Latest Rail News

05.07.18

Network Rail in 2017: Record delivery despite profit slump, ‘critical’ estate sale due this year

Network Rail has invested a record £4.1bn in the last financial year, despite profits falling from £483m to just £48m – a huge drop of 90%.

The profit drop was assumed in the CP5 regulatory settlement determination, with a further decreased anticipated next year. According to NR, this is because income (largely fixed by the regulator) does not increase in line with borrowing costs and depreciation charges, “which increase as a result of the accumulated cost” of delivering railway upgrades.

“Although revenue and operating costs before depreciation increased broadly in line with each other, increased depreciation and finance costs/other gains and losses from delivery of the CP5 investment programme reduced overall profitability to £48m,” it said.

The infrastructure owner’s annual report also showed increasing investment in railways improvements, such as the frequency and reliability of trains and the creation of better travel experiences.

The report noted: “To maintain this momentum in the investment programme, Network Rail plans to continue additional funding through the sale of non-core assets and continues to look for additional funding from third parties and internally by delivering further cost efficiencies.”

Sir Peter Hendy CBE, chair of Network Rail, said the organisation is now much more customer-focused, adding: “We have become more cost-competitive, making over £85m of savings through our continuous improvement initiatives in the past year alone.”

Railway safety, reliability and efficiency will be amongst the focuses for the next five years as Network Rail aims to reduce the amount of late and delayed trains.

Its debt increased to £51.2bn from £46.3bn, although it said this was expected after borrowing £6.7bn from the DfT to make investments and pay back existing bonds. It plans to borrow significantly over the last year of CP5 – around £6.4bn from the agreed DfT loan facility – but it is not expecting to borrow any more in CP6.

Future funding will instead be made available by grants, alongside Network Rail’s plans to sell assets and attract more private investment.

Crossrail, Thameslink and London Bridge, the Ordsall Chord, the Edinburgh-Glasgow Improvement Programme, the Great Western Electrification Programme, and the Waterloo and South West upgrade are amongst the key projects for the year.

But the report explained that efficiencies have faced challenges this year. “The ORR and Network Rail agreed ambitious targets at the start of the control period, which have been built into the determination of charges.

“Efficiencies have been made, but are often offset against cost pressures; including changes to improve workforce safety, challenges in our supply chain such as the collapse of Carillion and fewer opportunities to carry out works as the network becomes busier.”

As a result, the annual report said that Network Rail must reduce costs and raise funds for the final year of CP5, with one of the key recommendations in the Hendy Review in 2015 being to dispose of non-core assets.

Jeremy Westlake, its chief financial officer, wrote: “The reason for this being to help bridge the funding gap for the Railway Upgrade Plan; assisted by additional government funding and generating additional efficiencies.

“Network Rail has continued to progress this disposal of certain property assets over the year. The anticipated sale of our commercial estate is critical to achieving our plans in 2018-19 and we anticipate that this will take place in the second half of the year.”

Top image: Jonathan Brady via PA Wire PA Images

 

Enjoying RTM? Subscribe here to receive our weekly news updates or click here to receive a copy of the magazine!

Comments

There are no comments. Why not be the first?

Add your comment

 

related

Rail industry Focus

View all News

Comment

The challenge of completing Crossrail

05/07/2019The challenge of completing Crossrail

With a new plan now in place to deliver Crossrail, Hedley Ayres, National Audit Office manager, major projects and programmes, takes a look at ho... more >
Preparing the industry to deliver trains for the future

04/07/2019Preparing the industry to deliver trains for the future

The move to decarbonise the rail network involves shifting to cleaner modes of traction by 2050. David Clarke, technical director at the Railway ... more >

Most Read

'the sleepers' blog

Maximising efficiency requires investment in data, but it’s rewards for rail could be extensive

14/11/2019Maximising efficiency requires investment in data, but it’s rewards for rail could be extensive

Rail Technology Magazine’s Matt Roberts explains the significant role data can play within the future development of the rail industry. Standing as a cornerstone of the UK transport network, the rail industry is forever striving to in... more >
read more blog posts from 'the sleeper' >

Interviews

Andrew Haines, CE of Network Rail, tells BBC News his organisation could issue future rail franchises

24/06/2019Andrew Haines, CE of Network Rail, tells BBC News his organisation could issue future rail franchises

Andrew Haines, the Chief Executive of Network Rail, has told the Today programme on Radio 4's BBC’s flagship news programme that he would not rule out his organisation issuing future r... more >
Advancing the rail industry with management degree apprenticeships

08/05/2019Advancing the rail industry with management degree apprenticeships

In answering the pressing questions of how current and future generations of managers can provide solutions to high-profile infrastructure projects across the UK, Pearson Business School, part of... more >