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Network Rail spending cut by £820m as profits fall

Network Rail’s capital expenditure fell by £823 million over the last year as it saw its profits fall by 75 per cent, net debt rise by £1.5 billion, and its costs increase by £100m.

The rail operator reduced its capital spending to £3.9bn in the financial year ending 31 March compared to £4.7bn in the previous 12 month period.

It posted a pre-tax profit of £395m, which was down from £1.52bn in the previous year.

Although the company’s net debt rose to £23.8bn, from £22.3bn, Network Rail now has a lower gearing ratio, which decreased from 70 per cent to 64 per cent.

Network Rail said its profit reduction, and a fall in revenue from £6.2bn to £5.7bn, was in line with the Office of Rail Regulation’s funding determination for it Control Period 4 investment period, which runs for five years from 1 April 2009.

Its net operating costs were up slightly to £3.7bn from £3.6bn, which it said was largely due to higher staff costs.

Chief executive Iain Coucher said: “This year is the first of five under the current funding settlement agreed with the Office of Rail Regulation. 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.”

The company developed a baseline at 1 April 2009 against which it needs to achieve savings of £1.1bn by the end of CP4.

In 2009/10 its operations, maintenance and renewal activities are £265m lower than the baseline.

Maintenance costs were reduced by 7 per cent (£86m) on a like for like basis, through tight cost controls and productivity improvements.

Mr Coucher added: “In a more austere spending environment it is vital that Network Rail continues to drive down costs and make further efficiency savings. 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.”