Media centre

Thursday 20 Nov 2008

NETWORK RAIL INFRASTRUCTURE LIMITED – INTERIM RESULTS FOR THE SIX MONTH PERIOD 1 APRIL TO 30 SEPTEMBER 2008

Region & Route:

National

• RECORD PUNCTUALITY • FOCUS ON INCREASING CAPACITY TO ALLOW MORE FREQUENT, LONGER TRAINS

Financial highlights

• Pre-tax profit of £706m compared to £780m at 30 September 2007
• Profit after tax of £5m (Sep 2007: £591m) owing to increase in tax charge following abolition of industrial buildings allowance
• Operating costs £1,891m (Sep 2007: £1,764m)
• Capital expenditure £2,161m (Sep 2007: £1,723m)
• Income of £3,117m (Sep 2007 £2,984m)
• Net debt of £20,490m (March 2008: £19,743m)

Network Rail today publishes its interim results for the half year to 30 September 2008. The results show the highest levels of train punctuality since records began (1992), averaging over 92% for the period, good all round performance across the business allowing continued high levels of investment, and a pre-tax profit of £706m.

Chief executive Iain Coucher said: "Network Rail continues to improve the railway for passengers and freight with record levels of train punctuality and continued high levels of investment. Once again, the company has delivered train performance ahead of forecast while running a safe and financially efficient railway.

"We have also met all the major project milestones on the West Coast main line in a period of intense activity and are on track to complete the upgrade on time, a phenomenal achievement on such a complex project. Starting in December, commuters, long distance passengers and freight users on the West Coast will start to enjoy the benefits of our work with hundreds more trains and thousands of extra seats.

"Going forward, our twin aims are even better on time performance and increasing railway capacity so that passengers and freight users benefit from longer, more frequent trains and better stations and information."

A summary of the company's performance over the past six months includes:

Safety

• Rail remains the safest form of transport
• Network Rail has initiated significant public information campaigns to improve public compliance at level crossings and reduce accidents resulting from trespass

Train performance

• Best punctuality since records began (1992) - an average of 92.06% of trains ran on time over the first six periods of the year (April to September)
• Over the past 12 months, an average of 90.6% of trains ran on time, the highest level since train punctuality started to be measured nationally for all services back in 1992
• Network Rail has reduced its delay minutes for the half-year by over 9% compared to the same period last year and by 52% since it took control of the rail infrastructure

Investment

• A further 25% increase in capital expenditure, compared to the same period last year, has seen almost £2,200m invested in the network over the last six months
• Over the past decade, the railway infrastructure has seen almost a fivefold increase in investment (£811m in 1995/6 to almost £4,500m this year)
• West Coast main line – 13 significant project milestones delivered including completion of Trent Valley four tracking and replacement of the passenger subway at Rugby station

Efficiency

• The overall ORR challenge for the control period was to produce combined efficiencies of 31% for operating, maintenance and renewals expenditure. The current forecast for the control period is 26%, a substantial efficiency but one that will fall short of target
• Renewals efficiencies remain disappointing, forecast to be 23% against a target of 30%, primarily as a result of track renewals where delivering savings remains particularly challenging with predicted efficiencies only 14%. Steps have been taken to improve performance (including high output mechanisation and other initiatives such as modular switches and crossings) but these have yet to significantly impact on delivered efficiency. We continue to focus on realising improvements
• In contrast, operating and maintenance cost efficiencies will largely be delivered with operating costs meeting the ORR’s target of 30% savings and maintenance delivering a 33% saving against a control period target of 34%

Final Determination

Network Rail has undertaken significant analysis of the five-year funding settlement set by the ORR. It is clear that the ORR has listened to Network Rail’s arguments and made significant concessions to bring it closer to the company’s position.

However, before Network Rail can accept the settlement there are two significant hurdles to overcome. Firstly, there are a number of issues on which the company needs clarification from the ORR. Given the lack of overall flexibility in the settlement, Network Rail requires a positive outcome on these items. Secondly, the company needs to attain an appropriate investment grade from the ratings agencies to allow it to commence a stand alone corporate debt programme. The company expects to receive a rating early in the New Year.

A final decision on whether to trigger a reference to the Competition Commission is unlikely to be made until these matters have been resolved.

Iain Coucher commented: "Passengers and freight users have been at the centre of our discussions on the ORR settlement. We will work with the ORR to avoid the necessity of an appeal as we see little benefit for our customers if we appeal against the determination and initiate a long process of review and uncertainty."