Network Rail announces interim results

Network Rail today announced its interim results for the six months to 30 September 2010 recognising the scale of the challenges facing it, and the industry as a whole, in the months and years ahead.

New maintenance track repair kit

The company reports better than planned progress across its business with big capacity enhancing schemes going well, train punctuality remaining at high levels and real cost reductions of almost £200m made in the period.

These cost reductions will have grown to around £400m of savings by year end and the company acknowledges that there is still a long way to go to make the railway more affordable.

Patrick Butcher, group finance director, said: “Delivering a safe, punctual, bigger and better railway will continue to be our focus but of increasing importance is the task of reducing the cost of our railway. We have made progress with almost £200m of real savings over the past six months, but there is a long way to go to deliver an affordable, value for money railway for passengers and taxpayers.”

Financial Highlights of the last six months include:

• £299m pre-tax profits up from £146m for the same period last year
• Over £1.7bn was invested in the railway over the period
• Net debt increased by 0.6% to £24bn from £23.8bn
• An average of 93.5% of trains ran on time during the period
• Headcount reduced by 1,100

Peter Henderson, acting chief executive, said: “The government’s comprehensive spending review has reinforced the value of our railway and the vital part it plays in generating economic growth. Network Rail is committed to building extra capacity to relieve overcrowding and to deliver a railway that is safer, more reliable and at a lower cost.”

In summarising Network Rail’s interim results:

Efficiencies

• Network Rail was set the demanding task by its regulator of cutting costs by 22% between 2009 and 2014. Today the company has reported almost £200m of savings in the first six months and is on track to achieve around £400m or a further 9% savings in this financial year
• This is just the start of the task of radically reducing costs across the whole rail industry to make the railway more affordable. Network Rail believes this can best be achieved by closer collaboration and partnership working with train operators and suppliers with better aligned incentives
• The savings in the period have been achieved by delivering capital works for less, improving asset management and reducing operating and maintenance costs reflected in headcount reductions of 1,100 since March 2010. A good example of the new techniques and equipment now being used, saving the railway millions of pounds, such as
  • The new high output track renewals train, which has recently set a further record for the amount of track renewed in one 29 hour shift – 2.4km – doubling what was previously possible, bringing down the average unit cost of such track renewals by £188,000 per km or 42%:

Investment

The outcome of the government’s comprehensive spending review has underlined the importance of Network Rail completing the delivery of its investment plans, and where possible, improving upon them. Significant progress has been made on the upgrade of the Thameslink route with major work at London Blackfriars station, and at projects at King’s Cross, Birmingham New Street, Reading and on Crossrail

Work has all but finished on completing the Airdrie-Bathgate line, creating an additional direct route between Glasgow and Edinburgh passing through previously unconnected towns such as Caldercruix, Blackridge and Armadale. The line will be the longest line built in Scotland for over a century – passenger services begin next month, with the project on time and on budget

Revenues

Revenue increased in the period (to £2.87bn from £2.84bn) in line with the business plan. Most of Network Rail’s turnover is indexed to RPI – the effective rate for the period was 0.3% and turnover increased accordingly. Network Rail’s income is largely fixed by the regulatory regime which means great emphasis is placed on cost efficiency and ensuring marginal costs are exceeded by marginal income

Debt

Net debt of £23,973m remains at a sustainable level, up just 0.6% from £23,838m at the last year end. Network Rail’s debt programme is well managed and the company has a policy of appropriate hedging against market movements. The company issued no bonds in the half year but is confident that its issuance programme will remain attractive to the market

Assets

The valuation of the railway network rose to £38,540m at 30 September 2010 from £36,629m at 31 March 2010, reflecting the capital invested in the infrastructure over the six months

Performance

Train performance for the first six months of the year reached a new record high with an average of 93.5% over trains over the six months arriving on time. This compares with 93.35% for the same period last year and with 84.4% in 2005. Some parts of the railway are not yet reaching the very high levels of performance we have come to expect and we are working closely with our partners, the train operating companies, to address this

Outlook

Mr Butcher concluded: “Network Rail is acutely aware of the need to change, to work more closely with its industry partners, to deliver on its promises and to play its part in significantly reducing the costs of the railway.

“Our figures today demonstrate Network Rail is already driving down costs, but much remains to be done. We will work closely with government, Sir Roy McNulty and most importantly, with train operators, to drive through change and deliver a more affordable and better railway for passengers and freight users alike.”