Caledonian Sleeper

[TimboM]

Usual journalistic hyperbole picking up on selected figures and using phrases such as "blowing a £47m hole in Serco's balance sheet"... it's an onerous contract provision, really not that exciting if you call it what it actually is. F an "onerous contract" (one that is expected to make a loss over its full term) accounting principles and standards require that ALL losses for the full contract term are taken in the year when such a position is identified.

This large figure is what Serco expect to lose over the remaining term (i.e. until 2030). It's booked as a provision held on the balance sheet that's then released to the profit and loss over the period of the contract and off-sets the operating losses each year. If losses are lower thane expected, some of the provision can be released, so their could even be an upside in Serco's figures in future years.

In answer to some earlier posts, this is what was reported in the Serco statutory accounts:

"...the terms of the franchise agreement provide a mechanism that requires Transport Scotland to bear 50% of contract losses from April 1, 2020. In addition, from April 1, 2022, we [SERCO] have the right to seek adjustments to the financial terms of the franchise agreement that would result either in a small positive profit margin for Serco from that date, or allow us to exit the contract."

Whilst Serco will take a hit, it's Transport Scotland that will increasingly pick up the bill if the service continues to make losses.

 

[gingerheid]

Do we know what overhead expenses the sleeper is being asked to cover? I accept that it's a complicated operation of questionable viability, but it seems strange to me that it's *so* loss-making compared to other services when it represents a series of trains that are typically full and that people generally pay a decent fare to be on (and when until now it has been using some very vintage rolling stock that was paid for a long time ago)!

 

[TimboM]

Came up to £132 for the two of us to get from London to Inverness with the railcard. Definitely not as cheap as it's been before (we've had it for about £70 in the past) but still not overly expensive when work is paying and more convenient than a flight (although flying via Amsterdam from Birmingham looked to be the same price).

As an illustration, that's £132 for a journey that the recent figures indicate costs c.£550 for you and your travelling companion to be on that train. That's a an absolute bargain thanks to the "generosity" of Transport Scotland, the DfT and Serco.

On the new trains, even guests in the "extortionate" Caledonian Doubles at £400+ for a room (for up to two people) won't be paying anywhere near their way.

 

[TimboM]

Do we know what overhead expenses the sleeper is being asked to cover? I accept that it's a complicated operation of questionable viability, but it seems strange to me that it's *so* loss-making compared to other services when it represents a series of trains that are typically full and that people generally pay a decent fare to be on!

It's not surprising at all it's very expensive to run and makes large losses.

Compare it to something like Virgin Trains West Coast - one Pendolino train works several trips up and down the country each day carrying hundreds of passengers on each one, with a comparatively low number of drivers, on-board staff and maintenance/depot costs; and the "back-office" admin costs are shared across many more passenger journeys (think of how many VTWC services/journeys there are a day).

Caledonian Sleeper only has four main trains in essence each day - they each require multiple locomotives, drivers, shunters, guards etc. and the ratio of on-board staff to customers is much higher. The capacity on each train is also much lower. On top of that, with the trains making only one journey per day (or night) they're not as heavily utilised and the stock/locos spend comparatively more time sat in the depot not earning revenue. The costs of cleaning/prep etc are also higher (think of all those beds to be made and laundered vs cleaning a Pendo…)

On top of all that, the post-2015 model of it being a stand-alone franchise means all the administrative costs (including sales, marketing, guest services etc) are all shared across far fewer passenger journeys.

It's inherently a very expensive operation to run; with a limitation to how much revenue can be earned. Hence why it's not commercially viable without the large government subsidies.​

 

[gingerheid]

The accounts are here https://beta.companieshouse.gov.uk/company/SC477821/filing-history

They've filed accounts for a three month period, which are quite interesting where they show detail and where they lack detail.

Ticket and catering sales were £3,962,000, and the subsidy was £4,180,000. On surface that's appalling, but then you have to consider that this is probably the three quietest months of the year (not even including Christmas). That doesn't seem horrendous.

It's hard to see where the £47m accounting adjustment (of which £4m has been allocated to the latest 3 month period comes from). Before that they made a loss of £350k. This isn't ideal, but it is also after interest paid to the parent company of £392k; something that dare I say it, even though I'm not necessarily in favour of nationalisation, a state company wouldn't have had to pay.

They have elected not to disclose other intra-group payments (as they are entitled to, and as almost everyone who is entitled to do so chooses to do), so we don't know how much (if anything) they've paid to the parent company for management expenses or things like that, but you'd suspect suspect it's something; it usually is (I looked at the parent company accounts; they also don't disclose them).

