NETWORK RAIL PUBLISHES ANNUAL REPORT AND ACCOUNTS 2009/10

Thursday 24 Jun 2010

NETWORK RAIL PUBLISHES ANNUAL REPORT AND ACCOUNTS 2009/10

Region & Route:: National

Marking the report’s publication, Rick Haythornthwaite, Network Rail's chairman, said: "Over the past year the railway has continued to improve - it is safer, more punctual and enjoying more support from passengers and freight users than at any time in the past. Meanwhile, we have been delivering better than planned performance with healthy profits, all of which are reinvested in the railway."

Financial & performance highlights

In line with the regulatory determination that reduced Network Rail’s annual rate of return expressed through track access charges to 4.8% (compared to 6.5% over the last three years), revenue and profits were down

Revenue was £5,668m down from £6,160m but still £170m higher than the regulatory target
Profit after tax was £284m, down from £609m slightly ahead of plan
Capital expenditure was £3,920m
£265m was cut from the cost of running the railway over the year
91.5% of trains ran on time over the year - up from 90.6% - and the highest ever recorded
The company cut the delays it causes to trains by over 700,000 minutes or 7.4% from 8.9m minutes to 8.185m - the lowest for over a decade

Within its report and accounts, Network Rail published details on executive remuneration. For 2009/10 the board has decided that directors’ annual incentive should be cut by 20%, their salaries frozen and next year's scheme suspended as the company's remuneration committee looks into its future suitability.

Mr Haythornthwaite said: “Network Rail only rewards for success. This is measured against what matters most to passengers - a better railway with more trains on time. On that basis, awards for the past year have been earned, are a contractual right and should be paid."

Overall the company achieved 71% of the targets set for it. Network Rail's remuneration committee used its discretion to reduce this potential payout by 20% to earn directors a 56.8% payout of annual salary.

This year the six executive directors will share annual incentive awards totalling £1.3m with the chief executive earning a £348,184 payment. Network Rail also runs an all-employee bonus scheme so its 37,000 employees can share in the company's and the railway's success. The all-employee bonus was also cut back by 10% with a payout of £958 per employee.

Mr Haythornthwaite concluded:"Having rescued the railway from its troubled state of earlier this decade, Network Rail has entered a new stage in its transformational journey. We must recognise this and, as chairman, I believe it is crucial to look at how the remuneration of Network Rail’s executive team should be structured. The key future objective is to deliver on stretching ambitions for passengers and freight users in what will be more austere times. To begin, I have ordered a review of how we can better align executive remuneration with expectations of passengers and public. As part of this review the views of our stakeholders and regulator will be sought and the scheme for 2010/11, suspended."

Notes to editors

Income Data Services has recently (17^th June) released some research that showed that the average annual bonus being earned by FTSE100 company directors so far this year was £558,918. For Network Rail directors it is less than half this amount at £224,644

The company has had a good year against the objectives established a year ago in the areas that define the underlying quality of the asset and its performance for passengers and freight users - train punctuality, asset condition, making savings and delivering projects aimed at providing a bigger, better railway

Network Rail’s customer focus still has room for improvement and the incentive awards reflect this – customer satisfaction performance was marked down by the remuneration committee and the company did not meet the ambitious targets that were set for passenger satisfaction

The incentive scheme:

In years past the annual incentive has been measured against three criteria:
- Train performance
- Asset condition
- Efficiency performance

This year's scheme has had a handful of other measures added to match up with the new demands of targets set by the regulator for the new control period (CP4) and to recognise the company's wider role in the industry. These additional measures are:
- Passenger satisfaction - measured by Passenger Focus' twice yearly survey
- Customer satisfaction - determined by the remuneration committee (REMCO) using the annual MORI survey of our customers as guidance
- Projects progress - determined by REMCO using the annual report on the progress of projects as guidance

The following table explains how much each of the targets is worth (% of salary) and how the company performed against them over the year:

Measure	% potential of salary (weighting)	Target	Actual	% achieved
Train performance	20%	89%	89.7%	Target beaten - 20%
Asset condition	20%	0.019	0.032	Target beaten - 20%
Efficiencies	20%	2.9%	5.8%	Target beaten - 20%
Passenger satisfaction	20%	83.4%	82.3%	Target not met - 0%
Customer satisfaction	10%	n/a	Remco judgement	Some progress - 3%
Projects progress	10%	n/a	Remco judgement	Good progress - 8%
*Total potential*	*100%*	-	-	*71%*
Remco discretion	-	-	-	-20%
Total payable	-	-	-	56.8% of salary

Bonuses awarded:

Annual award

Directors

2009/10

£s

Comparable 2008/9 - £s

Actual 2008/9

£s

Salary

£s

Iain Coucher

348,184

302,209**

Refused - nil

613,000

Patrick Butcher

198,800

172,548***

Nil*

350,000

Robin Gisby

187,440

130,185***

81,345

330,000

Peter Henderson

249,920

216,920

440,000

Simon Kirby

187,440

160,182***

81,345

330,000

Paul Plummer

176,080

143,611***

76,415

310,000

Total

1,347,864

1,125,655

456,025

2,373,000

* = No award as Patrick Butcher joined after the end of the year (20 April 2009)

** = Iain Coucher's bonus entitlement but turned down

***= This represents what the directors would have been entitled to if they had been in post for the full year 2008/9 and thus gives a fair comparison with this year's awards

The L-TIP is a long term - three year - incentive. It's used to focus the company on the long term health of the railway, not just the year ahead. It's measured against targets for the two main business challenges - train performance and delivering efficiencies. Over the past three years the company has achieved 92% of the targets in these areas and so the L-TIP will pay out 92% of the maximum potential, which the average of the last three years annual bonus, thus:

Long Term Incentive Plan

Directors

2009/10

£s

2008/9

£s

Iain Coucher

293,165

150,255

Patrick Butcher

Nil*

Robin Gisby

121,434

57,887

Peter Henderson

210,444

112,107

Simon Kirby

143,918

55,752

Paul Plummer

137,380

65,151

Total

906,341

441,152

* = Not in post for the required qualification period - three years

Contact information

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Network Rail national helpline
03457 11 41 41

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Please visit National Rail Enquiries

Journalists
Network Rail press office - National
020 3356 8700
mediarelations@networkrail.co.uk

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