymembers,ourvolunteersandthelocalcommunity.
AsmallstaffteamwillbeemployedbytheSociety,madeupofamanager,anassistantmanagerandan administrator. They will report to the Society board of trustees, and will be responsible fordevelopinghowweinteractwithourmembers,volunteersandcommunity.
VintageTrainsLimited(“theSubsidiary”)
The Subsidiary’s principal activitywill be to operate passenger trains on Britain’s national railwaynetwork.
ThetradingactivitiesoftheSubsidiarywillbe:
• Vintage Trains Tours: Operation of the heritage rail tours that are currently promoted byVintageTrainsCharitableTrust.TheSubsidiarywillhaveitsowntrainoperatinglicenceandsowillnotbereliantonathirdparty.Therewillbescopetoincreasethenumberoftours.
• Coachrental:TofacilitatetheChristmasshuttletrains,theSubsidiarywillneedtorefresh6coaches in the Tyseley Collection. Once refreshed, Vintage Trains will require the use ofthesecoachesonlyforthemonthofDecemberduringtheoperationoftheChristmastrains;theother11monthsoftheyearVintageTrainswillhavelimiteduseforthem,sotheycanberentedouttootheroperators.
• Services provided to other operators: The Subsidiary will primarily operate passengercharterservicesonweekends,leavingdriversandotherstaffwithavailablecapacityduringtheweekdays. Tomakebetter useof this down-time,Vintage Trainswill offer services tootherTrainOperatingCompaniesonanad-hochirebasis.
• Third Party Ticket Sales: We have developed our own online ticketing system, allowingcustomers tomakebookingsover the internet. TheSubsidiarywill beable toprovide thisticketingsystemtootheroperators.
To operate these activities a team of professional railway personnel will be hired, headed by amanagingdirector.WehavesecuredaveryseniormanagerwithexperienceinBritishRail,NetworkRailanda trainoperatingcompany tobecomethemanagingdirector.Themanagement teamwillalsobeaugmentedbyanoperationsstandardsmanager froma trainoperatingcompanywhohaspreviousexperienceasarailwaysafetyinspectorandwhoholdssteamanddieseldriverandguardqualificationsonaheritagerailway.
All train operating costs, such as staff costs, Network Rail access charges, fuel and water, andinsurancewillbebornebytheSubsidiary.PartoftherentandratesforthedepotwillberechargedtotheSubsidiaryfromVintageTrainsCharitableTrustinreturnforhousingtheleasedcollectionofassets.
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6.Marketanalysisanddemand
6.1Overview
For over 20 years, Vintage Trains has offered a heritage express steam train experience, full ofnostalgia and romance to awell-establishedmarketplace.We see an opportunity to develop andexpandthismarketplacebyofferingan improvedproduct, reachingout furtherafieldandofferingmoreservicesthroughacontrolledandmanagedexpansion.
Wecurrentlypromoteapproximately40 trainscarrying12,000passengersannually, splitbetweentrains offering awholedayout to international destinationsof interest, such asOxford, York andNorthWales.Inaddition,TheShakespeareExpresssteamtrainserviceoperatesonsummerSundaysfromBirminghamtoStratford.Bothoftheseofferingsarewellestablishedandrunatanaverageof85% capacity. The majority of passengers are domestic, originating within a short drive or trainjourney of our pickup stations, realising a catchment of 600,000 people.Much of our business isrepeatbookingsfromsatisfiedcustomers.
Weplan to repeatour successful core itinerariesbyaddingadditionalpick-uppointsup to1hourfurtherafield, increasingthe immediatecatchmentten-foldtoover6millionpeople.Doingsowillallowustoincrementallyincreaseourofferingto82trains,slightlymorethandoublingtheoverallnumberoperatedannuallyoveraperiodofthreeyears.
Weseektoincreaseourofferingtointernationaltouriststhroughearlytieswithinternationaltourcompanies,predominatelyfromtheOrientandAsia.WithdirecttouristflightsfromChinaandAsia,BirminghamisquicklybecomingthestartingpointformanytouristslookingtoexperienceBritainforthe first time. On every tourist’s bucket list is Shakespeare’s Stratford, offering the recently re-opened Shakespeare School Room & Guild Hall, Anne Hathaway’s Cottage and the RoyalShakespeareCompany;whatbetterwaytoarrivethanonagenuinesteamtrain,TheShakespeareExpress.
Midlands tourist attractions, such as the Severn Valley Railway, CadburyWorld and the Sea LifeCentreeachreceivesome200,000visitorseveryyear.Asweincreaseourtrainoperationto82trainsperannumasplanned,wewillstillonlycarry35,000people,albeitatahigherfare.KeystakeholderssuchasMarketingBirminghamandShakespeare’sEnglandarekeentoworkwithustodevelopourmarket,furtherenhancingBirminghamasatoptouristdestination.Tourismisoneofthethreekeyplanks in the Midlands Engine economic growth strategy and the main plank of Shakespeare’sEngland’sstrategy.
FromDecember2018,wewillintroduceabrandedseriesofChristmasshuttletrains,runningfromacentralBirminghamrailwaystation intheheartoftheBirminghamGermanmarket(whichattracts4.5millionvisitors)toourTyseleydepotpursuanttoacharacterfranchise.Existingoperatorsofsuchfranchise trains elsewhere in the UK are limited to preserved railways in semi-rural settingswithoften difficult and overcrowded road links. Despite these challenges, they sell out all their trainswithinweeksoflaunchduetohighdemand.ThefranchiseeisextremelykeenforVintageTrainstooffertheChristmasexperiencefromacentral,mainlinestation.
