Network Rail chief executive Iain Coucher has said costs must be driven down further as the rail operator makes “good progress” towards its target to cut costs by £4.1bn by 2014.
Coucher said Network Rail had performed well during the first half of 2009 as he published its results for the six months to 30 September.
“Maintenance costs are declining, staff costs have been held steady, and our investment programme continues apace. The debt programme continues to be prudent, well managed and fully hedged,” he said.
Network Rail is making very good progress in its commitment to reduce the costs of running the railway, making it ever more affordable, he said. The combined target for 2009 - 2014 is £4.1bn and currently efficiency savings are slightly ahead of projections.
Network Rail is making significant cost efficiencies in its maintenance operations by adopting smarter working practices. Maintenance costs were down 8.5% or £65M as a result of savings on subcontractors, agency workers and the hire of plant equipment.
The rail operator will cut costs further by implementing new techniques to replace life-expired infrastructure, such as the use of prefabricated, modular bridges and switches and crossings, said Coucher. This will also reduce the time needed to close sections of the railway and increase the amount of time that the network is available for trains to run.
Network Rail has recently announced a planned reduction of around 1,500 posts in maintenance over the next 18 months.
Network Rail’s expanding investment programme has allowed it to create 600 new jobs, combined with 500 jobs insourced as part of an efficiency drive. This has resulted in an increase in the workforce from 36,000 to 37,000 and an increase in total employee costs by £22M. The annualised average cost per employee, however, decreased by £414.
As a result of these savings, and other working capital movements, Network Rail generated cash flows of £1.638bn from its operating activities, broadly equivalent to the same period last year, despite the reduction in income. These cash flows funded 91% of the capital investment in the railway network in the period.
Investment remains at historically high levels reflecting the focus on adding capacity, increasing line-speeds and improving reliability. In London and the South East a major congestion-busting programme of platform lengthening, to allow longer trains, is well underway. The last six months has seen significant work started on other major projects, notably Thameslink, Birmingham New Street and the Airdrie to Bathgate line, near Edinburgh.
Net debt of £22.2bn remains at a sustainable level. Network Rail is confident that its debt is well managed and the company has a policy of fully hedging. The company’s debt issuance programme remains attractive to the market and continues to be over-subscribed. In the last six months over £2bn has been raised including a single public placement of a £750M inflation linked bond.
The valuation of the railway network rose to £35.476bn at 30 September 2009 from £34.925bn at 31 March 2009. This is despite a reduction in the valuation of investment property from £700M to £669M reflecting the continued depressed state of the property market.
“Network Rail has a big task ahead. It must continue to drive down costs and reduce prices to customers and at the same time build a bigger and better railway through an extensive investment programme that will bring more trains, more seats and better journeys,” said Coucher. “Network Rail continues to invest through the downturn; providing skilled jobs and opportunities for partners and suppliers across Great Britain. It anticipates that demand for rail will continue to grow and this vital investment will meet the needs of a recovering British economy. Looking forward Network Rail is confident that as roads and airports become more congested, the greener and safer option of rail travel makes it the best choice.”