• Year in review
• Market overview

Overall performance

After the difficulties of 2009, 2010 saw a steady rehabilitation of the Group in the UK rail industry. With a strong operational performance across its two rail franchises, both have now been extended by the DfT – c2c will run until November 2012 or May 2013 (at the DfT’s option) and National Express East Anglia (“NXEA”) will operate until February 2012. The Group will actively bid to secure the new c2c franchise when tendered, to build on the record-breaking punctuality delivered in 2010, together with the proposed 18 month extension to late 2013 of NXEA. National Express is now positioned to participate in profitable future rail operations where risks are both appropriate and manageable.

Revenue in 2010 was £637.5 million (2009: £1,190.5m), significantly down on the prior year reflecting the hand-back of the loss-making East Coast franchise in November 2009. Underlying revenue grew by 3%, driven by strong growth in passenger numbers in the second half of the year. Severe weather at the beginning and end of the year had limited impact; both services recovered operational performance quickly through the dedicated efforts of the entire workforce. NXEA remains in 80% revenue support from the DfT.

Normalised operating profit improved strongly to £33.8 million (2009: £12.0m). Continued cost control combined with improving revenue drove operating margin 4.3 percentage points higher, to 5.3%.

Driving revenue

As regulated prices reduced slightly in January 2010, underlying passenger volumes have increased by 4%. An improving Central London employment market helped c2c in particular and the extension of the Oyster card to suburban rail improved revenue. c2c also successfully grew its leisure patronage and its consistently outstanding reliability, achieving punctuality in August of 98.8%, boosted revenues. The franchise also recorded its best ever customer satisfaction results, reaching 91% in both the Spring and Autumn Passenger Focus surveys. Meanwhile, NXEA also improved punctuality, reaching 90% during the year.

Managing costs

Both franchises have managed cost successfully during 2010. Improved procurement reduced utility costs by £2 million and successful rationalisation of staffing agencies delivered wage cost savings.

mproved safety leads to lower costs. NXEA successfully drove down ‘signals passed at danger’ (“SPADs”) by nearly 50% in the year, whilst reducing employee, passenger and contractor accident rates. This was overshadowed by a serious accident at a level crossing in East Anglia, when an unauthorised crossing by a road tanker resulted in a collision with a train, with a number of injuries but, thankfully, no fatalities. The road tanker driver was subsequently convicted of endangering rail safety. We are working actively with Network Rail to ensure that level crossing risks are fully assessed and compliance with procedures enforced with all users. Safety performance at c2c was also strong, with only one SPAD and all employee, passenger and contractor safety targets exceeded.

Developing opportunities

NXEA began the roll-out of its £185 million capacity investment programme, funded in conjunction with the DfT. In December 2010, new services were introduced to the timetable, with a total of over 4,000 extra seats added on Liverpool Street commuter services at peak times. The overall programme includes faster trains, on-board Wi-fi from Norwich to London and, from March 2011, new rolling stock will be introduced to the network. Station and maintenance improvement work has also been carried out across East Anglia and c2c, with two new carriage washers, car park extensions and station upgrades.

The overall programme includes faster trains, on-board Wi-fi from Norwich to London and, from March 2011, new rolling stock will be introduced to the network.

The Group is in the process of bidding for the DfT’s announced tender of the Greater Anglia franchise (the successor to NXEA’s operation), which will run from February 2012 for a period of approximately 18 months. A decision on this franchise is expected in late 2011. The retendering process for c2c will not start until 2012 and the Group expects to bid. At this time, the Group has no plans to take part in either the West Coast Main Line or East Coast Main Line bidding processes. The Group believes it can drive both improved customer service and shareholder returns in UK Rail, subject to the balance of risk and reward available in the DfT’s proposed longer franchises.