Throughouttheproposedoperationsprogramme,TyseleyLocomotiveWorkswillbemanagingtheupgradeofourtraintoenableVintageTrainstoofferanenhanceddiningpackagetomoreseats.Weknowforafactthere isfurtherdemandfordiningasweareroutinelymaintainingwaiting listsforcancellationsandunfortunatelyturningpassengersaway.
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Furthermore other tour promoters (Steam Dreams, Railway Touring Company, A1SLT, etc) allcurrentlyhaveupto200diningseatsandbeyondcomparedwithourown114/130.Allpromotersarealsolookingatwaystoincreasediningseatstoupto300pertraintofulfildemand.
Wehavepreparedmoredetailedplansforeachofourtargetmarkets,includingadetailedanalysisofmarkettrendsandhavedesignedourplanneddevelopmentstorespondtothosetrends.
6.2SWOTAnalysis
Strengths
• We are building on a firm charitable and sustainable foundation that has existed for 50Years.
• Wearewell governedandmanagedbya strongcoreofpeoplewhoarededicated tooursuccess.
• Wehaveadedicatedvolunteerorganisationwhichunderpinstheoperationofourtrains.• Wehave the supportof thenational railway industry, theRailRegulatorand theHeritage
RailwayAssociation.• WehavethesupportoftheCityandUniversityandouractivitiesaddresstwocoremarkets
withintheCity’sstrategicplan:tourismandemploymentopportunities.• Weareconsideredthe ‘Gold-Standard’ in theHeritageRailway Industryandarenationally
knownforourengineeringstandardsandchartertrainpromotion.Weaknesses
• Thecarriagesusedonourheritagechartertrainaresafebuttiredandby2020willnolongerremaincompliantwithmodernindustrystandardsunlessweupgradethem.
• Ourteamisageingandweneedtoincreaseanddiversifyournumbers.• Wearecurrentlyunabletooperateourowntrainsaswearenotalicensedoperator.• We earn a surplus of £200k annually through railtours and engineering; we do not have
hugecashreservesandthereforemustraisemoneyfromothersources.
Opportunities
• Weare in the growing heritagemarketplace based in the Citywith the fastest expandingtourismmarketintheUKandwithtourismasoneiftheCity’skeygrowthdrivers.
• TheBritishrailwayindustryhelpedexpandtheworldandmuchofitscarriagemanufacturingtookplaceinGreaterBirminghamwhichalsobecamethefirst InterCityrailwayhubintheworld.Assuchweenjoyworldwideinterestonwhichwewillcapitalise.
• We have an establishedmarket position both in heritage engineering and tourist chartertrainpromotion.Withcapital improvementsandbyattractingthenextgenerationtoworkwithuswecansignificantlycontributetoGreaterBirmingham’seconomicgrowthandalsowidenouroffering.
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• We have the opportunity to establish the first publicly owned national train operatingcompany which will enable us to control a much greater sphere of our activities thanhitherto.
• The current market of people travelling on our trains is ageing. We must diversify andimproveourofferingtoattractnewmarketswhichareclearlyavailablefromourMidlandsbase.
Threats
• Wewerereliantonasolesuppliertooperateourtrains;thisprovedtobehighriskduetotworecentinabilitiesofthesuppliertoprovideserviceswehadcontracted.
• We need to raise sufficient capital through Community Shares in order to fund theestablishmentofourownlicensedtrainoperatingcompanyandrefurbishingandupgradingourtrain.Wehavelimitedcapitalofourown.
• Theskillsrequiredtomaintain80-year-oldsteamlocomotivesarebeinglost.Wemustpass-ontheskill-setstothenextgenerationinordertokeeptheseheritagemachinesoperable.
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7.FinancialInformation
7.1Existingfinances
TheSocietyandSubsidiarywerebothincorporatedin2017,andsotherearenoexistingfinancesforthem.Theexistingbusinesshasoperated throughTyseley LocomotiveWorks.Commercial tradingincome has come frommainline train passenger tickets, third-party engineeringwork, dining andbuffet sales and open day events. Surpluses earned have been used to restore our collection oflocomotivesandrollingstocktonationalrailwayrunningstandards inaccordancewiththeaimsofthecharity,aswellastoimprovethespecialistengineeringfacilitiesonsite.
Surplusesaretypicallymadeeachyear,whichareusedforthemaintenanceofthelocomotivesandcarriages. In theyearending31December2016 theamount spentonmaintenanceexceeded thetradingsurplusfortheyear.
Theenviablereputationoftheengineeringworkmeansthatrepeatbusinesscomesfromacustomerbasethathasgrownto150nameswithasignificantforwardorderbookandnobaddebtissues.Thesupplier base runs to around 550 companies with relationships established over time andstrengthenedbybothanexcellenttimelypaymentrecordandmutualrespect
There is significant passenger loyalty and train revenues can be predictedwith a great degree ofcertainty. Occupancy levels of around 85% have been consistently achieved, and our forecastingallowsforthepotentialofacoupleofcancelledtrainseachyearduetonetworkissuesoutsideourcontrol.
