NR debt rises 10%
Annual report reveals pre-tax profits for Network Rail fall, while revenue, operating costs and costs all increase.
PRE-TAX profits for Network Rail in 2015-16 fell by £95 million to £411m, while revenue, operating costs and debt all increased compared with the previous 12-month period.
The figures are contained in the company’s annual report and accounts, released on July 4. The headline figures showed an £11m rise in revenue to £6,098m (2014-15: £6,087), with operating costs rising by £9m to £2,712m. The company’s net debt also rose, from £37.8 billion in 2014-15 to £41.6bn. Capital expenditure increased significantly, from 201415’s figure of £6.47bn to £6.68bn, of which £3.53bn was spent on enhancements with £3.08bn on renewals.
Real-term revenue has continued to decrease over the last ten years, which NR says is a result of passing on the benefits of increased efficiency and stability through lower charges. Severe weather incidents cost the company £130m, and freight revenue fell by £19m due to lower volumes of traffic, particularly coal. However, property revenue increased by £18m, as a result of higher retail sales at managed stations and rental income growth from its commercial estate portfolio.
In 2015-16 NR borrowed £7.5bn from the Department for Transport. £3.1bn was used to pay back existing bonds, while the remainder (£4.4bn) was used to invest in the railway infrastructure. The company plans to draw down a further £11.2bn from its loan facility to finance its investment programme, along with a further £5.7bn to refinance maturing debt. This means that by March 2019 the company will have net debts of £52bn.
In terms of network performance, passenger usage continued to rise, from 62.4 billion passenger-km in 2014-15 to 64.4
fell, from 89.7% of trains on time in 2014-15 to 89.1% in 2015-16. Freight traffic also fell, with 17.8 billion tonne-km carried against the previous year’s total of 22.7 billion tonne-km.
NR Chief Executive Mark Carne said that with more trains running than ever before, demand is outstripping supply and that large parts of the network are full, with areas facing increasing problems with delays and congestion.
Following NR’s reclassification as a public body, he said: “Under our old financial structure we could have funded the extra costs [of projects committed to at an early stage which have exceeded planned budgets] through borrowing, subject to regulatory permission.
“However, the reclassification of NR as a public body closed that funding route. It is clear that this ineffective capital discipline led to, at times, a lack of proper upfront planning.”
Carne also said the company needs to find new sources of investment: “We cannot just rely on central and local government being able to continue to provide the capital investment needed.”
He added that NR will need to source funding for improvements from people, authorities and businesses that will directly benefit from better railways, and to modernise its systems with digital train control technology - the so-called ‘Digital Railway’.