Railtrack Group plc: 1999 annual general meeting: Chairman's address
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Railtrack Group plc: 1999 annual general meeting: Chairman's address
note Sir Robert Horton
Now, before we move on to the formal matters on the Agenda, I would like togive you a brief overview of events and developments in the business since our last Annual General Meeting, focusing on the areas which I hope will be of most interest to you.
Again, this year, we have had a very full post bag from shareholders, who have submitted questions in advance of today's meeting.
I hope, in this short presentation, to cover the issues raised by a number of you. Quite a lot of your questions, however, relate to plans for specific local stations and lines.
If any of you would like to pursue these matters, there will be representatives in the exhibition area after the meeting who will be happy to meet you and take a detailed note of your comments.
Let me now turn to some of the key features of the year under review:
We continue to experience a time of great opportunity, but also of great challenge, for the railways:
* We have had a further year of tremendous growth - with passenger train miles up by 8 per cent and freight tonne miles up by 18 per cent. This makes a 25 per cent increase in passenger traffic and 40 per cent increase in freight traffic over the last four years.
* We have increased investment spend again by 15 per cent, to over £1.45 billion for this year, which is about three times the level of our profits for the year. Of this, almost £300 million was investment which adds new capacity or new capability to the network, to meet the demands of growth. We expect this type of investment, which is called enhancement investment, to continue to increase over the next few years, with planned expenditure of around £440 million this year and £500 million next year.
* We have maintained the performance gains achieved in previous years and have made some further improvements, particularly in freight, against a background of increased traffic volumes and increased investment activity.
There were, unfortunately, performance shortfalls against our targets. These are receiving a vast amount of attention from us and from the train operators.
Together, we are determined to provide the service our customers need anddeserve.
It would be an understatement to say that improvement cannot come soon enough for any of us.
You approved, at the Extraordinary General Meeting last September, our proceeding with the acquisition of section one of the Channel Tunnel Rail Link. Construction began in October and I am pleased to report that theproject is now around 10 per cent complete, running to schedule and within budget.
It is a great project, probably the largest civil engineering work in the UK today, and many of you will have seen its progress if you use the motorways in Kent.
Against this background, I am pleased to report that our operating profitswere up by 8 per cent to £430 million on a turnover of over £2.5 billion.
The significance of these results is that they do enable us to deliver our ambitious investment programme.
I will say more about that in a moment.
Subject to the approval of this meeting, we shall be paying a final dividendof 17.6 pence per share on 6th October, bringing the total dividend for the year to 26.3 pence.
Profits always draw critics, so let me put these results in context - the context of the continuing growth seen on the rail network which means that around 2,000 more trains run each day, and one and a half million tons less carbon has been dumped into the atmosphere over the last three years as a result of fewer car journeys.
Our investment programme continues to gather pace. During the year, we spent £615 million on renewing track, structures, depots and stations and £739 million on electrification and resignalling schemes, telecoms and plant and machinery.
And we increased expenditure on our Station Regeneration Programme by 66 per cent to £302 million in the year, taking us well beyond the half-way point in this huge programme which will improve almost all of our 2,500 stations.
Work is proceeding on Phase One of our project to refurbish the West Coast Main Line, which by 2002 will reduce the London to Manchester journey time to around two hours. We have begun the detailed design and development work on Phase Two, the more technically challenging part of the project. We havegathered a high powered team under Simon Murray - our new board colleague -to deliver this project, and we are consulting with our customers all the way.
Overall, expenditure on capital and renewal projects was £200 million more than in the previous year and roughly double that in the year before privatisation.
We expect to maintain this overall level of expenditure this year, with moreof the investment in the second half. Our main focus has always been toensure that we meet the needs of our customers and that we get the best value from our investment.
In March of this year we published our fourth Network Management Statement, setting out a £27 billion spending programme for the next decade. Weconsulted industry partners more widely than ever before on this ambitious plan, with a £10 billion increase in investment - which is what our customers told us they wanted us to deliver, to meet the surge in passenger train miles.
Just to remind you, this includes upgrades to the East Coast Main Line, the Great Western Main Line between London and Penzance and the creation of a third major freight corridor between Scotland and the south of England.
