Southeastern to be taken over by OLR

[matt_world2004]

It's headquarters appears to be in Albany house isn't that a tfl building near 55 broadway

 

[Mojo]

It's headquarters appears to be in Albany house isn't that a tfl building near 55 broadway

TfL have leased parts of that building to a number of public sector organisations, including the DfT, Ministry of Justice, and BTP, for many years now.

 

[dorsetdesiro]

I'm glad Southeastern remains unchanged, it seems like a good brand which, apart from the Networkers & 376s, is better than having utilitarian white with a TOC sticker simply stuck on.

It seems to be the right thing to do at this difficult & unpredictable time as unlike Northern, there was little or no reference to the parent company and the East Coast franchise had to rebrand to LNER as it previously had Virgin branding.

If SE eventually goes back in private hands it will probably will be less visible under the future possible unified GBR branding something like "operated by XXX for Great British Railways" as it would manage the South Eastern part for GBR?

 

[py_megapixel]

After 2am, the website footer changed to SE Trains Limited, but still uses the GoVia template.

Was the UK Says No More banner there before, or is that added by OLR?

 

[PG]

Obviously the media are trotting the story out again to get a bit more mileage from it. I note a quote in this BBC article from Transport Focus which appears to suggest passengers want space to stand. I'm sure most would actually prefer a seat!

Anthony Smith, chief executive of passenger watchdog Transport Focus, said: "Passengers will want a punctual, reliable, clean train, with enough room to sit and stand, and value for money fares."

 

[py_megapixel]

Obviously the media are trotting the story out again to get a bit more mileage from it. I note a quote in this BBC article from Transport Focus which appears to suggest passengers want space to stand. I'm sure most would actually prefer a seat!

I think in the current climate many passengers would rather have a fair amount of space to stand than a seat right next to someone.

 

[PG]

I think in the current climate many passengers would rather have a fair amount of space to stand than a seat right next to someone.

Fair point, I'm just wondering if it provides an excuse for short forming? No seats left - doesn't matter, plenty of standing room...

 

[RUK]

Was the UK Says No More banner there before, or is that added by OLR?

It was there before - it was added at some point between the 30th of January: https://web.archive.org/web/20210130014110/http://www.southeasternrailway.co.uk/

and the 26th of February this year, according to the Internet Archive: https://web.archive.org/web/20210226025910/https://www.southeasternrailway.co.uk/

 

[Frontera2]

For high frequency metro routes that, certainly pre-covid, carried several hundreds of passengers, expecting everyone to have a seat is unrealistic. These routes are often more akin to London Underground where standing is the norm during busy times (as is the case on the London Overground and indeed nearly if not all "metro" systems in the world!)

 

[matt_world2004]

Fair point, I'm just wondering if it provides an excuse for short forming? No seats left - doesn't matter, plenty of standing room...

If the gbr contracts are meant to be similar to the tfl contracts there will be a penalty for short forming.Usually a fine under the capacity measure.

 

[Amaroussi]

Was the UK Says No More banner there before, or is that added by OLR?

It was there before the Operator of Last Resort took over.

Source: https://web.archive.org/web/20211010032743/https://www.southeasternrailway.co.uk/ (Web archive snapshot from 10 October 2021).

 

[-Colly405-]

What I don't get is that the company now known legally as SE Trains Ltd changed its name to this in May 2019 (from DFT OLR2 LTD, previously CROSS COUNTRY TRAINS LTD)

WHy would that the South Eastern OLR be in legal existence in 2019? Or does every franchise/management contract have an OLR company sitting as a shell in the wings, awaiting its demise?

SE TRAINS LIMITED overview - Find and update company information - GOV.UK

SE TRAINS LIMITED - Free company information from Companies House including registered office address, filing history, accounts, annual return, officers, charges, business activity

find-and-update.company-information.service.gov.uk

 

[James H]

I wonder how long they will continue to use the Govia online ticket booking engine.