Theconsolidatedprofitandlossaccountsforthepastthreeyearshavebeensummarisedbelow:
VintageTrainsCharitableTrust £ £ £ProfitandLossAccount 31/12/2014 31/12/2015 31/12/2016
IncomeCommercialtradingincome 1,457,625 1,369,248 1,210,162Grants 82,016 15,454 73,177Museumandopendays 33,418 43,130 71,614Donations 2,500 2,500 7,332Interest 21 8 8
1,575,580 1,430,340 1,362,293
ExpenditureCommercialtradingoperations 1,416,351 1,318,398 1,210,869Preservationoflocomotives 42,195 82,805 163,841Governance 8,896 10,150 9,115
1,467,442 1,411,353 1,383,825
Surplus/(Deficit) 108,138 18,987 (21,532)
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Theconsolidatedbalancesheetsforthepastthreeyearshavebeensummarisedbelow:
Tangible assets aremade up of freehold land, leasehold property improvements, trackwork, andplantandmachinery.Thestocksincurrentassetsistheengineeringworkinprogressonlocomotivesand rolling stock under restoration. The majority of short-term creditors is made up of tradecreditorsandticketsalesmadeinadvance,andlongtermcreditorsaremadeupofdeferredgrantsandamortgage.
7.2Costsandfunding
Usesofcapital
£2.8m of the £3m raised by the Society will be lent to the Subsidiary to enable it to commencetrading.Theloantermswillmirrortheshareofferterms:interestfreeandwithoutrepaymentuntiltheSubsidiary is innetworth,with2% interestand repayment thereafterat thediscretionof theboard. £200kwill be retained by the Society and used to provideworking capital to enable it tocommenceitsowntradingactivities.
The loan will not be secured against the subsidiary’s assets because firstly the subsidiary will bewholly-owned by the society, and secondly, the subsidiary does not have any tangible assets tosecure the loan against. The rolling stock will be leased, and the licence fromORRwill not be a
VintageTrainsCharitableTrust £ £ £BalanceSheet 31/12/2014 31/12/2015 31/12/2016
FixedAssetsIntangibleassets - 5,110 4,542Tangibleassets 419,575 350,550 331,097
419,575 355,660 335,639
CurrentAssetsStocks 749,687 743,500 695,190Debtors 79,319 174,295 115,783Cashatbank 123,882 81,196 185,592
952,888 998,991 996,565
CreditorsAmountsfallingduewithinoneyear (275,836) (242,480) (250,009)
NetCurrentAssets 677,052 756,511 746,556
CreditorsAmountsfallingdueafteroneyear (217,666) (214,222) (205,778)
NetAssets 878,961 897,949 876,417
FundsUnrestrictedfunds 878,961 897,949 876,417
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tradeableasset,as itwillbedependenton thewider staffingandoperations infrastructureof thesubsidiary. That leaves the cash the subsidiary has, which will be overwhelmingly derived frompassengerfarespaidinadvanceandwhichwedonotbelieveshouldbeusedasloansecurity.
The£2.8mlenttotheSubsidiarywillbeusedasfollows:
• £623kworking capital for the first two years of operations, to allow for trading losses astradingcommences.
• £2,177kcapitalexpenditureonthecollectionofassetsthatwillbehiredfromVintageTrainsCharitable Trust. The total capital expenditurehas been forecast as £2,272kover the firstthreeyearsofoperations (2018to2020),andtheremaining£95kwillbe fundedfromtheSubsidiary’sreservesasitmovesintoapositivetradingcashflowby2020.Thisispartofa6-year programme of capital expenditurewhich has been developed, which totals £2,796k,andismadeupofthefollowing:
CapitalImprovement £’000Improvementstoleaseholdoffices,toiletsandtelephonesystem 75Telephonesystem/ITupgrade 10SetforChristmastrain 110Web-siteandticketingsystemforChristmastrain 20Wastehandlingfacility 50WorkonChristmaslocomotiveincludingair-braking 25WorkonChristmastrain 205Improvementstocharterfleet 75Fitdisabledaccesstoiletto9101BSO 40ControlledEmissionToiletdesign&fitx2toPullman99361 50ControlledEmissionToiletx26to16vehicles 520Electricalupgrademodificationsfor15vehicles 150Centraldoorlockingfitmentto17vehicles 170Dualbrakingdesign&fitmentto8vehicles 280Kitchencar 250Pullmancar"Eagle" 100Generatorsets 200VATontheabove 466TOTAL 2,796
Sourcesofcapital
Theprimarysourceofstart-upcapitalwillbethecommunityshareissue.
The only other source of funds for the Society or the Subsidiary is a £90k donation fromVintageTrainsCharitableTrusttohelpthesocietywithstaffcostsinthefirstyearofoperations.
7.3Sharecapitalandinterest
TheSubsidiaryisexpectedtoachieveabreak-evenpositioninthethirdyearofoperation(i.e.2020)andmoveintopositivenetworthin2023.WeproposetoofferMembersnon-compoundinginterestfrom the next year, 2024, at 2%. The payment of interest is only possible in the light of tradingperformance.
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WhenwemoveintopositivenetworthandbegintopayinteresttoourMembersin2024,wemaymovetoanopenshareoffertoencouragenewmemberswhowanttobepartoftheVintageTrainscommunity, and we would seek to make that new capital the primary source of capital forwithdrawalbyexistingMembers.
There are no current plans to raise additional share capital beyond the £3m target, but newopportunitiesmaywellariseforMemberstoconsider.
AlthoughtheSocietyislossmaking,weanticipategiftaidingprofitsfromtheSubsidiaryonceitisinpositivenetworth.ThisispossibleduetothecharitablestatusoftheSociety,andwillresultintheSociety’scumulativelossreducingfrom2024onwards.
7.4Alternativescenarios
Wehaveputinplacearrangementsshouldwefailtoreachouroptimumtarget.Ifweonlyreachourminimumsharetarget,theprojectwillstillbeviablebutwewouldneedtostripoutorsubstantiallydelay all the capital expenditure,whichwould reduce the revenueachievable fromeach trainwerun.
