Directly Operated Railways Limited (DOR), the company established in July 2009 and wholly owned by the Secretary of State for Transport, today published its fifth Annual Report and Financial Statements, for the period 1 April 2013 to 31 March 2014.
The figures include the consolidated results for the Company’s subsidiary, East Coast Main Line Company Limited (East Coast).
Turnover for the year to 31 March 2014 amounted to £720.0 million (2012/13: £693.8 million) mainly reflecting ticket revenue earned from passenger services at East Coast and associated income earned from catering, car parks and commission from the sale of tickets on other train operators’ services. Operating expenditure in the year amounted to £715.3 million (2012/13: £690.0 million), comprising premium payments to the DfT, access charges payable to Network Rail for stations and depots, rolling stock leasing costs, staff, and other operating costs.
This generated an operating profit for DOR before Department of Transport (DfT) service payments and taxation, of £225.3 million (2012/13: £208.7 million), and an operating profit after DfT service payments before taxation, of £8.4 million (2012/13: £5.9 million).
A total of 19.9 million passenger journeys were made with East Coast during the year – which represents an increase of 4.5% on 2012/13.
The Company exists to manage Train Operating Companies that are returned to temporary public ownership. It is planned that the East Coast franchise will transfer to a new private operator in March 2015 and DOR has been working closely with the DfT, to assist this process. Unlike previous franchise changes/ transfers, the Company ‘East Coast’ will be the subject of a business sale to a new private sector owner. By delivering these results, DOR has achieved the objectives set for the Company by the Department of Transport.
Commenting on the results, Doug Sutherland, Chairman of DOR, said:
“During the year, we continued to make further good progress with the business turnaround of East Coast, and at 91%, we were able to achieve the top customer satisfaction result for a long-distance franchised rail operator, in the 2014 spring wave Passenger Focus National Rail Passenger Survey, matching the result of the autumn 2013 survey.
“East Coast has continued to improve the journey experience for its customers during 2013/14 through various new initiatives. These included the development of a brand new station at Wakefield Westgate, opened at the beginning of 2014 by the Transport Secretary, the refresh of the Standard Class catering offer, the launch of a new uniform for staff, and other significant investments in the on-board environment of its train fleets and station facilities. A project to upgrade the on-board Wi-Fi service was also started during the year and completed during the first quarter of 2014/15.
“The Company also achieved another record for its annual employee engagement survey in 2013, with a participation rate of 78% and an engagement score of 73% – a result significantly higher than any previous franchisee on the East Coast Main Line. The participation rate represents a 23% improvement on the 2011 survey. Whilst many employee training initiatives continued during the year, a significant focus was also placed on leadership and management development within the business.
“As part of the DfT’s franchise direct award programme, DOR continued to undertake contingency planning relating to potential transfers. This work remained a significant part of the activities of the core team at DOR during the year, with the aim of minimising costs for the Government, whilst providing a credible capability to take over any franchise, if required at reasonably short notice.”
Safety & Environment
The safety of customers and employees at East Coast continues to remain the top priority. Progress over the last year has continued, with improvements in many of the operational and occupational targets. During the year, East Coast achieved a 75% reduction in all passenger accidents, and 13 of its 19 Key Performance Indicators were fully met.
The last two years have seen a step change in East Coast’s environment performance; almost 45% of the Company’s wastes are now recycled, and the carbon footprint has been reduced by 6%. As a low carbon business, East Coast’s customers say that they expect the Company to demonstrate the very highest environmental standards in everything it does, from energy efficiency in its buildings, recycling its wastes – to making it simple to get to and from its stations using sustainable transport, such as cycling.
East Coast will continue to increase its recycling levels to 55% and further reduce its carbon emissions in 2014/15.
Achieving an acceptable and sustainable level of operational performance has long been a significant challenge for East Coast and its predecessors, and this has been and remains a critical area of focus for DOR. Around two thirds of all delays are typically due to causes which are the direct responsibility of Network Rail, and the vast majority of the remaining causes of delay have related to the ageing train fleet.
High winds and overhead line incidents were the most detrimental during the year for East Coast. Given the nature of the current rail infrastructure on the East Coast Main Line, delays to customers during disruption remains the single biggest challenge to East Coast. The Company continues to work closely with Network Rail to facilitate integrated working where possible, to mitigate such delays and to understand the root causes.
Significant investment in depot facilities and the capabilities of the engineering team has led to improving availability and reliability of the fleet, and as a consequence, the number of cancellations was reduced and delays attributable to fleet performance started to improve during the year. This positive trend is continuing, and after the year-end, and for the first five Periods of 2014/15, operational performance has begun to show signs of very significant improvement.
During 2012, the Government decided that a new fleet of diesel trains would replace East Coast’s ageing diesel fleet as part of the InterCity Express Programme (IEP).
This was followed by a further announcement from the DfT in July 2013 that new electric trains would also be procured to replace the current Mk4 225 fleet as part of the IEP. This means that for the first time in its history, the future franchise will benefit from a standardised fleet of state-of-the-art trains on its route network.
East Coast has established a project team to work with the manufacturers Hitachi, both on issues affecting the final design, and to facilitate the introduction of the fleet on its network between 2018 and 2020.
During 2013/14, the progress at East Coast was again recognised by numerous organisations; 13 awards were won during the year, and to date, the Company has been the recipient of no fewer than 55 such awards, including successes in safety best practice, people development, customer service, special projects, marketing and PR.
Doug Sutherland concluded:
“DOR’s financial performance has been good throughout the year, with £216.8 million (2012/13: £202.8 million) provided to the DfT in premium and dividend payments.
“The business plan for the remainder of the franchise during 2014/15 will see the good work continuing, with the twin aims of ensuring a successful transfer of the business back to the private sector – in good condition, and maximising the value of the franchise achieved by the Government and the taxpayer.”