Network Rail profits and revenues down as new control period terms starts to bite

Network Rail revenues and profits are down for 2014-15, its first year under the more rigorous CP5 control period regime (2014-19). The release of the results coincided with news that NR’s investment programme will be reviewed by the DfT (following cost overruns), and that the chairman, Richard Parry-Jones, is to stand down and to be replaced by TfL’s Peter Hendy (LTT, 9 July).

NR’s total revenue fell 3.9% to £6.087bn (2014: £6.333bn) largely due to charges being ‘rebaselined’ by the ORR (Office of Rail & Road).  Operating profit was 13.3% down at £1.735bn (2014: £2.001bn); profit before tax plummeted 51.1% to £506m (2014: £1.035bn), which resulted in an overall loss of £376m (2014: £1.256bn profit).

Smaller (ORR proscribed) margins depressed profits, and a ‘derecognition’ of deferred tax assets in previous years, resulted in higher than usual tax payments (of £882m as against a £221m tax credit in 2014).

Net operating costs increased 0.5% to £4.352bn (2014: £4.332bn). Capital expenditure was 5.8% down at £6.474bn (2014: £6.873bn), though enhancement expenditure increased to record levels of £3.393bn (2014: £3.198bn). Eight of the top ten investment milestones were attained (the exceptions being the Great Western and North West electrification schemes).

Net debt increased 14.5% to £37.759bn (2014: £32.987bn), but finance costs fell 3.5% to £1.338bn (2014: £1.386bn). Total grant access and grant income fell from £6.135bn to £5.670bn.

Although revenue from track access charges and grant income declined in 2014-15, freight revenue increased 44.2% to £75m (2014: £52m), and property rental income was 7.6% up at £256m (2014: £238m).

The number of passenger kilometres travelled increased by 4.5% to 62.4 billion (2014: 59.7 billion), but the amount of freight moved fell slightly by 2.2% to 23.9 billion net tonne kilometres (2014: 24.4billion).

Network Rail says that – in real terms (at 2014-15 prices) – revenue has decreased (through lower charges) from £7.5bn in 2006-07 to £6.1bn in 2014-15, while passenger revenue increased from £6.4bn to £8.0bn during the same period. Operating costs per train mile have also fallen by 48% since 2003-04 (from £12 to less than £7 per train mile). The figures are cited by NR as examples of greater efficiency.

In England & Wales, 89.7% of passenger trains arrived ‘on time’ (i.e. came within 10 minutes of the scheduled time for long distance trains, or arrived within five minutes for other services). This was 1.3% below the 91% target and 0.3% down on the previous year’s performance. Scottish trains were 1.5% below the 92% target.

94.5% of commercial freight trains ran to time (i.e. turned up within 15 minutes of the booked arrival time).

Summing up, Network Rail’s group finance director Patrick Butcher said: “2014-15 has been a year of transition for Network Rail, and the first year of what is proving to be a very challenging control period settlement.

“Our financial performance in 2014-15 was £234m lower than planned. This was largely due to financial underperformance in renewals, notably in track, signalling and civils; net overspends across our enhancement portfolio; financial underperformance resulting from poor train punctuality; and lower than expected savings in operations and maintenance.”

676/Jul 15

 

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