There is also a pension scheme problem, which again you would expect and which won't go away regardless of what the trains do.

This of course gets nowhere near touching how the railway system allocates costs to them, which was the cause of my original suspicion.

I accept that the "not that bad" version of the accounts still includes a significant subsidy - is it worth it? If it was being paid in respect of people using the lowland sleepers to go and see their families in Scotland because it's nicer than flying, maybe not - but from my use of those services I struggle to think that they make that much of a loss. If it's being paid in respect of bringing tourists to the highlands and west highlands... it's probably worth every penny!

 

[gordonjahn]

This isn't ideal, but it is also after interest paid to the parent company of £392k; something that dare I say it, even though I'm not necessarily in favour of nationalisation, a state company wouldn't have had to pay.

Curious about this bit - how would a state company not have had to pay interest on borrowed capital? For a nationalised company it would have been via issued government bonds, probably at a lower rate, but it would still have been paid.

Is there any indication of the level of borrowing they paid that interest on?

 

[TimboM]

Curious about this bit - how would a state company not have had to pay interest on borrowed capital? For a nationalised company it would have been via issued government bonds, probably at a lower rate, but it would still have been paid.

Is there any indication of the level of borrowing they paid that interest on?

The amounts owed to Serco group were £38.4m at 31 Dec 2017 increasing to £41.6m at 31 March 2018 (date of accounts referred to above).

There is no fixed repayment term for this loan and interest is paid at LIBOR + 2% (which is a reasonable / market rate).

Whilst Serco Caledonian Sleepers Limited is loss making, it's requiring this funding from the group to keep paying its bills. As you say, any company/entity in this position would need to borrow money from somewhere and pay an appropriate finance charge (even if that was a nationalised entity borrowing from the Treasury).

From a Serco perspective, it's all "wooden dollars" as within the group - but ensures matters are properly accounted for in the right places and all above board.

From a subsidy point of view, as Serco are making heavy losses, this relatively small amount of interest just adds to those losses for Serco Caledonian Sleepers Ltd to bear - it is not funded by the subsidy.

 

[TimboM]

Just to explain the onerous contract provision (OCP) a bit further - in the c.15 month accounting period to 18 September 2016 to 31 December 2017, the recognition that the new stock would be heavily delayed and other factors resulting in much higher operating costs than were originally forecast, resulted in an additional £49m being booked to the OCP.

Note there was already an OCP as at Sept 2015 of £14m and £8.7m at Sept 2016 - meaning even at these points Serco were expecting to make losses over the full term of the contract.

After movements in the OCP during the period to Dec 2017 (including the additional £49m booked), the provision stood at £44.3m on the balance sheet. This meant that as at 31 Dec 2017, Serco's best estimate was that over the remaining term of the contract to 31 March 2030 they would make (after subsidies etc.) a further £44.3m of operating losses. Accounting principles/standards require that such losses related to an onerous contract need to be recognised in their entirety when identified - even though it may seem a bit odd that what in effect is £44m losses over 12+ years all has to be taken as a bit hit "up front" in one year.

In the 3 month period ended 31 March 2018, Serco Caledonian Sleepers Ltd reported:

Turnover: £8,142,000 (of which £4,180,000 were franchise payments from Transport Scotland, aka subsidy as @gingerheid notes above)
Operating Profit: £42,000
LOSS After Interest and Tax: £350,000 (the main movement from the small operating profit being the interest payable to Serco Group of £300,000).

Note that the £42,000 operating profit is arrived at after releasing £4,727,000 of the onerous contract provision booked in 2017 to offset the losses in the 3 month period to 31 March 2018.

So if you take away the subsidy (£4,180k) and the release of the OCP booked in the prior year (£4,727k) from the £42k operating profit reported, the "real" operating losses made by Serco Caledonian Sleepers Ltd in that period were £8,865k (in just 3 months).

As noted above, this is the Off Peak season for the Sleeper, but does give an indication of the scale of losses the operation incurs before any subsidies or accounting treatments for OCPs come into effect.

The Serco Caledonian Sleeper Ltd accounts are prepared on the Going Concern basis, though, as Serco Group (as at the date of these accounts) formally committed via a "letter of support" to ensure Serco CS Limited's liabilities are met as they fall due.

[Worth noting these accounts were for the (3 months) period ended 31 March 2018, so almost already a year out of date - and with the Mk5s being delayed even further since then, it's difficult to think the 2018/2019 accounts will paint any more positive a picture.]