And what will happen to The Key branding etc?

 

[mattdickinson]

What I don't get is that the company now known legally as SE Trains Ltd changed its name to this in May 2019 (from DFT OLR2 LTD, previously CROSS COUNTRY TRAINS LTD)

WHy would that the South Eastern OLR be in legal existence in 2019? Or does every franchise/management contract have an OLR company sitting as a shell in the wings, awaiting its demise?

SE TRAINS LIMITED overview - Find and update company information - GOV.UK

SE TRAINS LIMITED - Free company information from Companies House including registered office address, filing history, accounts, annual return, officers, charges, business activity

find-and-update.company-information.service.gov.uk

Do a search for DFT OLR and you'll find quite a few companies ready to go...

 

[PG]

does every franchise/management contract have an OLR company sitting as a shell in the wings, awaiting its demise?

Do a search for DFT OLR and you'll find quite a few companies ready to go...

Almost as if DfT realised that the whole franchising system was falling to pieces...

 

[pdeaves]

What I don't get is that the company now known legally as SE Trains Ltd changed its name to this in May 2019 (from DFT OLR2 LTD, previously CROSS COUNTRY TRAINS LTD)

WHy would that the South Eastern OLR be in legal existence in 2019? Or does every franchise/management contract have an OLR company sitting as a shell in the wings, awaiting its demise?

SE TRAINS LIMITED overview - Find and update company information - GOV.UK

SE TRAINS LIMITED - Free company information from Companies House including registered office address, filing history, accounts, annual return, officers, charges, business activity

find-and-update.company-information.service.gov.uk

A summary can be found on http://www.railwaycodes.org.uk/licences/licenced.shtm under the 'DfT' entries (and associated forward links).

 

[-Colly405-]

Helpful stuff; thanks all

 

[swt_passenger]

Helpful stuff; thanks all

If you put “DfT OLR” into their search box you get 154 hits. Luckily only about 15 are relevant. You can find all the various DOR and OLR shadow companies over the entire privatisation period, many of them have had quite a few different names in that time:

Dft OLR - Find and update company information - GOV.UK

Free company information from Companies House including registered office address, filing history, accounts, annual return, officers, charges, business activity

find-and-update.company-information.service.gov.uk

 

[LNW-GW Joint]

It seems the MD of the new Southeastern Trains is Steve White - recently deputy CEO of Govia Thameslink Railway.
So this OLR ex-Govia operation has an ex-Govia boss...
SE Trains takes over Southeastern services | Rail Business UK | Railway Gazette International

Business as usual​

Southeastern is being retained as the customer-facing brand, and there will be no changes in day-to-day services as a result of the transfer.
The Managing Director of Southeastern is Steve White, who joined on October 11 from Govia Thameslink Railway where he was Deputy CEO.
...
In the medium term, the government plans to move operation of Southeastern services back into the private sector using the Passenger Services Contracts which it is developing to replace the franchising system and the temporary contracts put in place during the pandemic.

 

[hwl]

It seems the MD of the new Southeastern Trains is Steve White - recently deputy CEO of Govia Thameslink Railway.
So this OLR ex-Govia operation has an ex-Govia boss...
SE Trains takes over Southeastern services | Rail Business UK | Railway Gazette International

He was meant to take over as SE MD if Govia had kept it!
OLR jumped at the chance to have useful person fresh to SE but with local knowledge take over.

 

[pdeaves]

So this OLR ex-Govia operation has an ex-Govia boss...

But, of course, someone who has no involvement (and probably not even any inkling of knowledge) with the problems that caused Govia to have to give up the contract. It's neither here nor there.

 

[ScotGG]

How long was he at Thameslink?

Is it enough of a clean sweep to bring fresh thinking? Will he focus on improving neglected Metro services?

 

[Djgr]

How long was he at Thameslink?

Is it enough of a clean sweep to bring fresh thinking? Will he focus on improving neglected Metro services?

