Q3Quarterly Report

2016/17

NETWORK RAIL LIMITED Q3 REPORT 2016/17

CONTENTS

3 Chief executive’s foreword

4 Scorecard

6 Performance commentary

8 Highlights of the quarter

10 Glossary

WELCOME TO OUR LATEST QUARTERLY REPORT

This report covers the third quarter of 2016/17, from 11 October 2016 to 2 January 2017. It is intended to provide clear information on how we are doing against our key targets.

Welcome to our third quarterly report of 2016/17.

This quarter included the completion of one of the biggest programmes of engineering work that we have ever carried out over Christmas and New Year. It was a hugely ambitious programme, which saw several of our major enhancement programmes complete critical milestones as well as the usual, vital renewals and maintenance work. More than 24,000 staff worked over a ten day period to deliver over £100m of improvement work. Passengers are already feeling the benefits of this – from the new electric trains that can now run from Hayes&Harlington to Paddington (an upgraded service that offers an additional 6,550 seats a day) to a new platform at Cardiff Central station offering improved passenger facilities.

This quarter also saw a significant speech from the new Secretary of State for Transport, Rt Hon Chris Grayling MP, in which he set out his vision for the future of the railway. He spoke about the need for new ways of working and new ways of funding improvements to the railway and called for closer working across the industry. These themes are consistent with our own Delivering for our Customers transformation plan which we published earlier this year, and which we continued to make progress on this quarter. We have established an independent review, for example, to look at barriers to third party funding and financing and alternative models of delivering projects. We have also increased the financial authority of route managing directors, to enable more investment decisions to be made at a regional level and allow routes to be more responsive to their customers. This process of becoming a more customer focused, commercially minded organisation will continue at pace and a full update on progress against our transformation plan can be found on our website.

Performance against our scorecard targets has been mixed this quarter. Financial performance continues to be an area in need of improvement and train performance this quarter has also not been up to standard. GTR performance on the South East route continues to have a major and disproportionate impact, with their industrial relations issues creating a significant challenge, but there is also much more we can do. Our focus on temporary speed restrictions (TSRs), for example, has led to a reduction in the number of TSRs and also on their impact on delays.

On safety, asset management and delivery of major projects we remain largely on target. This is certainly reflected in some of my highlights of this quarter, which include the opening of the Oxford-London Marylebone line – the first new rail link between a major British city and the capital in 100 years – and four of our delivery teams being awarded the British Safety Council’s ‘Five Star Occupational Health and Safety Grading’.

We will be maintaining a keen focus on driving up performance across the board as we approach year-end, and I will look forward to presenting the outcomes of this in my next report.

Mark CarneChief executiveFebruary 2017

“WE WILL BE MAINTAINING A KEEN FOCUS ON DRIVING UP PERFORMANCE”

CHIEF EXECUTIVE’S FOREWORD

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Area Performance measure Full-year forecastSafety AIP % weighting Current period Prior period Worse than target Target Better than target

Workforce safety Lost time injury frequency rate (LTIFR) 5.0% 0.473 0.472 0.470 0.447 0.425

Workforce safety Workforce close calls raised 2.0% 7,701* 142,511** 90 K 120 K 150 K

Workforce safety YTD close calls closed within 90 days (%) four period in arrears (MAA)† 3.0% 75.1% 74.5% 70% 80% 90%

Passenger safety Train accident risk reduction measures 5.0% 86% 83% 60% 80% 100%

Level crossing risk reduction Top 10 milestones to reduce level crossing risk 5.0% 1 0 60% 80% 100%

Financial performance AIP % weighting Current period YTD Worse than target Target Better than target

Financial performance measure Total efficiency generated excluding enhancement 10.0% -5 -136 -£100m 0 +£100m

Financial performance measure Enhancement only 5.0% -18 -29 -£70m 0 +£70m

Cash compliance Income and expenditure 5.0% 8 433 -£12m 0 +£47m

Investment AIP % weighting Current period YTD Worse than target Target Better than targetTop 10 IP renewals and enhancement milestones

Key milestones of top 10 renewals and enhancement projects 5.0% 0 5 6 8 10

All delivery plan enhancement milestones Interim and completion milestones of all enhancement projects 5.0% 70% 75% 60% 80% 100%

Asset management AIP % weighting Current period Prior period Worse than target Target Better than target

Composite Reliability Index (CRI) Total 5.0% 15.0% 15.1% 13.7% 15.0% 16.3%

Renewals (seven key volumes) Volumes (period and YTD) 5.0% 93.7% 95.6% 90% 95% 100%

Train performance* AIP % weighting Current period Prior period Worse than target Target Better than target

Public Performance Measure (PPM) Aggregate of route performance 9.3% 7/24 6/24 0% 50% 100%

Cancelled and Significantly Late (CaSL) Aggregate of route performance 3.5% 5/18 5/18 0% 50% 100%

