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Unread 14-11-2012, 05:42   #1
Colm Moore
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Default [Article] Auditors say CIÉ's status as going concern at risk

http://www.irishtimes.com/newspaper/...326573760.html
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Auditors say CIÉ's status as going concern at risk
CIARÁN HANCOCK, Business Affairs Correspondent

The rail section of CIÉ recorded a deficit of €22 million after receiving a subvention for current spending of €149 million

Auditors to State transport company CIÉ have warned about the health of the company’s finances and its ability to remain in business.

Auditors PwC stopped short of qualifying CIÉ overdue 2011 accounts but said there exists a “material uncertainty which may cast significant doubt” about its “ability to continue as a going concern”.

The accounts are due to be released later this week.

PwC’s warning is stark given that CIÉ enjoys the implicit backing of the exchequer as a State-owned company.

This warning comes as CIÉ has exhausted its €121 million borrowing facilities and had to seek an early drawdown in the summer of its State subvention for the fourth quarter of this year. In July, the Government made an additional €36 million available to CIÉ to plug its finances this year.

However, the company was put on notice that it would have to introduce a package of measures to resolve the shortfall in its finances.

According to Government sources, CIÉ recorded a deficit, or loss, in 2011 of €6 million in spite of receiving €540 million in State support for current and capital spending. This was an improvement than 2010 when the deficit was €53 million.

Irish Rail recorded a deficit of €22 million after receiving a subvention for current spending of €149 million.

Dublin Bus reported a deficit of €18 million after receiving a subvention of €73 million.

Bus Éireann closed the year in the black, with a €500,000 surplus. But this was after it had received €43 million in State subvention.

PwC said CIÉ faces four key challenges to its ability to continue as a going concern.

These are the ongoing challenging trading environment, with declining passenger numbers; projected trading deficits up to 2014, which give rise to funding requirements; the expiration of current borrowing facilities in 2013; and reductions in the level of State funding.

CIÉ’s State subvention was to have reduced to €235 million this year before the emergency funding was granted in July.

It has been provisionally set at €226.5 million for 2013.

Minister for Transport Leo Varadkar has told CIÉ it cannot be bailed out. Some cost-reduction measures have been agreed in Irish Rail and talks are at an advanced stage within the bus companies, although these severance programmes will require funding. CIÉ is also looking at the sale of assets.

Additional fare increases are also on the way for commuters.
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Unread 14-11-2012, 13:10   #2
karlr42
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I've no idea why it is meant to be run as a going concern or as a company at all. It should be nationalised properly and operated as a public service. Money taken in in fares goes straight back to government coffers and there is no expectation that it has to cover its own costs.
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Unread 14-11-2012, 14:16   #3
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http://www.independent.ie/national-n...s-3293793.html

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BUS and rail passengers will be hit with years of repeated fare hikes as the cash crisis deepens in state transport companies.

Job losses are also on the cards as Dublin Bus, Bus Eireann and Iarnrod Eireann desperately try to avoid going out of business, the Irish Independent has learned.

Routes with low passenger numbers face the prospect of being axed or having services severely reduced.

CIE is desperately trying to turn around a €40m loss last year to a break-even situation in 2013.

But its unpublished annual report for 2011 shows that its financial crisis became so acute that banks refused to lend any more money.

CIE was forced to seek state payments in advance and audi- tors PricewaterhouseCoopers have warned there is now a major doubt that it can survive as a going concern.

Government sources said the company would not be bailed out, and that funding would have to be found for any voluntary severance package.

As well as fare hikes and job losses, there are also fears about cuts in services. There will be no capital investment in new buses or trains, and only basic maintenance will be allowed.

CIE passenger numbers peaked in 2007 when 288.7 million journeys were made on public transport. But this fell to 232.7 million last year.

Mounting fuel bills, falling passenger numbers and cuts in state aid have worsened the crisis.

The CIE group’s annual report, due to be published later this week, reveals just how bad things have become.

It shows:

The company breached its borrowing limits earlier this year and it has to renegotiate its banking facilities in 2013.
The CIE board says annual fare increases are needed to address the crisis.
Costs have to be cut, including payroll, which could result in job losses.
Only basic maintenance will be carried out – and there will be no new buses, trains or other capital expenditure.
Only Bus Eireann recorded a surplus last year, of €500,000. Iarnrod Eireann lost €22m and Dublin Bus lost €18m.
Deficit

While the CIE deficit is now €6m compared with €53m in 2010 thanks to cost-cutting, auditors PWC also warned of question marks over the compa- ny’s ability to survive.

The accounts show a ”material uncertainty which may cast significant doubt about the group’s and compa- ny’s ability to continue as a going concern”.

The CIE board has admitted that further cost-cutting is need- ed as the “outlook remains extremely difficult” and that it was relying on Government support to stay in business.

“The board is confident that planned actions, together with the additional funding commit- ted by the Department of Trans- port; the additional revenue generated by fare increases; the ongoing support of the Govern- ment and the successful imple- mentation of cost-reduction measures, will ensure that the group can achieve financial sustainability,” it said in a statement.