I think keeping his hand out of the till will be the key benefit.

 

[hwl]

How long was he at Thameslink?

Is it enough of a clean sweep to bring fresh thinking? Will he focus on improving neglected Metro services?

Joined September 2018 after the May 2018 timetable fiasco. Previously ran SSR at TfL.

BR --> Ilford Rail maintenance at privatisation (taken over by Bombardier) --> Silverlink --> Eurostar (including CTRL testing) --> Siemens ---> TfL ---> GTR ---> SE

I think keeping his hand out of the till will be the key benefit.

No hand in till involved just not doing necessary calculations and transfers. The difference was between timetabled and actual HS1 access charges, SE didn't hand back the difference between the two to DfT.

 

[jfollows]

Go-Ahead has admitted to "serious errors" and its share price has fallen by ~25% as a result, close to a 20-year low. It will delay publication of its annual accounts until the new year because of the financial punishment to be imposed by DfT. This will lead to a suspension of its shares because of stock exchange listing rules.
The latest "serious errors" is coded language for "worse than mistakes made" which was the previous admission, back in September this year.
The starting point for the money owed to DfT was £8 million, revised to £25 million in September, but now? Presumably significantly more than £25 million. However its profits before provisions estimated for the last financial year are £87 million on its bus and train operations, so it's about how much of a bite will be taken, not whether or not the money exists. But Go-Ahead also warns of £36 million in provisions on top of £58 million on losses on its German train operations. So it's not exactly floating in spare cash.
Reported today in The Times (https://www.thetimes.co.uk/article/go-ahead-group-shares-slump-after-admission-of-failure-83lrcf3g9?):

Go-Ahead Group shares slump after admission of failure

Robert Lea, Industrial Editor

Thursday December 09 2021, 12.00pm, The Times



Go-Ahead shares have had their second big one-day crash in ten weeks as the group continued to count the cost of owing the taxpayer at least £25 million in its operation of Southeastern Trains.

An admission of “serious errors” by the company prompted a near-25 per cent collapse in the bus and train group’s stock today after a fall of similar proportions in September when it was announced that the Department for Transport (DfT) had sacked Go-Ahead from the contract to run Southeastern. The Serious Fraud Office is understood to be continuing to monitor the affair.

Go-Ahead’s shares fell 164½p, taking them close to a 20-year low at 540½p, as it warned that an expected financial punishment by the DfT means that it will have to delay the publication of its annual accounts into the new year. That will put it in breach of stock exchange listing rules and its banking covenants and will lead in due course to the suspension of its shares. Go-Ahead’s financial year ended on July 3 and it will miss a regulatory deadline of January 3 to publish results. which have already been delayed twice.

Go-Ahead, which also operates the Southern and Thameslink train franchises and the Gatwick Express, was sacked from Southeastern over the failure to properly calculate profit-sharing repayments with the department and for the non-declaration of over-payments from the Treasury subsidising its Javelin train operations on the high-speed line between Kent and London St Pancras.

An investigation into the accounting mismanagement at Southeastern has been led by Clare Hollingsworth, Go-Ahead’s chairwoman, and Sir Derek Jones, chairman of Keolis, the French company that is Go-Ahead’s joint venture partner in the operation of Southeastern.

The Southeastern affair is a huge embarrassment to the two as they have both been high-ranking civil servants: Hollingswoth sits on the board of UK Government Investments and Jones is the former permanent secretary to the Welsh government.

Their report has been filed with the DfT and admits that Southeastern “breached contractual obligations of good faith”. The company said: “The review has found that serious errors were made by [Southeastern] with respect to its engagement with the DfT over several years.”

The “serious errors” admission is a step further than the “mistakes made” messaging that Hollingsworth previously admitted to. That report has not been made public but it has plainly uncovered an unsavoury affair.

The company reported: “The behaviours identified by the independent committee . . . do not reflect the values and standards of conduct that the group expects of its colleagues.”