Under this scenario, ourmodel indicates thatwewill still have a viable operatingmodel, but ourprofit margins and reserves will be under greater pressure therefore putting the business undermorestress,andexposingsubscriberstomorerisk.TheSubsidiarywilltakealongertimetomovetopositive net worth, and so withdrawals and share interest will be more restricted under thisscenario.
7.5Financialassumptions
The financialmodel is driven by numerous assumptions, themost important ofwhich have beenlistedbelow.
TheSociety:RevenueAssumptions
TherevenuefromopendaysisexpectedtocarryonfromthecurrentlevelsasoperatedbyVintageTrains Charitable Trust. We have forecast a 10% increase in revenue year by year to take intoaccount the additional interest and activity arising from the community share offer and thecommunitydevelopmentplan.
TheSociety:ExpenditureAssumptions
ThemajorityofexpenditureintheSocietyismadeupofthefollowing:
• Opendayexpenditureisassumedtobe50%ofopendayrevenue,aspercurrentlevels.• Amanager,anassistantmanagerandadministratorwillbeemployedfromearly2018.• Amarketingbudgetof£250khasbeenforecast, forboththepromotionoftheshareoffer
andtomarkettheexpandednumberoftoursavailable.• Start-upcostssuchasequipmentof£20kandgovernancefeesof£16kinyear1.
TheSubsidiary:RevenueAssumptions
VintageTrainsTours
TheSubsidiarywillcautiouslybuild itsactivity levels fromagentlestart in2018,whenwewill runour existing summer Shakespeare Express programme, a small number of charter trains and a
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programmeof localChristmastrains.2019willseeareturntoourcurrent levelofoperationswithadditionalchartertrains,and2020willseeafurtherincreaseinthenumberoftrainstoalevelweperceivetobecomfortablysustainablethroughto2023andbeyond.
TheforecastprogrammeoftoursincludestheChristmasspecials;Christmasexperiencetourswhichoperate in the same way as the Vintage Trains tours, but need an external licence for use ofbranding,andrequireadditionalcostssuchasanenhancedticketingsystem.Thesetoursaremoreprofitablethanothers,andgiveusthepotentialtosellsouvenirs.
The summary programme of tours is as follows. The revenue forecasts are supported by aprogramme of train services, whose routes, timings, mileages, revenues and costs, have beenitemised individuallybasedon successfulpast experience, alongwith information fromouronlinebookingsystemsuchaspassengerfiguresandoccupancy.
IllustrativePassengerCharterSeries Locomotivesused 2018 2019 2020
SteamCharters TyseleySteam&GuestSteam 7 29 39ShakespeareExpress(SteamfromBirminghamtoStratforduponAvonandreturn)
TyseleySteam&GuestSteam 10 10 11
EveningDiningTrains TyseleySteam&GuestSteam - 3 16
ChristmasTrains TyseleySteam 16 16 16 Total(Days) 33 58 82
CoachRental
Aspartofthecarriagerefurbishmentwork,sometrainswillberefurbishedtomakethemairbraked.ThesecarriagesareusedfortheChristmasSpecials,andsowillberentedoutforthe11monthsoftheyearthattheyarenotinuse.
Nonpassengerservices
There is an industry shortage of experienceddrivers, sowehave identified significant demand tohireourdriverstocarryoutthefollowingservices:
• Routeconductingforotheroperators• Routeconductingforontrackoperators• Drivertrainingdays• Driverhiretootheroperators• Thirdpartydrivertrainingandadditionaltestingofnewtrainsforotheroperators
Vintage Trains has been approachedby other railway tour organisers, and thesediscussions havebeenusedtocreatetheThirdPartyTicketSalesrevenueforecasts.
ManagementchargetoTyseleyLocomotiveWorks
TheSubsidiary’smanagingdirectorwillspend2/3ofhistimeworkingontheSubsidiary,and1/3oftheirtimeonTyseleyLocomotiveWorksLimited.1/3ofthepayrollcostwillthereforeberecharged.
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TheSubsidiary:ExpenditureAssumptions
Staffcosts
Staffwillbehiredoverthefirstsixyearsofoperationsasfollows:
OtherDirectCosts
These costs have been calculated on a train by train basis, using similar sources as the revenueforecasts,suchastheprogrammeoftrainservicesandonlinebookingsystem:
• Catering• DirectPromotion• LocoandCoachhire• NetworkRailAccessCharges• Royalties/ChristmasCommission• FuelandWater
OtherOverheads
• Rentandrates:VintageTrainsCharitableTrustwillrecharge50%ofthecostitincurs.• Insurance:Quotationshavebeenreceivedfrominsurersbasedonthelevelofoperations.• Depreciation:Assetsaredepreciatedover:
o 5yearsforChristmastrainimprovementworkso 10yearsforallothertrainimprovementworkso 15yearsforleaseholdimprovementworks
DirectCosts 2018 2019 2020 2021 2022 2023
OperationsDirector 1 1 1 1 1 1DriverManagers 2 2 2 2 2 2Drivers 1 2 2 2 2 2GuardsTeamLeader 1 1 1 1 1 1Guard 0 0 1 1 1 1CommercialDirector 1 1 1 1 1 1PR/CharterManager 1 1 1 1 1 1CustomerServicesTicketAgent 1 2 4 4 4 4TrainManager/TicketAgent 1 1 2 2 2 2
Overheads
ManagingDirector 1 1 1 1 1 1BookKeeping/TicketAgent 0.5 0.5 1 1 1 1
Totalstaff 10.5 12.5 17 17 17 17
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7.6Forecastfinancialstatements
The following financial statementshavebeenextracted fromour6-year financialmodel.Wehaveestablished this model based on 20 years’ experience of promoting heritage passenger chartertrains,anditwillbereviewedindetailbytheOfficeofRailandRoadRegulationinordertosecureapassengerchartertrainlicence.
