Network Rail unveils £1.6bn pre-tax profit

Network Rail, the company that has owned and operated Britain’s railway system for the past five years, has unveiled a pre-tax profit of £1.6bn, which represents a profit margin of 27%.

The latest figure covers the financial year running to 31 March 2008. Turnover during the period ran to £6.0bn.

In the previous year Network Rail achieved a 26% profit margin on the back of a pre-tax profit of £1.5bn.

Ian McAllister, chairman, said that Network Rail has achieved a great deal since taking over from Railtrack in 2002.

Over that time the railway network has been transformed, he said, listing the main changes as:

• Rail travel is safer than it has ever been.
• More trains are running than ever before.
• Average punctuality is the highest since records began in 1996.
• Passenger journeys are at their highest level for 60 years
• Cost efficiencies of 23% have been delivered
• Investment has grown

McAllister said that investment will double over the next five years and will then double again.

“Network Rail will deliver a £30bn investment programme to grow capacity and meet the increasing demand for rail,” he said.

“After decades of under-investment, Network Rail is in the position of having to cope with a backlog of renewals and [also] having to deliver capacity to meet future growth.

“This year Network Rail managed an investment programme totalling around £4bn – probably the biggest and most complex capital investment programme of any company in the UK.

“We deliver around 5,000 separate major projects on the network every year. Every one requires careful planning, sometimes years and months in advance, but also demands meticulous execution in just a few days.

“We are planning a dramatic increase in the number, size and complexity of schemes for the next five years.”

Looking back over the financial year that has just ended, there was an enhancement investment of more than £1bn, double the figure two years earlier.

Asset reliability improved last year:

• points and track circuit failures were 15% down at 14,000
• asset failures were 10% lower at 52,000

However, McAllister was not happy with the rate at which cost efficiencies have been achieved.

“Driving out further efficiencies becomes more difficult,” he said. “This is particularly the case with track renewals. Although unit costs are falling in real terms, they are not reducing quickly enough to meet the targets set for the company five years ago.

“The year under review has seen an overall reduction in renewals efficiencies (from 23% to 18%). We continue to focus on addressing this issue but it is clear we will not meet the renewals efficiencies challenge for this Control Period, in particular the area of track renewals.”

Network Rail has no shareholders so profits are reinvested in the railway network.