kpmg · web view2020. 11. 18. · turnover for the railway undertaking is all other turnover...

Northern Ireland Railways Company LimitedRegulatory Financial Statements

Year ended 29 March 2020

Northern Ireland RailwaysRegulatory Accounts year ended 29 March 2020

ContentsPage

Basis of Preparation 1Report of factual findings 5Review of the activities 8Income Statement 9Extract from balance sheet net of impairment 11Notes to the balance sheet extract 12


Basis of PreparationThe Regulatory Accounts have been prepared on such a basis as to comply with the requirements of the Office of Rail and Road (ORR) and in particular, Statutory Rule 2016 No. 420. The Railways Infrastructure (Access, Management and Licensing of Railway Undertakings) Regulations (Northern Ireland) 2016’.

These regulatory accounts show the separation of Northern Ireland Railways Limited into its Infrastructure Manager (IM) and Railways Undertaking (RU) and have been computed as follows:

Source dataThe regulatory accounts are based on the management accounts of Northern Ireland Railways Limited for the year ended 29 March 2020 to operating profit level. These regulatory accounts do not include the accounting adjustments for derivatives, pensions and intercompany write-off which are reflected in the statutory accounts of Northern Ireland Railways Limited. The Infrastructure assets have been extracted from the trial balance of Northern Ireland Railways Limited before the accounting adjustments for derivatives, pensions and intercompany write-off, where applicable. There is no requirement to adjust for debtors/creditors/cash.

TurnoverTurnover for the Infrastructure Manager comprises track access charges levied to the Railway Undertaking and other third parties.

Turnover for the Railway Undertaking is all other turnover recognised in the management accounts of Northern Ireland Railways Limited (“NIR”).Public Service Obligation is spread pro rata to Infrastructure Manager and Railway Undertaking in accordance with unfunded net depreciation or where there is a shortfall in funding in the year, this is spread pro rata based on loss before PSO.

Operating CostsOperating costs for the Infrastructure Manager comprise its share of the infrastructure division and projects division as shown in the NIR management accounts. These are allocated to the infrastructure manager on the basis of

Allocation of time spent by specified operational personnel carrying out infrastructure manager duties, based on informed estimates of time allocation;

This allocation has resulted in 35% of operating costs (31 March 2019: 34%) allocated to IM and 65% of operating costs (31 March 2019: 66%) allocated to RU.

1


Engineering Costs

Allocation of engineering divisional costs relevant to infrastructure duties, estimated at 5% of engineering division costs excluding fuel and engineering income as shown below:

2019/20 2018/19

£’000 £’000

Total engineering division costs 21,866 21,096

Deduct fuel and income (7,076) (6,534)

Net engineering costs 14,790 14,562

Allocated to:

Infrastructure Manager (5%) of net engineering costs

740 728

Railway undertaking 21,126 20,368

Total engineering costs 21,866 21,096

Overhead costs

Overhead costs for the Infrastructure Manager comprise the relevant % of infrastructure and projects labour as a % of total NIR labour applied to overhead costs per the management accounts.Overhead costs for the Railway Undertaking comprise all other overhead costs shown in the management accounts.

2


2019/20 2018/19

£’000 £’000

Total overhead costs 7,776 6,706

Allocated to

Infrastructure Manager % 34.1% 31.6%

Railway Undertaking % 65.9% 68.4%

£’000 £’000

Infrastructure Manager 2,655 2,118

Railway Undertaking 5,121 4,588

Total overhead costs 7,776 6,706

Reconciliation to Northern Ireland Railways Statutory accounts

Financial ReviewA summary of key financial results is set out in the table below.

(Loss)before tax

2020 2019£m £m

Per Statutory Accounts (18.2) (5.1)IAS 19 pension adjustment 8.7 3.8Derivatives 4.0 0.5Pro Forma (5.5) (0.8)

Note 1 – Pro forma (loss) before tax is stated after deducting pension contributions paid to NILGOS pension scheme but before any adjustments required in accordance with International Accounting Standard No.19 ‘Retirement Benefits’, intercompany balance write back and derivatives.