 

[gingerheid]

Curious about this bit - how would a state company not have had to pay interest on borrowed capital? For a nationalised company it would have been via issued government bonds, probably at a lower rate, but it would still have been paid.

You would expect a state company to be provided with the required capital. We've been conditioned to accept this type of funding as acceptable, even normal, in recent years but it's not a sensible way of providing a public service. It's most appropriate if you're a multinational looking to start reducing tax bills!

 

[Bald Rick]

I would say most people won't drive for London to Scotland - it's just way too far to do in one go. Many might do it with a stop-off if going for a week's ski-ing, say, but I doubt many business travellers do it by car. Most of them will use day trains or fly.

It really isn’t. I live in Surrey and have driven to the Forth Bridge in a day including a cross country drive through the borders and stop offs at Kielder, the Kelpies and the Falkirk wheel.
Also driven home from Loch Lomond twice (one including watching a game at Tranmere then the rest of the way without going on the motorways).
Friends regularly do it and Scots colleagues have done it regularly for business trips.
Even knew one crazy bloke who would drive up and back to use his Inverness season ticket!!!

Exactly. I’ve left St Albans early morning and been walking near Drumochter just after lunch. If you live on the outskirts of London, and not far from the motorway, it’s not much longer than flying if you get the timing right. Particularly if you need a car up there. And if there is more than 1 of you, it’s cheaper too (I have got to Mallaig and back on a tank and a half of diesel).

 

[cb a1]

To get to central London on business by about 10am (usually when I need to be there) my options are:
1. Car - set off at 1am. Do a day's work. Get home at 2am next day. 16+ hours driving with no sleep ... never done it and never would unless the car was level 5 autonomous.
2. Fly - set off at 5am. Do a day's work. Get home at 10pm. Not too bad and I have done it. Getting to airport for flight back can be a bit tight.
3. Day trains - leave work an hour early the day before. Hotel in London. Get home at 1am. Doable.
4. Sleeper - head to station instead of bed. wake up in London. After work, go for a few pints, head to station. Wake up and go to work.

Cost - Flying is cheapest, followed by Sleeper, then Day trains. Don't know about car, but there's no way our H&S would allow it, let alone the fact that I'd refuse to do it anyway.
Social - Sleeper; I can have a few beers with friends and colleagues in London before heading home. Day train; again I can have a couple of drinks although without friends and colleagues for company. Flights - none as I generally need a car to get to / from airport and it's usually a rush to make the connections at the London end for the train from airport into London.
Comfort - I like the Sleeper and sleep well on trains; flying next and day trains last.

 

[Meerkat]

And no packing problems - just keep chucking stuff in the boot!

 

[JohnMcL7]

You don't need to fly down the same day though, I usually find cheap late flights the day before leaving after the sleeper does, get a decent night's sleep in a hotel and do the same otherwise. The cost of the flights, two overnight stays and even five day car hire was still cheaper than the sleeper.

Aside from it being much faster and cheaper to fly, no way would I drive all the way to London and back on my own as that's a whopping 20 hour round trip from up here not even counting breaks.

 

[route101]

Used the sleeper on Friday night ! Glasgow to London.

Booked cabin solo , not cheap but heck last chance on old stock . The service was quiet , are Fridays heading South quiet usually?
Boarding was just after 10pm , funny lying in a bed in the middle of central. Went to lounge car for departure from Glasgow to Carstairs ! Didnt get any meals just a beer and packet of crisps . Only complaint was the glass was soapy . The staff were a London crew and were friendly , heard the guy calling the Edinburgh portion to check that it had left Edinburgh . A couple got on at Motherwell . And Carstairs , how often do you get a passenger there? Is there a sleeper attendantin every coach?

Couple across from me in the lounge car were complaining about the price ! If it was cheaper id use it more than using the coach , the seated is ok if its quiet . The lounge car was the other way round , seated portion passengers had to walk through it ! Took a wee while for me to get to sleep , i never noticed the train stopping at Carlisle , does it stop even if not passengers are booked to travel?
Window blind down and phone off and charging so i managed a bit sleep ! Got up just south of Leighton Buzzard. At Euston i got off prompt , only seen one person get off with me .

 

[route101]

With the price increases occurring I can see the sleeper definitely becoming more of a luxury thing for the experience more than anything else. I'm not sure how much of an improvement the new stock will be in terms of comfort but I don't see how they could make it more appealing than a good hotel in Inverness and a relatively cheap flight for the majority of people. For business travellers many won't care about the cost and would instead go for the convenience but the sleeper is now particularly overpriced for a family (as an example), who would look at other options for going to Scotland.

