Profits down and debt up at rail company

RAIL infrastructure company Network Rail (NR) today announced a much-reduced annual profit and an increase in net debt to £23.8bn.

The company's operating profits, revenue and capital expenditure also fell in the 12 months ending March 2010.

But NR stressed that costs had been controlled, charges to rail companies had been cut and the number of trains on time had reached an annual record level.

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The not-for-dividend company, which has no shareholders, made an after-tax profit of 284m in 2009/10 - well down on the 609m figure for 2008/09.

Net debt rose from 22.30bn to 23.83bn. But NR said its debt had a lower gearing (debt to regulated asset base) ratio of 64 per cent - down from 70 per cent - and that this was "well within permitted limits".

Revenue was 5.66bn compared with 6.16bn in 2008/09, while net operating costs were up slightly from 3.61bn to 3.68bn.

This was largely due to higher (but lower than inflation) staff costs, NR said.

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Operating profits were down to 1.98bn from 2.54bn, but the company said this was in line with terms laid down by the Office of Rail Regulation (ORR).

NR said charges to passenger train companies had been cut by seven per cent or 22p per passenger train journey, while, on average, freight charges had fallen 35 per cent.

NR chief executive Iain Coucher said: "Passengers care most about trains being on time and we have delivered another record year with punctuality surpassing 91 per cent.

"NR also has a duty to get best value for the British people and we have retained a tight focus on controlling costs. This has meant that we can cut charges to passenger and freight operators.

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"As a result, the savings we make could be passed on to passengers in lower fares or to taxpayers through lower Government subsidies to the rail industry."

He went on: "This year is the first of five under the current funding settlement agreed with the ORR. Our results show we are delivering well against the ORR's key performance indicators, meeting or exceeding the vast majority of them.

"There remains a lot more hard work to do in this control period. This is a long-term business but solid groundwork has been laid."

Mr Coucher continued: "In a more austere spending environment it is vital that NR continues to drive down costs and make further efficiency savings.

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"A strong start has been made in 2009/10 in delivering against our targets but we must and we will work harder and faster in the coming years."

The results come a day after the ORR reported that NR had had a "mixed" year.

ORR boss Bill Emery said he had written to NR's remuneration committee urging it to take into account this mixed performance when considering top NR executives' bonuses which are due to be announced later this month.

Mr Emery expressed disappointment last summer, and again yesterday, that, despite his sending a similar letter last year, top NR directors had received bonuses totalling around 1.2m.

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Transport Secretary Philip Hammond has also expressed concern about the level of bonuses, writing to NR chairman Rick Haythornthwaite about the matter.

Gerry Doherty, leader of the TSSA rail union, said Mr Coucher's claims of record punctuality were "poppycock".

Mr Doherty went on: "Iain Coucher keeps claiming record punctuality figures in the hope of justifying his taxpayer-funded 500,000 bonus on top of his over-the-top salary of 650,000 a year.

"His figure of 91 percent (of trains running on time) is only a record because British Rail did not announce national figures. But its largest region - the old Southern Railway - regularly achieved 95 per cent punctuality figures.

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"NR does not own one single train - it is a maintenance firm looking after track and signals.

"Punctuality is down to the private train operators who actually run the trains and it should not be used by Mr Coucher to try and prop up a flawed bonus system which is wholly unacceptable for running what is a state monopoly."

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