The Government had pledged a €36m cash bailout for CIE with the aim of pre- venting further cuts in bus and rail services.

But the money was withheld, as CIE has been told to sell assets or borrow money to keep its services running.

Among the options being considered are the sale of the company’s fibre optic cable network along the rail system and the sale of its interest in offices on Dublin’s Spencer Dock – which could yield €25m.

CIE has already made signif- icant savings with operating costs slashed by €174m since 2008 and employee numbers falling by 1,450.

Its state grant, designed to meet the costs of running unprofitable routes – called the subvention – has fallen by €41.4m, down to €265m in 2011.

Fuel costs have increased by €22m, and the elimination of a fuel rebate added €24m to annual costs while revenues have dropped by €81m in the same period.

Transport Minister Leo Varadkar is hosting regular meetings with the group and closely monitoring the group’s finances. The Cabinet was briefed on the CIE annual report yesterday. It will be pub- lished later this week.

Redundancy

Last summer, Iarnrod Eireann introduced a voluntary redun- dancy scheme for its 4,100 workers which is aimed at reducing numbers by 450 by 2016.

Unions and management have agreed changes to pension arrangements, over- time, annual leave, sick leave and subsistence rates aimed at delivering another €12m in savings.

Dublin Bus employs 3,227 staff and Bus Eireann another 2,605. The company is seeking cuts in overtime, premium pay- ments and changes to work practices from its employees, and talks are continuing at the Labour Relations Commission.
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Unread 14-11-2012, 14:51   #4
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there will be no new buses, trains or other capital expenditure.
Is this not a bit disingenuous? Any new buses or trains will not be bought by CIE anyway, the NTA will buy and own them, as with the new Dublin Bus VGs, right?
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Unread 14-11-2012, 14:57   #5
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Yup, but the NTA does not own any trains, nor is in the business of buying them. Bus is different
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Unread 15-11-2012, 01:44   #6
Colm Moore
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http://www.irishtimes.com/newspaper/...326607555.html
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CIÉ chairwoman warns of 'significant challenges' after fall in revenue last year
CIARÁN HANCOCK, Business Affairs Correspondent

Revenues at State transport group CIÉ fell by 0.6 per cent last year to €707.8 million, according to its 2011 annual report, published yesterday.

As reported by The Irish Times on Wednesday, CIÉ made a loss of €6.1 million for the year while its auditors, PricewaterhouseCoopers (PwC), warned about its ability to continue as a going concern given its level of liabilities and concerns over its future funding and trading prospects.

Chairman Vivienne Jupp said CIÉ was facing “some of the most significant financial challenges in its history” but she was “confident” the business could be stabilised.

“Only through a continued focus on cost reduction and growing the business will we succeed,” Ms Jupp added.

She said there were “encouraging signs” that passenger numbers are stabilising. “However, the outlook remains a challenging one,” Ms Jupp said.

A spokesman for CIÉ confirmed that it is progressing a number of options for asset disposals to help raise finance for the business. It expects to confirm “significant developments” by the year end.

He said Iarnród Éireann reached agreement with its staff in the summer and is now working on generating further efficiencies in the business.

Dublin Bus and Bus Éireann are in “advanced” talks with staff at the Labour Relations Commission.

Voluntary severance has been offered primarily at Iarnród Éireann.

So far in 2012, 77 staff have left and more than 100 others are expected to leave before the year end. This will bring staff numbers to below 4,000.

Seeking fare increases

The spokesman also confirmed that it is awaiting a determination from the National Transport Authority on increasing single and return fares.

“In the context of continuing reductions in [state-funded] PSO payments, it is envisaged that further fare increases will be sought in future years,” he added.

CIÉ companies have already been given the green light to increase fares by up to 10.3 per cent for monthly and annual tickets.

While the auditors did not qualify CIÉ accounts, PwC included an “emphasis of matter” note relating to the group’s ability to continue as a going concern. It noted that at the end of 2011, CIÉ had net current liabilities of €394.1 million, of which €77.8 million was bank borrowings.

“Management’s current projections show that the group will incur further deficits in the period 2012, 2013 and 2014, with a return to profitability expected in 2015 and 2016,” PwC stated.

Iarnród Éireann revenue declined last year by 2.3 per cent to €185.8 million and it recorded a loss of €21.9 million.

Dublin Bus’s revenue was €3.9 million lower at €178.3 million while it made a loss of €18.2 million.

Bus Éireann made a surplus of €500,000 after exceptional items. Its revenues fell marginally to €283.7 million.
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Unread 15-11-2012, 20:02   #7
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The question is: just what do we want our railways to be?

Are they a public service, with social benefits that can't be quantified financially, or a transport provider driven by profit? One will inevitably generate monetary losses and the other will involve closures.

Railways can be a mixture of both, where some services can turn a profit (although in Britain, the vaguaries of franchising mean 'profit' is subjective) which supports routes which are loss making and yet feed passengers onto the profitable routes.
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Unread 22-11-2012, 11:00   #8
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The question is: just what do we want our railways to be?
well, this is the big question. it would appear that the minister wants a railway that is almost entirely funded from its revenues. How that can be done in this small market is the interesting part.
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