My most recent experience of Cally Sleeper was last night in fact, going north from London to Inverness in a classic twin. Check in was quite quick because we were fairly late arriving but there was still a small queue for the Inverness portion and no one at the Aberdeen/Fort Bill queues. The railcard was checked before boarding (ISTR that many people in this thread have said that there was no railcard checks until recently?) and there was no hassle with finding the berth. I was in the bottom bunk and I definitely didn't like the mattress. It was incredibly thin, so much so that when just sitting or lying on the bed you could feel the wooden board below. The top bunk didn't have this problem so it was hopefully just a one off. The journey was punctual and, apart from some annoying rattling - possibly the ladder hitting the wall as the train moved (I tried to sort it but wasn't very awake at 4 in the morning so couldn't even work out what it was, let alone how to fix it) - it was a decent journey. Came up to £132 for the two of us to get from London to Inverness with the railcard. Definitely not as cheap as it's been before (we've had it for about £70 in the past) but still not overly expensive when work is paying and more convenient than a flight (although flying via Amsterdam from Birmingham looked to be the same price).

I didnt find it too , the bed . The only issue was my sheets came off and this it nit picking , the bed could of been wider . Is there a difference from diesel to electric traction?

 

[FQ]

I didnt find it too , the bed . The only issue was my sheets came off and this it nit picking , the bed could of been wider . Is there a difference from diesel to electric traction?

I've travelled on the sleeper quite a few times and have always found the bed to be good but this one was much thinner than any I've ever had before, including the top bunk. My travelling companion has also used the sleeper quite a few times and agreed that it was much worse than any they'd seen too. I've sometimes had issues with sheets coming off but not this time. There was a very large jolt just after stopping at Waverley and the fire alarms went off shortly after departure with the 67 leading (through the Haymarket tunnels so someone had left the windows open and fumes entered the train) but other than that there was very little difference between diesel and electric bits.

 

[route101]

I've never used the Lowland train, but from my experience on the Inverness and Fort William routes, this rule is almost never enforced (although I think the on-train staff still can enforce it if the train is exceptionally busy). I can't say that I've ever been asked to show a ticket, or even what class I'm travelling in when going into the lounge car on either of these routes and most staff that I know are generally very laid back about this. Until last year you could, as a First Class passenger, pre-order an evening meal for £15 which would ensure a reserved table in the lounge, but I think that has stopped now (although I'm told it's coming back with the new stock). At the moment, it generally seems to be a first come first served setup, regardless of whether you have a standard or first class ticket.

The lounge was not really busy , i was not asked for my ticket . I only stayed until Carstairs and a couple and a guy remained when i left . From Inverness and Fort willaim i would spend more time in the lounge with the extra time . I did see a table reserved but no one at it . When does the lounge car shut southbound on the lowlander !

 

[alistairlees]

I didnt find it too , the bed . The only issue was my sheets came off and this it nit picking

I hope not literally

 

[alistairlees]

The service was quiet , are Fridays heading South quiet usually?

In January a bit yes.

And Carstairs , how often do you get a passenger there?

Rarely!

Is there a sleeper attendant in every coach?

Every two sleeper coaches

i never noticed the train stopping at Carlisle , does it stop even if not passengers are booked to travel?

Yes

 

[route101]

In January a bit yes.

Rarely!

Every two sleeper coaches

Yes

I take it Fridays are busier NB from London!

Love to know how many a year use the sleeper from Carstairs

 

[MrEd]

I take it Fridays are busier NB from London!

Love to know how many a year use the sleeper from Carstairs

I was on the northbound Highlander on Friday 25th, and the Inverness and Fort William sections were both fully booked (although they're one coach down at the moment), and the Aberdeen about three quarters full or so. That's quite normal for a Friday night northbound Highlander, even at this time of year. I very rarely use the Friday night southbound, but whenever I have it's been fairly quiet in comparison, even on the Inverness section. I couldn't account for the Friday night Lowlander, but have heard that the Glasgow portion in particular struggles with loadings at present. One thing I did notice was that about 5 or 6 folk in the Fort William portion were travelling to places on the edge of the Glasgow commuter belt like Dumbarton and Helensburgh, for which you'd think the Lowlander and a connecting train might be more attractive- maybe they needed to get there very early or simply wanted a direct train?