Right time arrivals Aggregate of route performance 1.6% 0/14 1/14 0% 50% 100%

Freight Delivery Metric (FDM) Aggregate of route performance 4.0% 6/8 5/8 0% 50% 100%

Others Aggregate of route performance 1.6% 3/4 1/4 0% 50% 100%

Locally driven measures* AIP % weighting Current period Prior period Worse than target Target Better than target

People measure Your Voice action plans and local people measures 3.2% 3/8 5/8 0% 50% 100%

Passenger satisfaction Survey results 5.8% 3/8 3/8 0% 50% 100%

Reduction in railway work complaints Count of complaints received by routes 2.2% 5/8 2/8 0% 50% 100%

Others Various measures 8.8% 5/8 2/8 0% 50% 100%

SCORECARD

† Currently close out only calculated for non-IP close calls

* Performance represented by number of metrics hitting target

Key to performance colours ‘Worse than target’ or below Between ‘worse than target’ and ‘target’ Between ‘target’ and ‘better than target’ ‘Better than target’ or above

Our scorecard gives an at-a-glance summary of our achievements against key indicators and areas in which we need to do better.

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NETWORK RAIL LIMITED Q3 REPORT 2016/17

Area Performance measure Full-year forecastSafety AIP % weighting Current period Prior period Worse than target Target Better than target

Workforce safety Lost time injury frequency rate (LTIFR) 5.0% 0.473 0.472 0.470 0.447 0.425

Workforce safety Workforce close calls raised 2.0% 7,701* 142,511** 90 K 120 K 150 K

Workforce safety YTD close calls closed within 90 days (%) four period in arrears (MAA)† 3.0% 75.1% 74.5% 70% 80% 90%

Passenger safety Train accident risk reduction measures 5.0% 86% 83% 60% 80% 100%

Level crossing risk reduction Top 10 milestones to reduce level crossing risk 5.0% 1 0 60% 80% 100%

Financial performance AIP % weighting Current period YTD Worse than target Target Better than target

Financial performance measure Total efficiency generated excluding enhancement 10.0% -5 -136 -£100m 0 +£100m

Financial performance measure Enhancement only 5.0% -18 -29 -£70m 0 +£70m

Cash compliance Income and expenditure 5.0% 8 433 -£12m 0 +£47m

Investment AIP % weighting Current period YTD Worse than target Target Better than targetTop 10 IP renewals and enhancement milestones

Key milestones of top 10 renewals and enhancement projects 5.0% 0 5 6 8 10

All delivery plan enhancement milestones Interim and completion milestones of all enhancement projects 5.0% 70% 75% 60% 80% 100%

Asset management AIP % weighting Current period Prior period Worse than target Target Better than target

Composite Reliability Index (CRI) Total 5.0% 15.0% 15.1% 13.7% 15.0% 16.3%

Renewals (seven key volumes) Volumes (period and YTD) 5.0% 93.7% 95.6% 90% 95% 100%

Train performance* AIP % weighting Current period Prior period Worse than target Target Better than target

Public Performance Measure (PPM) Aggregate of route performance 9.3% 7/24 6/24 0% 50% 100%

Cancelled and Significantly Late (CaSL) Aggregate of route performance 3.5% 5/18 5/18 0% 50% 100%

Right time arrivals Aggregate of route performance 1.6% 0/14 1/14 0% 50% 100%

Freight Delivery Metric (FDM) Aggregate of route performance 4.0% 6/8 5/8 0% 50% 100%

Others Aggregate of route performance 1.6% 3/4 1/4 0% 50% 100%

Locally driven measures* AIP % weighting Current period Prior period Worse than target Target Better than target

People measure Your Voice action plans and local people measures 3.2% 3/8 5/8 0% 50% 100%

Passenger satisfaction Survey results 5.8% 3/8 3/8 0% 50% 100%

Reduction in railway work complaints Count of complaints received by routes 2.2% 5/8 2/8 0% 50% 100%

Others Various measures 8.8% 5/8 2/8 0% 50% 100%

185 K

143.8

86.4%

7/8

4/8

7/8

5/8

94.7%

70%

78.2%

0.459

6/8

7/24

-39

-201

5/18

1/14

2/4

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PERFORMANCE COMMENTARY

The following pages provide details on our achievements in this quarter against key indicators, our plans and priorities for improvement.

SafetyWorkforce safety - Lost time injury frequency rateThe number of injuries leading to absence from work among staff and contractors per 100,000 hours worked. Our target is 0.447; a lower figure represents a better performance against the target.

Based on current performance, we are forecast to be very close to achieving our end-of-year target. We can never be complacent on safety and are focusing on reinforcing the basics – the importance of risk assessments, of leaving work sites tidy, of following the ‘lifesaving rules’ and of raising close calls.