VintageTrainsCBSIncome&ExpenditureAccount
2018 2019 2020 2021 2022 2023Income £ £ £ £ £ £
Donationsreceived 80,055 9,945 - - - -OpenDays 60,000 66,000 72,600 79,860 87,846 96,631
140,055 75,945 72,600 79,860 87,846 96,631
Expenditure
Manager 31,295 34,140 34,140 34,140 34,140 34,140AssistantManager 22,760 22,760 22,760 22,760 22,760 22,760Administrator 11,380 11,380 11,380 11,380 11,380 11,380Marketing 146,000 104,000 - - - -Otherprofessionalfees 16,000 - - - - -Equipment&materials 25,000 5,000 5,000 5,000 5,000 5,000Memberships 3,000 3,000 3,000 3,000 3,000 3,000Publicity&promotion 5,000 5,000 5,000 5,000 5,000 5,000Contingency 5,000 5,000 5,000 5,000 5,000 5,000Legal&accountancyfees 12,200 12,300 12,400 12,500 12,600 12,700OpenDaycosts 30,000 33,000 36,300 39,930 43,923 48,315
307,635 235,580 134,980 138,710 142,803 147,295
NetProfit (167,580) (159,635) (62,380) (58,850) (54,957) (50,665)
ProfitandLossBroughtForward (21,000) (188,580) (348,215) (410,595) (469,445) (524,402)
ProfitandLossCarriedForward (188,580) (348,215) (410,595) (469,445) (524,402) (575,066)
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VintageTrainsCBSBalanceSheet
Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23£ £ £ £ £ £
CurrentAssets
Cashatbankandinhand 1,599,420 676,785 39,405 5,555 100,598 199,934LoanstoVintageTrainsLimited 1,225,000 1,975,000 2,550,000 2,525,000 2,375,000 2,225,000
2,824,420 2,651,785 2,589,405 2,530,555 2,475,598 2,424,934
CurrentLiabilities
Marketing 13,000 - - - - -
13,000 - - - - -
Totalassetslesscurrentliabilities 2,811,420 2,651,785 2,589,405 2,530,555 2,475,598 2,424,934
ShareCapitalandReserves
ShareCapital 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000Profit&LossAccount (188,580) (348,215) (410,595) (469,445) (524,402) (575,066)
2,811,420 2,651,785 2,589,405 2,530,555 2,475,598 2,424,934
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VintageTrainsCBSCashflowForecast
2018 2019 2020 2021 2022 2023Income £ £ £ £ £ £
Financing
Shareissue-grossreceipts 3,000,000 - - - - -Donationsreceived 80,055 9,945 - - - -FundsrepaidbyVintageTrainsLimited - - 250,000 25,000 150,000 150,000
Trading
OpenDays 60,000 66,000 72,600 79,860 87,846 96,631
3,140,055 75,945 322,600 104,860 237,846 246,631
Expenditure
Financing
FundsloanedtoVintageTrainsLimited 1,225,000 750,000 825,000 - - -
Trading
Payroll 65,435 68,280 68,280 68,280 68,280 68,280Marketing 154,000 117,000 - - - -Otherprofessionalfees 16,000 - - - - -Equipment&materials 25,000 5,000 5,000 5,000 5,000 5,000Memberships 3,000 3,000 3,000 3,000 3,000 3,000Publicity&promotion 5,000 5,000 5,000 5,000 5,000 5,000Contingency 5,000 5,000 5,000 5,000 5,000 5,000Legal&accountancyfees 12,200 12,300 12,400 12,500 12,600 12,700OpenDays 30,000 33,000 36,300 39,930 43,923 48,315
1,540,635 998,580 959,980 138,710 142,803 147,295
NetCashFlow 1,599,420 (922,635) (637,380) (33,850) 95,043 99,335
Madeupof:
FinancingCashflows 1,855,055 (740,055) (575,000) 25,000 150,000 150,000TradingCashflows (255,635) (182,580) (62,380) (58,850) (54,957) (50,665)
NetCashFlow 1,599,420 (922,635) (637,380) (33,850) 95,043 99,335
CashBalanceBroughtForward - 1,599,420 676,785 39,405 5,555 100,598
CashBalanceCarriedForward 1,599,420 676,785 39,405 5,555 100,598 199,934
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VintageTrainsLimitedIncome&ExpenditureAccount
2018 2019 2020 2021 2022 2023Income £ £ £ £ £ £
PassengerServices 966,792 1,922,432 2,935,682 2,935,682 2,935,682 2,935,682Non-passengerServices 97,500 182,310 215,910 317,510 357,510 417,510Otherincome 47,986 52,348 52,348 52,348 52,348 52,348
1,112,278 2,157,090 3,203,940 3,305,540 3,345,540 3,405,540
DirectCosts
Staffcosts 559,177 734,902 861,449 861,449 861,449 861,449Trainrunningcosts 545,039 1,178,812 1,728,880 1,728,880 1,728,880 1,728,880
1,104,216 1,913,715 2,590,329 2,590,329 2,590,329 2,590,329
GrossProfit 8,062 243,375 613,611 715,211 755,211 815,211
Overheads
Staffcosts 164,702 168,765 180,487 180,487 180,487 180,487Othercosts 211,755 241,531 244,899 248,285 248,690 249,116Depreciation 16,729 70,750 119,250 122,750 126,250 129,750
393,186 481,046 544,635 551,522 555,427 559,353