It said it would be adjusting its corporate governance controls “to better safeguard and assure the compliance obligations of complex long term rail contracts”.

Go-Ahead initially calculated that monies owed to the DfT totalled £8 million. In September it increased that to £25 million. On Thursday it did not divulge what it thinks the quantum might be as it does not know. It and its auditors, Deloitte, are now trawling through Southeastern’s previous accounts to come up with an exact figure.

That and the DfT’s failure as yet to determine what financial penalty it plans to levy on Go-Ahead means that the company’s finance department and Deloitte are still trying to work out how large a provision it should include in its 2021-21 accounts.

The penalty will be unprecedented as the DfT has not previously used its powers under the Railways Act 1993 to sue one of its contractors.

Go-Ahead’s accounts for the year to July 3 are expected to produce a profit before provisions of £87 million on its bus and train operations even though most of its income in the period was underpinned by emergency pandemic public transport subsidies funded by the taxpayer.

The fiasco amounts to neither the best of testimonies to the recently retired long-serving chief executive David Brown nor the warmest of welcomes to Christian Schreyer, the German who has just replaced him and who will be straight into negotiations with the DfT to salvage the group’s remaining train contracts.

Elodie Bryan, Go-Ahead’s group finance director, left the company with immediate effect when Southeastern was sacked by the DfT. Bryan had previously been the finance director at Southeastern and the business’s point person with the DfT.

To compound matters Go-Ahead also smuggled out a profit warning on its expansion into Europe. It is to take a total of £36 million of provisions on its German train operations on top of losses and start-up costs in the previous year totalling £58 million. The company also warned investors to expect “a material provision” against a lossmaking rail contract in Norway.

This report implies to me that the affair is a little worse than "just an ongoing accounting error" which was the tenor of some of the reports at the end of September.

EDIT By 2:15pm share price has "recovered" to 583p, -122p on the day, -17.3%, but above the earlier low of 537.5p

Press release from Go-ahead group: (https://otp.tools.investis.com/clients/uk/go-ahead1/rns/regulatory-story.aspx?cid=64&newsid=1534891) which confirms that shares are expected to be suspended from 7am on 4 January 2022 until the full-year 2021 results can be published (for full financial year year ending 3 July 2021).

PRESS RELEASE

9 December 2021

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION



THE GO-AHEAD GROUP PLC

("GO-AHEAD" OR "THE GROUP")


UPDATE ON DISCUSSIONS WITH THE DFT REGARDING LSER
AND DELAY TO ANNOUNCEMENT OF FY21 RESULTS


The Go-Ahead Group today announces an update on discussions with the Department for Transport (DfT) regarding London & South Eastern Railway Ltd (LSER) and the expected date for publication of the Group's financial results for the year ended 3 July 2021 (FY21), previously expected to be 16 December 2021.



Update on discussions with the DfT regarding LSER

As announced on 28 September 2021, the Operator of Last Resort took over delivery of passenger services on the Southeastern franchise when its existing contract expired on 17 October 2021. The DfT's decision not to award a National Rail Contract to LSER from this date was as a consequence of discussions with the DfT regarding the calculation of profit share payable by LSER under franchise agreements and the treatment of certain overpayments made by the DfT to LSER over the course of the franchise agreements.



Go-Ahead has been focused on open collaborative and constructive engagement with the DfT in order to reach a full and satisfactory settlement with the DfT. An independent committee comprising the Chairs of LSER's shareholders (Go-Ahead and Keolis UK) commissioned an independent review, led by external legal and accounting advisers, into LSER's performance of its contractual obligations under the Southeastern franchise agreements. The findings of this review have now been shared with the DfT.



Notwithstanding the complexity of the franchise agreements relating to LSER, the review has found that serious errors were made by LSER with respect to its engagement with the DfT over several years. In particular, the Group accepts that, by failing to notify the DfT of certain overpayments or monies due to the DfT, LSER breached contractual obligations of good faith contained in the franchise agreements. Accordingly, the Group has apologised to the DfT.