Workforce safety - Close callsWe measure the number of close calls reported, and consider a higher number to be a positive result, as it suggests the workforce takes seriously their responsibility to report safety concerns. We aim to close 80 per cent of close calls (by either rectifying the issue or having a plan in place to mitigate the risk) within 90 days.

The number of close calls raised is forecast to be significantly better than target at year-end. The percentage closed within 90 days is slightly below target, but is expected to improve following engagement with the responsible managers across the business.

Passenger safetyThis measures progress against a set of actions to reduce train accident risk, including maintaining and improving the safety of our track, bridges and earthworks as well as staff training.

We are currently forecast to exceed our year-end target.

Level crossing risk reductionPerformance against the top ten milestones to reduce level crossing risk.

We are currently forecast to miss our target at year-end, with only six of the ten crossings identified now expected to be closed. The reasons for delay to the other four include a lack of resource within the local council’s Rights of Way department in order to progress the closure and the need to purchase land and obtain access rights from others.

Financial performanceFinancial performance excluding enhancementsHow we are performing against our income, operating expenditures and renewals budget. Our target for the year is £0 (breakeven). A higher figure represents better performance against our target.

We are currently forecast to come in significantly below target, with higher renewals costs, train performance compensation and lower than expected efficiencies in operating expenses being the main causes. Whilst we are working to improve our project planning and delivery, our network resilience and our efficiency planning and monitoring, these changes will take time to result in improved financial performance.

EnhancementsHow we are performing against our enhancement expenditure budget. Again, our target for the year is £0 (break-even) and a higher figure represents better performance against our target.

We are currently forecast to come in below target. This is related to higher costs on the Edinburgh-Glasgow Improvement programme and rolling programme of electrification enhancement projects in Scotland, and to a range of factors (including increased contractor costs, supply chain constraints and access issues) on the Northern Hub programme.

Cash complianceA measure of how well we have remained within our funding envelope in total. This is an aggregation of all variances against our financial budgets within capital expenditure, operating expenditure and income.

We are currently forecast to finish the year significantly better than target.

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NETWORK RAIL LIMITED Q3 REPORT 2016/17

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InvestmentTop ten renewals and enhancement milestonesOur target is to meet eight of our top ten milestones within our enhancement projects.

We are currently forecast to meet our target at the end of the year.

All enhancement milestonesOur target is to achieve 80 per cent of interim and completion milestones for all enhancement projects.

We are currently forecast to miss this target, and achieve 70 per cent. There are a variety of project-specific reasons for this, including changes in scope, a desire to incorporate learnings from other projects, staff shortages in partner organisations and a need to divert resource to more urgent projects.

Asset managementComposite reliability indexMeasures the short-term condition and performance of our assets including track, signalling, points, electrification, telecoms, buildings, structures and earthworks.

We are currently forecast to meet our target on this measure at the end of the year. The number of service affecting failures was 3 per cent better than target, with signalling performance having benefited from improvements to axle counters (the devices used to detect when a train passes between two points).

Renewals (seven key volumes)Measures delivery against budget in seven key types of renewals: plain line track, switches and crossings, signalling and equivalent units (SEU), underbridges, earthworks, conductor rail renewal and wire runs.

We are currently forecast to just miss our target at year-end. Whilst most of the seven are on (or ahead of) target, the average is brought down by under performance in two areas. Plain line delivery is behind due to our high output programme delivering less volume than expected. SEUs are also behind due to the reprogramming of a scheme in Scotland.

Route driven measuresThe following performance measures have been agreed with customers locally, taking into account their priorities. As there is no national measure, the scorecard reflects aggregate results in these areas.

Passenger train performanceTargets relating to PPM (the percentage of all passenger train journeys that arrive on time), CaSL (how many passenger trains are cancelled or are more than 29 minutes late) and Right Time Arrivals (whether a set of chosen passenger services arrive on time at certain stations on a journey). Delays and cancellations are caused by a wide variety of factors, some within Network Rail’s control (e.g. track or signalling problems) and some not (e.g. train failures or train crew issues).

We are currently forecast to miss these three targets. The reasons why and our plans for improvement will vary by route, but we are working closely with train operating companies to make progress against these measures.

Freight delivery metricAn indicator of how many freight services arrive at their destination on time.

We are currently forecast to meet our target at year-end.

Train performance - otherAny other train performance measure that is not consistent across the routes.

We are currently forecast to miss this target at year-end. As above, the reasons why and the actions we are taking in response will vary from route to route.

People measureMeasures agreed locally – relates to staff engagement.

Seven of the eight routes are expected to meet their target and when the measures are weighted and aggregated we are currently forecast to exceed our target at year-end.

Passenger satisfactionMeasure agreed locally.

Four of the eight routes are expected to meet their target and when the measures are weighted and aggregated we are currently forecast to exceed our target at year-end.

