Media centre

Thursday 25 May 2006

NETWORK RAIL INFRASTRUCTURE LIMITED – PRELIMINARY RESULTS FOR THE YEAR TO 31 MARCH 2006

Region & Route:

National

• MORE TRAINS ON-TIME
• LOWER OPERATING COSTS
• HIGH LEVELS OF INVESTMENT

Network Rail today publishes its preliminary results for the year to 31 March 2006, which shows train punctuality at its highest for six years, a reduction of £74m in the operating expenditure of the business, and more than £3 billion of investment in the railway.  With funding increases coming on-stream this year, Network Rail predicts a profit after tax of more than £850 million in 2006/7.  Financial highlights

• Turnover was £3.8bn, an increase of £37m against the previous year
• Operating costs (before depreciation) are down by £74m to £2.4bn
• Operating profit increased to £468m, up slightly from £465m in 2004/5
• Pre-tax loss increased to £232m, from a loss of £47m the previous year due to  interest payments on the increased debt
• Net debt stands at £18.2bn, up from £15.6bn, £600m less than forecast last year

Performance results

• Train punctuality is at its highest level for six years with an average of 86.4% of trains on-time, compared with 83.6% the previous year, and 78.6% when Network Rail took over the railway infrastructure
• An 8.7% reduction in Network Rail delay minutes, down to 10.5m minutes from 11.5m minutes last year.  This represents a 28% reduction since Network Rail took over
• Calendar year to date (Jan, Feb, March, April) has seen train punctuality average 90.2%
• Freight market growth continues with a 6.7% increase in gross tonne miles in the last year

Safety

• A reduction in signals passed at danger (SPADS) for the seventh successive year to the lowest ever level - now at 328 in 2005/06. 
• Broken rails were reduced for the seventh successive year to a record low of 317 compared to a peak of 952 in 1998/99
• Network Rail has started a major public education campaign about the safe use of level crossings, including a powerful £3m advertising campaign 

Asset condition, investment and efficiency

• £2.7bn was invested in renewals 2005/06
• 696 miles of new rail was laid, an increase of 11% over last year
• 496 miles of new ballast was laid, up 10% on last year
• 563 switches and crossing units were installed, a rise of 10% on last year
• 20% efficiency saving has been made over the two years of the control period to date, with the company well on course to make the 31% saving required by the ORR over the full five years

Commenting on the year, Chairman Ian McAllister said: “Network Rail has had a very successful year, building on the achievements of the previous two years.  More trains are arriving on time than at any point over the past six years and substantial reductions in costs are being made.” Group Finance Director Ron Henderson added: “This has been a year of considerable progress and achievement.  The company has already made 20% savings against the ORR’s 31% target due to strong budgetary control and efficiencies.  The £74 million savings in operating expenditure clearly demonstrate this. “We are committed to delivering further efficiencies and to securing a value for money railway now, and for the future.” Ian McAllister concluded: “Punctuality continues to rise and costs continue to be reduced. Safety performance, meanwhile, remains strong and levels of investment in the rail infrastructure are high. We have a sound foundation that allows us to be ambitious for the future growth of the railway. “I would like to thank our people for their efforts in delivering the substantial improvements made so far.  During the last year, Network Rail’s 32,000 employees have worked more closely with our customers to deliver a better railway for passengers and freight. It will require equal effort to continue this progress in the months and years to come. We are determined to rise to this challenge.” Annual incentive awards 2006 Following receipt of the company’s performance figures for 2005/06, the Network Rail Remuneration Committee met to review the totality of the company’s performance against the demanding targets set by the Office of Rail Regulation. These targets were made even tougher by the company last year. The Committee has decided that all Network Rail employees will share in the success of the company in the last year. Network Rail has delivered more trains running on time, improved financial efficiency and railway assets in better condition – beating each and every one of the targets set by the independent ORR. Chairman Ian McAllister said: “From signal box to track depot to boardroom, all Network Rail employees will share in the success of the company this year. We have had a very successful year and delivered a much improved railway to passengers and freight customers. “Our bonus scheme aligns payments with passengers’ interests and ensures employees are incentivised for delivering a better train service now and in the future. “Network Rail has beaten the tough targets set by the ORR.  The Remuneration Committee is determined to continue to demand even better performance and so set even tougher targets for 2005/6.  It is great news for passengers and freight customers alike to see Network Rail exceeding these challenging targets.” Performance on each of the Management Incentive Plan (MIP) key performance indicators was as follows:

• Train delay minutes (measures train punctuality) – the target level was exceeded
• Asset Stewardship Index (measures the condition of railway assets) – the target level was exceeded and the maximum target level was reached
• Financial Efficiency Index (measures the financial efficiency of the company) – the target level was exceeded

The resultant awards are:

• A bonus of £954 for all employees (£1,112 in 2004/5) except:
  • Varying proportions of salary for senior managers depending on the above measures as well as performance against personalised measures
  • 47.7% of salary for executive directors (56% in 2004/5)

In addition, executive directors and other senior managers are eligible this year for payments under the company’s long-term incentive plan (L-TIP), due to sustained strong performance. The L-TIP sets long-term targets for train punctuality and financial efficiency, and is designed to perform a similar role to share options in a PLC. The existence of the L-TIP is a requirement of Network Rail’s licence, as regulated by the ORR and approved by Members.Performance on each of the L-TIP key performance indicators was as follows:

• Train punctuality – the target was met
• Financial Efficiency Index – the target was met

 The resultant total award to qualifying employees under the L-TIP is therefore as follows:

• Varying proportions of salary for senior managers depending on the above measures as well as performance against personalised measures
• 22% of 2005/6 salary for executive directors