Our programme will relieve congestion bottlenecks and provide better links with airports and major developments in the London area. It also includes plans for new facilities at stations, for disabled access to the whole network, new metro services and the provision of new capacity.
We are also discussing with Government and London Transport the possible integration of parts of our network with the subsurface lines of London Underground. Our proposal has two main elements - an east/west integration,which would allow through services from Reading, Slough and Heathrow into theCity; and a north/south integration, which would create new journeys between Croydon, Wimbledon, Gatwick and Brighton to Docklands and north London.
I believe it is against this background of growth and increased investment that our operating performance should be judged. We measure operatingperformance in minutes of lateness or minutes delay. Minutes' delay forwhich Railtrack is responsible improved last year by an average of 6 percent, against a target agreed with the regulator of 7.5 per cent. The 6 percent improvement was made up of an improvement in freight delays of 16 percent, whilst passenger delays improved by just 2 per cent. This was a disappointment, particularly as we have made great progress in mobilising people in a systematic drive to improve performance.
However, we are encouraged by the results in the last few months, which certainly suggest that the intense management focus the industry has given to performance over the last year is beginning to show results.
We have announced details for the first quarter, which showed a 9 per cent improvement on the same period last year, compared with our target of 7.5 percent.
This was in spite of the delays in the Severn Tunnel in May. Our team in the Great Western Zone and our contractors moved swiftly to re-rail nearly five miles and replace over two miles of track. This incident once more showed the importance of co-operation and communication between Railtrack, HMRI, contractors and our other stakeholders.
Our focus on performance improvement is matched by our efforts continually toimprove our safety record. The recent train collision at Winsford served as a further reminder of the need to reduce the risks which can lead to accidents occurring; in this case, the introduction of TPWS, the train protection warning system which awaits Government approval. Assuming the regulations will soon be signed, the TPWS system will be installed network-wide by January 2004, at a cost to Railtrack of about £140 million.
New safety measures are being taken continuously with the industry. I cite,for instance, the adoption of a safety critical communication system, a review of competence standards, the tightening up of access to working areas and the introduction of new operating rules.
We are building on the work we do with schools, parents and the media to avoid the needless loss of young lives through tragic acts of trespass and vandalism.
In my statement to shareholders in this year's Annual Report I say that there is a growing consensus that the railway is more than just another mode of transport - that it is a vital national asset which should form the centrepiece of an integrated transport system, serving the needs of the whole country.
Rail travel can improve the quality of life for everyone in the UK, users and non-users alike, in terms of health, safety, pollution and efficiency.
So, with our commitment to deliver the most ambitious investment programme this century comes a commitment to our environmental and our public andsocial obligations.
Last week I had the pleasure of presenting our awards to Railtrack staff and contractors for environmental achievements.
This week we have published our second Corporate Responsibility Report. I do hope that many of you can find time to read the report, and the commitments we make in it. Please use the feedback form to let us know how you think we are doing.
The creation of the Strategic Rail Authority will help the whole transport industry to pursue sustainable development and to accelerate the integration of rail with other forms of transport.
We are working closely with Sir Alastair Morton and Mike Grant, as Chairman and Chief Executive respectively of the Strategic Rail Authority, and, of course, with Mr Tom Winsor, the new Rail Regulator and his staff at ORR. So,in summary, our priorities going forward are:
* to continue to improve our safety record;
* to build upon and achieve further improvements in train performance;
* to deliver our huge investment programme, whilst shifting the balance from renewal to enhancement investment, but always obtaining the best value for money. Reflected, in that investment, will be the wishes of government, our regulators and our customers;
* to address the environmental agenda; and, finally,
* to encourage active and efficient management throughout the industry.
You know, of course, that this is my last Annual General Meeting as your Chairman, which I have had the honour to be from the start.
Railtrack still faces enormous challenges but, although it is for others to judge, I am proud of what your company has achieved since we were vested five years ago.
The whole environment for rail has changed for the better far more quickly than most people thought possible at that time.
I hand to my successor, Sir Philip Beck, a team that is committed to creating the railway system of the future that our country needs and deserves.
I believe that all our stakeholders share that ambition. It is with confidence that I wish the Board and you - our shareholders - every success.
Railhub Archive ::: 1999-07-21 RTK-001