Reduction in railway work complaints Measure agreed locally.

Five of the eight routes are expected to meet their target but when the measures are weighted and aggregated we are currently forecast to miss our target at year-end. We are currently evaluating the trial of a new pre-notification process that we piloted in Wales and are working to roll-out training on worker behaviour across the business, which we hope will lead to a reduction in complaints.

OthersA range of other measures chosen by customers for the routes.

Six of the eight routes are expected to meet their target but when the measures are weighted and aggregated we are currently forecast to miss our target at year-end.

Network Rail awarded four prestigious health and safety management awards

Four Network Rail infrastructure project delivery teams have won prestigious Sword of Honour awards from the British Safety Council. The awards are made to companies that have demonstrated excellence in the management of health and safety risks at work. Winners have to achieve the maximum five stars in the British Safety Council’s health and safety management audits, and then demonstrate to an independent panel that they have a proven track record and culture of best practice that runs throughout the business.

HIGHLIGHTS OF THE QUARTER

Network Rail announces independent review into competition in project delivery

We have established an independent review to help us identify and break down barriers that discourage third party funding and financing of projects, innovation or new models of delivery. The review will be chaired by Professor Peter Hansford, who has over 40 years’ experience in major infrastructure and building projects in the UK and overseas and is currently professor of construction and infrastructure policy at University College London.

The review is due to report in spring 2017 and further information can be found at thehansfordreview.co.uk

New Edinburgh Gateway station opens

The new £41m Edinburgh Gateway station opened on 11 December, transforming travel options for passengers from Fife and the north by integrating the rail network with the tram network and providing a convenient link to Edinburgh airport. Passengers will have direct trains to Perth, Dundee and Inverness as well as to the city centre and Fife. When combined with the nearby South Gyle station, six trains per hour will serve north west Edinburgh instead of the current four and the station will also provide increased choice for those travelling to Edinburgh Business Park.

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NETWORK RAIL LIMITED Q3 REPORT 2016/17

New Oxford-London rail line opens

On 12 December, Chiltern Railways and Network Rail opened a new rail link connecting central Oxford and the capital – the first new rail link between London and a major British city in over 100 years. The idea for the line came from the train operator, who jointly funded the project with Network Rail – a good example of how the industry can work together to finance and deliver the improvements that people want. Two trains an hour will now run on the line, offering passengers more choice, more trains and faster journey times.

£100m upgrade work completed over Christmas

More than 24,000 members of Network Rail’s orange army were working this Christmas to deliver £100m worth of upgrades to the railway. In London, we installed and upgraded signals, tracks and overhead lines as part of the Crossrail project. In Manchester, bridge and track work were completed as part of the project to build the Ordsall Chord – a new piece of track that will link Manchester’s main train stations for the first time. In Cambridge, tracks and overhead wires were installed at the site of the new Cambridge North station, due to open in May. And in Cardiff, work took place on the largest ever signalling renewals project of its kind.

New platform opened at Cardiff Central station

On 2 January, we officially opened the new platform eight at Cardiff Central station. Passengers travelling on the Penarth, Barry Island and Vale of Glamorgan lines will benefit from the new facilities, including a new waiting shelter and customer information desk. The platform will also ease congestion in the Cardiff area and creates the potential for more services to run in the future.

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This page provides details and explanations for some of the terms, abbreviations and acronyms that have been used in this report.

Term DescriptionAIP weighting The percentage that each performance measure contributes to the overall

Annual Incentive Plan rating.

Close calls A ‘close call’ is defined as anything that has the potential to cause harm or damage. All Network Rail staff are asked to report close calls via the phone line or app. These are then assigned to a ’responsible manager’ to rectify.

Enhancements Enhancements are the projects that Network Rail is delivering to improve or grow the railway. These range in size from a few hundred thousand pounds to billions, but all of them enhance the railway in some way.

IP Infrastructure Projects – Network Rail’s project-delivery arm.

Lifesaving Rules Network Rail’s Lifesaving Rules tackle the ten most common causes of injury and loss of life on the railway, and all staff are expected to follow them.

MAA Moving Annual Average.

Period The railway year is sub-divided into 13 periods of four weeks each, from 1 April to 31 March.

Renewals Renewals refers to Network Rail’s programme of renewing its assets, such as track, points or conductor rails.

Route We are divided into eight geographical routes, each with their own route managing director. We have also recently created a ‘freight and national passenger operators route’.

Your Voice Our bi-annual employee opinion survey.

YTD Year to date.

GLOSSARY

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NETWORK RAIL LIMITED Q3 REPORT 2016/17

Network Rail Limited1 Eversholt Street London NW1 2DN

Tel 020 7557 8000

networkrail.co.uk

Company number: 4402220 Registered in England and Wales

Further updates and information are available at networkrail.co.uk