As previously disclosed, the DfT has confirmed that it is considering its options for enforcement action in relation to this matter, including imposing a financial penalty under the Railways Act 1993. In the absence of specific precedent or relevant guidance, it is difficult to estimate precisely the likely quantum of any penalty. However, the Group is considering with Deloitte the inclusion of a provision in the FY21 financial statements.



The behaviours identified by the independent committee which contributed to the management of LSER's contract with the DfT do not reflect the values and standards of conduct that the Group expects of its colleagues. Whilst the Board is of the view that the Group has good corporate governance arrangements in place, it will take this opportunity to further enhance certain aspects to better safeguard and assure the compliance obligations of complex long term rail contracts.



Further details relating to these matters will be set out with the FY21 results.



Update on expected date of publication of FY21 results

The independent committee's report has also been shared with Deloitte. As a result of the complex, detailed nature of the report, the Group and Deloitte have concluded that additional time is required to consider the implications of the report's findings for the FY21 results and that it will not be possible to complete the audit before 3 January 2022. This is the latest date permitted for publication of the FY21 results under the Financial Conduct Authority (FCA)'s Disclosure Guidance and Transparency Rules. After consultation with the FCA, the Group anticipates that trading in its shares will be temporarily suspended with effect from 7.00 a.m. on 4 January 2022 until publication of the FY21 results. Application will be made to the FCA requesting suspension of trading in the Group's shares in due course.



The Group is working closely with Deloitte to ensure that the FY21 results are published as soon as possible. This is now expected to be before the end of January 2022.



Results for the year ended 3 July 2021

On 8 November 2021, the Group announced that the FY21 results remained in line with the Board's expectations. Whilst the audit is ongoing, the Board's current expectations are that adjusted operating profit for the rail division will now be ahead of previous expectations, in part reflecting the treatment of certain non-recurring items in rail. Expectations for the regional bus and London & International bus divisions are unchanged.



The Group also highlighted on 8 November that government funding arrangements in relation to its Norway rail business for the remainder of the current financial year had not yet been agreed. Whilst discussions are ongoing regarding the continuation of government support of rail services, unless a satisfactory agreement can be reached, the Board expects that a material provision would be required in the FY21 results for potential losses in our rail contract in Norway.



In German rail, following the recognition of a £25.9m provision in the first half of the year reflecting latest financial projections for the contracts in Bavaria, a further provision of up to £10m is expected to be recognised in the FY21 results. The Board's expectation is that provisions for both Norway and Germany would be treated as exceptional items.



The audit of the FY21 results is ongoing and all of the expectations referenced in this announcement are subject to audit sign off.



Debt facilities

Under the Group's debt facilities, the Group is required to publish audited results by a specified date. As a result of the further delay to the publication of the Group's FY21 results beyond 31 December 2021, the Group will be seeking appropriate waivers of this requirement. A similar waiver was previously agreed in relation to the Group's revolving credit facility in respect of the delay to the publication of the results beyond 31 October 2021.



Annual General Meeting

The Group's Annual General Meeting will take place on 21 December 2021 and will be held in accordance with applicable COVID-19 rules and guidance. As previously announced, the Group is required to convene a separate shareholder meeting in connection with the Group's annual report and accounts and certain other matters ordinarily put to shareholders at the Group's Annual General Meeting. The details and timing of this meeting, previously expected to take place in February 2022, will be confirmed in due course.





The person responsible for arranging the release of this announcement on behalf of the Group is Carolyn Ferguson, Company Secretary.



ENDS

 

[DNCharingX]

Oh, forgot about this thread. Any news since? Not much change to performance, as I slowly came to realise OLR isn't much of a magic wand. It seems that transport is in some sort of topsy-turvy anyway (entire underground is being threatened due to funding.) so it would be unfair to comment.