NetProfit (385,124) (237,671) 68,976 163,690 199,784 255,858
ProfitandLossBroughtForward - (385,124) (622,795) (553,819) (390,129) (190,345)
ProfitandLossCarriedForward (385,124) (622,795) (553,819) (390,129) (190,345) 65,513
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VintageTrainsLimitedBalanceSheet
Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23FixedAssets £ £ £ £ £ £
IntangibleAssets
TrainOperatingLicence 121,810 121,810 121,810 121,810 121,810 121,810
TangibleAssets
Premises 78,125 70,625 63,125 55,625 48,125 40,625ChristmasTrain 267,958 229,708 187,958 142,708 93,958 41,708CharterFleet 69,688 602,188 1,435,688 1,575,188 1,714,688 1,662,188
537,581 1,024,331 1,808,581 1,895,331 1,978,581 1,866,331
CurrentAssets
TradeDebtors 30,600 44,862 49,182 69,502 77,502 89,502VATRecoverable 31,012 46,711 44,900 41,547 40,887 36,694LoantoTyseleyLocomotiveWorks - 125,000 - - - -CashAvailableForTrading 342,309 223,143 209,065 244,038 203,232 413,533TicketMoniesRingfenced 107,121 216,508 216,508 216,508 216,508 216,508
511,042 656,224 519,655 571,595 538,129 756,238
CurrentLiabilities
TradeCreditors 75,291 82,573 82,601 82,601 82,601 82,601PAYE/NI 19,122 21,289 24,197 24,197 24,197 24,197Pension 7,113 7,881 8,649 8,649 8,649 8,649TicketSalesinAdvance 107,121 216,508 216,508 216,508 216,508 216,508
208,647 328,250 331,955 331,955 331,955 331,955
NetCurrentAssets 302,395 327,974 187,700 239,640 206,174 424,283
Long-TermLiabilities
LoanfromVintageTrainsCBS 1,225,000 1,975,000 2,550,000 2,525,000 2,375,000 2,225,000
TotalAssetsLessTotalLiabilities (385,024) (622,695) (553,719) (390,029) (190,245) 65,613
ShareCapitalandReserves
ShareCapital 100 100 100 100 100 100Profit&LossAccount (385,124) (622,795) (553,819) (390,129) (190,345) 65,513
(385,024) (622,695) (553,719) (390,029) (190,245) 65,613
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VintageTrainsLimitedCashflow
2018 2019 2020 2021 2022 2023Income £ £ £ £ £ £
Financing
LoansfromVintageTrainsCBS 1,225,000 750,000 825,000 - - -MaintenanceloanrepaidbyTLW - - 250,000 - - -
Trading
ManagementchargetoTLW 47,986 52,348 52,348 52,348 52,348 52,348PassengerTrains 1,077,113 1,969,020 2,872,882 2,872,882 2,872,882 2,872,882Non-PassengerOperations 86,400 270,510 320,772 426,692 487,012 555,012VATRecoverable 156,638 268,311 450,469 293,569 282,957 236,175
2,593,136 3,310,189 4,771,471 3,645,491 3,695,199 3,716,417
Expenditure
Capex
Capitalexpenditure 519,000 669,000 1,084,200 251,400 251,400 21,000
Financing
Start-uploanrepaymenttoTLW 146,072 - - - - -MaintenanceloantoTLW - 125,000 125,000 - - -LoansrepaidtoVintageTrainsCBS - - 250,000 25,000 150,000 150,000
Trading
Payrollcosts 697,644 900,733 1,038,259 1,041,936 1,041,936 1,041,936Trainrunningcosts 440,081 1,219,025 1,877,841 1,877,869 1,877,869 1,877,869Othercosts 340,911 406,208 410,250 414,313 414,800 415,311
2,143,707 3,319,967 4,785,549 3,610,518 3,736,005 3,506,116
NetCashFlow 449,429 (9,778) (14,078) 34,973 (40,806) 210,301
Madeupof:
FinancingCashflows 1,078,928 625,000 700,000 (25,000) (150,000) (150,000)CapexCashflows (519,000) (669,000) (1,084,200) (251,400) (251,400) (21,000)TradingCashflows (110,499) 34,222 370,122 311,373 360,594 381,301
NetCashFlow 449,429 (9,778) (14,078) 34,973 (40,806) 210,301
CashBalanceBroughtForward - 449,429 439,651 425,573 460,546 419,740
CashBalanceCarriedForward 449,429 439,651 425,573 460,546 419,740 630,042
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NotesonVintageTrainsLimitedCashflow
MaintenanceloantoTyseleyLocomotiveWorks:Inordertodelivertheproposedtrainprogramme,TyseleyLocomotiveWorkswillneed tocarryout significantheavymaintenanceon locomotives in2019, specifically in January and February when they are out of service. To enable TyseleyLocomotiveWorks to carry out thismaintenance, a short term loanof £250kwill be advanced in2019and2020,toberepaidinlate2020.
Start-up loanrepaymenttoTyseleyLocomotiveWorks:TyseleyLocomotiveWorkshas fundedandcarriedouttheworkinvolvedinsettingupthetrainoperatingcompany,andsoanamountwillberepaidfromtheSubsidiarytorecoverTyseleyLocomotiveWorks’stafftimeandothercosts.