 

[47271]

I hope not literally

This is a true story, I think that I've posted it before, but it does the rounds in the sleeper lounges every few months I believe.

Back in the days of British Rail, a man travelled from Edinburgh to London by sleeper. He found that there were fleas in the bed.

He wrote in the strongest terms to the BR Chairman of the time, one of the Bob Reids I think, so late eighties or early nineties.

A while later he got a very long and apologetic letter back from the Chairman, basically saying how horrified he was and how rare and unheard of a problem this was.

Which was great, apart from the fact the letter still had a Post It note attached saying 'Send standard flea letter.'

 

[route101]

I hope not literally

Well come to think of it i was a bit itchy !

 

[Highlandspring]

This is a true story, I think that I've posted it before, but it does the rounds in the sleeper lounges every few months I believe.
...
Which was great, apart from the fact the letter still had a Post It note attached saying 'Send standard flea letter.'

A well known and ancient urban legend I'm afraid...
https://www.snopes.com/fact-check/the-bedbug-letter/

 

[47271]

A well known and ancient urban legend I'm afraid...
https://www.snopes.com/fact-check/the-bedbug-letter/

Ha, I knew that all along, you've spoiled it now!

Quite amusing nevertheless.

 

[route101]

I was on the northbound Highlander on Friday 25th, and the Inverness and Fort William sections were both fully booked (although they're one coach down at the moment), and the Aberdeen about three quarters full or so. That's quite normal for a Friday night northbound Highlander, even at this time of year. I very rarely use the Friday night southbound, but whenever I have it's been fairly quiet in comparison, even on the Inverness section. I couldn't account for the Friday night Lowlander, but have heard that the Glasgow portion in particular struggles with loadings at present. One thing I did notice was that about 5 or 6 folk in the Fort William portion were travelling to places on the edge of the Glasgow commuter belt like Dumbarton and Helensburgh, for which you'd think the Lowlander and a connecting train might be more attractive- maybe they needed to get there very early or simply wanted a direct train?

I see , i dont know anyone that uses the sleeper . Dont know if it seems such an obscure thing or a bit twee .I thought the sleeper misses out Dumbarton , i suppose its good using there local station for sleeper.

 

[al78]

Well, it's a never-ending argument about what you do or don't count as 'externalities', basically.

If you only count road building / maintenance as the 'cost' then yes there is more received in revenue. But the real costs extend beyond that.

http://ipayroadtax.com/no-such-thin...vers-start-paying-the-full-costs-of-motoring/

Lets not go there. Such a debate always attracts extremists on both sides, quickly rendering logical discussion impossible.

 

[MrEd]

I see , i dont know anyone that uses the sleeper . Dont know if it seems such an obscure thing or a bit twee .I thought the sleeper misses out Dumbarton , i suppose its good using there local station for sleeper.

I think Dumbarton Central has been a call for the Fort William portion of the Highland sleeper since September 2014 if my memory serves me correctly, when the stop at Westerton was removed and stops at Glasgow Queen Street Low Level and Dumbarton Central added. I think it's both a pick up call for seated passengers for day passengers for stations north to Fort William and a set down call for overnight passengers from London (and the reverse southbound). Southbound I can see that it might be preferable to using the Lowlander, as it avoids the change in Glasgow (perhaps involving a walk between Queen Street and Central?) and also arrives in Euston at a more sociable time.

 

[route101]

I think Dumbarton Central has been a call for the Fort William portion of the Highland sleeper since September 2014 if my memory serves me correctly, when the stop at Westerton was removed and stops at Glasgow Queen Street Low Level and Dumbarton Central added. I think it's both a pick up call for seated passengers for day passengers for stations north to Fort William and a set down call for overnight passengers from London (and the reverse southbound). Southbound I can see that it might be preferable to using the Lowlander, as it avoids the change in Glasgow (perhaps involving a walk between Queen Street and Central?) and also arrives in Euston at a more sociable time.

I see , did not realise it called at DUmbarton . Wonder how much custom it gets !

 

[HamworthyGoods]

I was on the northbound Highlander on Friday 25th, and the Inverness and Fort William sections were both fully booked (although they're one coach down at the moment), and the Aberdeen about three quarters full or so.

All the mk3 sets have been reduced in length permanently; each ‘half-set’ now only has a maximum of 5 sleeping cars; this was to allow 8 sleeping cars due regular exams to be withdrawn for scrap.

They desperately need the new trains to be ready for summer to restore capacity to its previous levels on busy nights....