Would hate to find out that there was intent, but only time will tell, eh? And I'll also still have to go to work.

 

[jfollows]

Go-ahead share price:
690.00 at start of day
537.50 at lowest point during the day (-22.1%)
600.00 at end of day (+11.6% on low, -14.9% on day)
however was 2,262 in early 2020
473.6 in March 2020
decline then (1Q20) presumably driven by Covid-19

Comment in The Guardian: (https://www.theguardian.com/busines...ssing-saga-southeastern-rail-serious-go-ahead) suggests that DfT won't remove the Thameslink franchise from Go-Ahead but the situation for them is unusual and embarassing for a public company.

Nils Pratley on finance

Suspending shares is embarrassing, the saga of Southeastern rail is serious

Nils Pratley

Go-Ahead is unlikely to be stripped of Thameslink franchise but has some explaining to do elsewhere

The most important item in Go-Ahead’s annual accounts last year, it turns out, was buried on page 188. Note 27 gave brief details of a dispute with the Department for Transport about past profit-sharing calculations on the Southeastern rail franchise, where Go-Ahead had a 65% stake in partnership with French firm Keolis.

The quarrel sounded dry, technical and the sort of thing that crops up from time to time on the railways. The accounts confidently asserted that should the DfT’s claim prove successful “the outflow of resources could be in the region of £8m”.

The small problem, however, keeps getting bigger. In September, the DfT stripped Southeastern of the franchise and accused the company of a “serious” breach of the franchise agreement. Go-Ahead apologised and said £25m – a far chunkier sum – had been returned.

Now comes another grovelling admission of “serious errors” plus news that the two parents’ postmortem on events is so complex that the auditors, Deloitte, need extra time to finalise this year’s accounts. One uncertainty is how to estimate the size of the provision for the fine that DfT, almost certainly, will impose.

The delay means Go-Ahead will miss its deadline for filing this year’s accounts, in turn provoking a suspension in trading in the shares on 4 January, an embarrassment for a public company. No investor likes to be stuck in the sidings, so you can understand why the shares reversed by 15%. The stock now stands at a 20-year low.

The main way in which events could get worse for Go-Ahead is if the DfT decides to remove the remaining Thameslink franchise, a big commuter route. That feels unlikely since the failings relate solely to Southeastern, but the board has some explaining to do when the accounts eventually appear, which is expected to be before the end of January. This saga relates to taxpayer funding from 2014 and its seriousness seems to have been serially underappreciated.

 

[Doomotron]

I have noticed some trains seem to be cleaner on the outside, but that just might be me. Luckily, the dark liveries hide dirt quite well.

 

[Horizon22]

Oh, forgot about this thread. Any news since? Not much change to performance, as I slowly came to realise OLR isn't much of a magic wand. It seems that transport is in some sort of topsy-turvy anyway (entire underground is being threatened due to funding.) so it would be unfair to comment.

Would hate to find out that there was intent, but only time will tell, eh? And I'll also still have to go to work.

In terms of operations, there never were going to be any significant differences so any changes are likely to be purely coincidental at this point.

 

[WesternLancer]

Go-ahead share price:
690.00 at start of day
537.50 at lowest point during the day (-22.1%)
600.00 at end of day (+11.6% on low, -14.9% on day)
however was 2,262 in early 2020
473.6 in March 2020
decline then (1Q20) presumably driven by Covid-19

Comment in The Guardian: (https://www.theguardian.com/busines...ssing-saga-southeastern-rail-serious-go-ahead) suggests that DfT won't remove the Thameslink franchise from Go-Ahead but the situation for them is unusual and embarassing for a public company.

I'm guessing Nils analysis fails to note (or understand?) that in the post covid agreements with DfT the volume of passengers on the route (TSGN is what I assume he means by 'Thameslink') is irrelevant to Go-ahead's income from the TOC)