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8.CommunityPlan
8.1Communitybenefits
InbuyingsharesintheSociety,Memberswillenableustocreatethefollowingbenefits:
1. We’re anticipating that our Members will support us with more than just their money.Vintage Trains has hitherto been a very traditional charitable operation, but we need tobringinnewblood,aswellasnewcash.InadditiontotheMemberswhowillbeelectedtojointheboardoftheSociety,wewantpeopletoparticipatebytheirownershipandbecomemore involved in ourwork at every level, from volunteering and assisting our operationsacrosstheboard.WehaverecentlyappointedaVolunteerLiaisonOfficertocommencethisstrategicworkandinvolvethecommunityinourendeavours.
2. WewilldeveloptheSocietysothatitprovidesrealparticipationopportunitiesforeveryone,anywhere,whoisinterestedinsteamtrainsorrailwaytransportationintheheritagerailwaycommunity nationwide; and also for our local community in Tyseley, within the City ofBirmingham,whereourbaseofoperationsatthehistoricGreatWesternRailwaylocomotivedepotissituated.
3. We will develop training schemes and apprenticeships to ensure the necessary skills arepasseddownandkeptforthefuture.Wewillencourageeveryonetoparticipate,eitherbyvisitingourdepot, travellingonour trainsor learningengineering,operatingandbusinessskills. These opportunities to participate are vital to our success and that of the newoperating company. Only by keeping alive the skills of the steam age and encouraging awiderrangeofpeopletoparticipateinouractivitiescanwehopetosucceed.
4. Additionally,manyareasofourGreatWesternRailwaydepotrequirerefurbishment,suchastheoriginalcoaling-stagebuildingwhich isuniqueinretaininganelectricallyoperatedcoallifting hoist, is still intact but unrestored .We also need to expandour engineering andoperatingfacilities,andengineshedandservicingfacilities,andprovideundercoversecureprotectionforourtrains.
5. Wewilltellthefascinatingandimportantstoriesaboutsteamlocomotion,particularlyhowitfundamentallychangedtheworldandsowedtheseedsformoderncivilisation.MatthewBoultonandJamesWatt inventedandmarketedimprovementstothesteamenginewhichled Birmingham to become the greatest manufacturing city the world has ever known,enablingmassmanufacturetobeperfected,creatingunprecedentedeconomicgrowthandsocialchange.
6. We will engage with regional industry and heritage stakeholders to create a globallyimportantheritagetouristoperation,whichbuildsonoursuccessesandharnessestheiconichistorical aspects of Birmingham’s contribution to international railway development.WewillcelebratethepioneeringworkoftheGrandJunctionandLondon&Birminghamrailwaystoformtheworld’sfirstInterCityhubatCurzonStreet,nowtobereinforcedbythearrivalofHS2atthesameplaceinaroundtenyears’time.
WewillworkwiththeCityandHS2todeliveraheritagegatewaytothecity, incorporatingboth theGrade I listed 1832Curzon Street station and the 1906GWR restored cityMoor
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Streetstationterminus(only250yardsapart).Thesewilldeliverarailwaytouristofferingtolocal,nationalandinternationaltouristswhichbeginsinLondonandtransportspassengerstousatMoorStreetandthencebyour famous ShakespeareExpress train toStratfordbyPullmancoachesbuiltinBirmingham.TheroutetoStratfordfromBirminghamMoorStreetstationremainslargelyasbuiltbytheGreatWesternRailwayin1906,saveformodernisedsignalling.Manyofthestationsremainauthenticandavailableforadoptionbycommunitygroups, which would help the promotion and development of a heritage route andparticipationinapubliclyownedmainlinerailwaycompanyrunningexpresssteamtrains.
7. WewillperpetuatethesignificantcontributionmadebyBirminghamtothedevelopmentofrailways worldwide by continuing the tradition of carriage building and maintenance atTyseley under the iconic name of Metropolitan Railway Carriage & Wagon Co. Ltd. Thisfamous company built royal saloons for emperors and princesses in Argentina and China,dining and sleeping cars for the Orient Express, suburban carriages for thousands ofcommutersinallfourcornersoftheearth,trainsforLeShuttleandtheVirginPendolinoandeven the East African coach from which a man-eating lion dragged an unlucky Britishengineer to his untimely death. We will create an apprentice and training scheme topreserve and develop both locomotive and carriage engineering skills. We will fostercommercialandadministrativeexpertisesothatthenextgenerationcandevelopinnovativeandcreativeskillswithinasustainableandworthwhileenvironment.
8. Aboveall,wewill enable the steam locomotive to continue to fulfil its designpurposebycontinuingtohaulexpresstrainsinthe21stcenturyinregulartimetabledserviceasatouristbusiness. This will also deliver economic and social improvements, public benefit andenjoymentthroughthedevelopmentofatouristbusinessrunbyapubliclyownedmainlinerailwaycompanyforeveryone.Thiswillcreateafirmfoundationforthenextgenerationtocontinuetoinnovateandacontinuingpurposeforourcollection.
Wecando thisbecausewehave spent thepast fifty years collecting, restoringandoperatingourcollection on the national railway network. We have gained an enviable reputation for ourengineeringandoperationalskills.Wehavebuiltgoodrelationshipswithlocal,heritageandnationalrailwaynetworkindustrystakeholdersandwehavebeenabletodeliveranannualrevenuesurplustocontinuetheseendeavoursyearbyyear.
8.2Memberengagement
In addition to becoming involved as owners of a licensed train operating company as part of ouruniqueproject,Memberswillbeentitledto:
• Exclusive Member offers for tickets, special Members’ trains and advance bookingopportunities.
• AsayinthegovernanceoftheSocietythroughvotingattheAnnualMembers’Meetingandthe ability to put forward items for discussion, as well as being consulted on importantissues.
