VTEC makes operating loss of £117.4 million

Accounts made public in December reveal that Virgin Trains East Coast made an operating loss of £117.4 million for the year to March 31 2017 (£24.9m profit in previous year). It paid government £272.0m (£204.5m) and recorded a turnover of £819.7m (£794.3m).

VTEC said revenue growth over the year was lower than expected and lower than in previous years.

The accounts explained that this was the result of poor Network Rail performance, increased car performance as a result of low fuel prices, and slower economic growth with weaker consumer and business confidence, including uncertainty following the UK’s decision to leave the European Union. Passenger revenue growth was 3.4%, from 2.8% journey growth and 0.6% yield growth.

During the year, VTEC repaid an £18.5m loan from Stagecoach Group and drew down £32.5m from Stagecoach’s support facility. Its 2016-17 accounts contain a pretax charge of £93.7m to reflect the onerous nature of its contract with the Department for Transport.

Company Secretary Tim Kavanagh’s financial review in the accounts explained: “The calculation of that onerous contract provision takes account of the Stagecoach parent company’s £165m loan commitment to Virgin Trains East Coast, from which £66.5 million was already loaned at 31 March 2017. 10% of any loan is funded by Virgin.”

VTEC paid no dividend for the year to its parent company, Inter City Railways Limited (owned 90% by Stagecoach Transport Holdings Limited and 10% by Virgin Holdings Limited). Its accounts show VTEC paid parent and group companies £17.0m for services and made sales to them of £0.5m.

Just before Companies House published VTEC’s accounts, the DfT revealed that it would be looking for a new operator of East Coast services from 2020, cutting the final three years of VTEC’s deal.