• StandforandvoteinelectiontotheboardoftheSociety.• Opportunitiestovolunteeronourservices,whichwill reduce,costsandprovideenjoyable
activities(whichcouldalsoleadtonewcareersintherailwayandhospitalityindustry).
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9.Marketingtheshareoffer
We plan to deliver cross-channel marketing activity to launch the share offer, and will leveragevariouscampaign‘milestones’toensureourmessagingevolves.Wewillmaximiseopportunitiestocontinuetoengagewiththeregional,nationalandbroadcastpress.
Theshareoffercampaignwillinvolve:
Groups, networksandsocieties
We have identified a range of suitable target groups, includingvarious rail societies, enthusiast groups, andorganisations suchasUniversityoftheThirdAge,andwewillbecontactingthesegroupsdirectly offering speaker opportunities, and communications viatheirownnewsletter/socialchannels
Regionalpress Targeted PR activity to regional press titles in the Birmingham /Midlandsarea
Nationalpress Targetedtradeandnationalpressactivity, includinga ‘relationshipbuilding’approachwithkeynationaltitles
RadioandTV Provisionof ‘visual storytelling’opportunities forbroadcastmedia,includingopportunitiestofilmfromasteamengine
SocialMedia Maximise thepotentialof socialmediachannels–alreadyachievestrong engagement across Vintage Trains’ Twitter and Facebookpages, we plan to increase reach and engagement through paidadvertisingtospecificandrelevantaudiences
Celebrityendorsement
Currently liaising with well-known ‘celebrity’ ambassador to leadourcampaignactivity
Events AlauncheventatTyseleyLocomotiveWorkswillmarkthelaunchoftheshare issue,andwewillbe invitingkeystakeholders,potentialsubscribersandpresstothisprivateevent.VintageTrainsalsoholdregularopendays,andwewillusethesetopromotetheshareissuetoanalreadyengagedaudience.Weareattending‘thirdparty’rail-focusedeventswithpromotionalstands,encouragingpeopletosignupontheday
CRM Vintage Trains already has a database of over 12k previouscustomers, andweplan todeliver a campaignof email activity tolaunch the ‘Founder’s Club’ – an opportunity only available toprevious VT customers, offering exclusive incentives if shares arepurchasedbeforeaparticulardate
Leaflets andcollateral
Weareproducingarangeofleafletsandcollateraltopromotetheshare issue.Leafletswillbehandedoutatvariousevents,andthebrochure will be sent to select key stakeholders and potentialsubscribers.
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Wehaveundertakenamarketsegmentationexercisetodeterminethedifferentmarketsegments,theirsizes,andhowwewillmarkettothem.Thishasidentifiedatotalpotentialreachof680,000+subscribers:
Description Segmentsize Assumedreach
Railenthusiasts M Steam Railway magazine, circulation 32k,RAILmagazine,20k
GWRenthusiasts S 3-5k
Currentandex-railwaystaff M 200k
Railwayclubs S 10k
Highnetworthindividuals S 500
Birminghambusiness S 200
ExistingVTcustomers S 12k
Parents / grandparents(preservinghistoryforkids)
H Reach via Facebook advertising – 100k(utilisingthebudgetwehaveavailable)
Traditionalists / days out /Uniof3rdAge
H Reach via Facebook advertising – 100k(utilisingthebudgetwehaveavailable)
Railcommuters H Reach via Facebook advertising – 100k(utilisingthebudgetwehaveavailable)
Youngidealists H Reach via Facebook advertising – 100k(utilisingthebudgetwehaveavailable)
Engineers L 10k(viaspecificengineeringpublications)
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10.Risksandmitigation
Wehave identifiedtheprincipalriskswiththisproject,andthecontingenciestomitigatethem,asfollows:
RiskSummary Likelihood Impact ActiontakentoreduceriskWearen’tabletosecure apassengercharter trainlicence from theOfficeofRailandRoadRegulation
Low High We have already taken significant steps to achievingthis. We have built good relationships with theregulators and are working with them through thisprocess. We have employed professional industryspecialists to help us with our application and havebuilt contingencies into our financial projections. Wehave already completed work on our safetymanagement system, obtained the necessaryinsurancequotesandestablishedaprofessionalboardofdirectors.Nowweonlyneedtoshowthemthatwecan fundour start-upworking capital,which iswhereyoucomein!Shouldwe hit ourminimum target, but the Office ofRail and Road does not grant us an operating licenceforanyreason,all fundswillbereturnedtoMemberslessanyoperatingexpenditurethathadbeenincurredto that date, on a pro-rata basis in proportion to thefundssubscribedbyeachMember.
Weareunabletorun a safe andreliable railwayoperatingcompany andweloseourlicence
VeryLow Medium Wehaveaboardofexperiencedrailwaydirectorsandmanagers who have spent careers in the industryrunningrailwayssafelyaspartof theirDNA.Wehaveput in place governance structures and safetymanagement systems toensureour focuswill remainresolutely on safety. We will also have insurance toprotect our licensed train operating company, and asitsparent,theSocietywouldbeinsulatedfromanyriskin the event of the licensed train operating companybeingsubjecttoclaims.
We becomeinsolvent
Low High Wehaveestablishedaveryprudentfinancialmodelforour train operating company which is based on 20years’ experience of promoting heritage passengercharter trains, althoughoperatedbyothers.Wehavepromotedtheseprofitablyandseenoreasonwhythiscannot continue as long aswewalk beforewe try torun.TheSocietywouldnotbeviableasastandaloneentity,andsoas itwillhaveprovidedfundstotheoperatingcompany,Members’ fundswouldbe lost in theeventoftheoperatingcompanybecominginsolvent.