3


Assets

The assets of the Infrastructure Manager have been extracted from the management accounts as follows:

1. Tangible fixed assets owned by the infrastructure division.2. Unamortised capital grant on tangible fixed assets owned by the infrastructure

division.3. Infrastructure stocks (net of provision for obsolescence).

The assets of the Railway Undertaking have been extracted from the management accounts as follows:

1. Tangible fixed assets of the Railway Undertaking are total tangible fixed assets of NI Railways Limited less assets owned by the infrastructure division.

2. Unamortised capital grants of the Railway Undertaking are total unamortised grants of NI Railways Limited less unamortised grants owned by the infrastructure division.

3. Total stock less stock owned by the infrastructure division (net of provision for obsolescence).

4

KPMGAuditThe Soloist Building 1 Lanyon Place Belfast BT1 3LP Northern Ireland

The Board of DirectorsNorthern Ireland Railways Limited 22 Great Victoria StreetBelfast BT2 7LX

The Office of Rail and Road 1 Kemble StreetLondon WC2B 4AN

25 September 2020

Dear Sirs

Report of Factual Findings

In accordance with the terms of our engagement letter dated 14 June 2018, we have performed those procedures agreed with Northern Ireland Railways Company Limited (“the Company”) and The Office of Rail and Road (collectively and individually “you”) in relation to the verification of financial information included in the Northern Ireland Railways Company Limited regulatory disclosures.

Our report has been prepared for you solely in connection with the provision of financial information included in the Northern Ireland Railways Company Limited regulatory disclosures.

It has been released to you on the basis that our report shall not be copied, referred to or disclosed, in whole (save for the Company’s own internal purposes) or in part, without our prior written consent.

Our report was designed to meet your agreed requirements determined by your needs at the time. Our report should not therefore be regarded as suitable to be used or relied on by any party wishing to acquire rights against us other than you for any purpose or in any context. Any party other than you who obtains access to our report or a copy and chooses to rely on our report (or any part of it) will do so at its own risk. To the fullest extent permitted by law, KPMG will accept no responsibility or liability in respect of our report to any other party.

KPMG, an Irish partnership and a member firm of the KPMG network of5

independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity

6

Report of Factual Findings (continued)Our engagement was undertaken in accordance with International Standard on Related Services 4400 Engagements to Perform Agreed-upon Procedures Regarding Financial Information. The procedures performed were as follows:

Procedure Finding1 Confirmation as to whether

Northern Ireland Railways has clearly documented policies for the preparation of the regulatory disclosures including policies for the allocation of financial information between the railway undertaking (“RU”) and the infrastructure manager (“IM”).

With respect to the procedure we found no exceptions

2 Confirm that the amounts of income and expenditure used in the calculation have been correctly extracted from the underlying accounting records. The auditor is not required to form a view about the quality of the underlying accounting records.


3 Confirm that the allocation of financial information is performed in accordance with aforementioned policies for the allocation of financial information between the IM and the RU.


4 Confirm that there has been appropriate internal review at an appropriate level of seniority of whether Northern Ireland Railway’s actual calculations are consistent with stated processes and policies;


5 Confirm that the sub-totals and totals in the disclosures downcast and cross cast.


6 Confirm that the regulatory disclosures reconcile to the statutory accounts.


7

Report of Factual Findings (continued)

Because the above procedures do not constitute either an audit or a review in accordance with International Standards on Auditing (UK) or International Standards on Review Engagements (UK and Ireland), we do not express any assurance on the Schedule of Rail Passenger Services.

Had we been engaged to perform, and had performed, additional procedures, an audit or a review in accordance with International Standards on Auditing (UK) or International Standards on Review Engagements (UK and Ireland), other matters might have come to our attention that would have been reported to you.

This report relates only to the financial information specified above and does not extend to any financial statements of the Company, taken as a whole.

Yours faithfully

KPMGChartered Accountants

8

Review of activities

We have recently ordered 21 new carriages to increase capacity of our trains. These carriages will allow us to provide an extra 1,400 seats for our growing customer base and helps us to sustain growth levels and timetable enhancements.

Our trains operate over 300 miles of track including many bridges, level crossings and signals. We continue to routinely inspect and efficiently maintain this infrastructure to high technical, operational and safety standards. Capital funding, from DfI for fleet investments and for our infrastructure maintenance and upgrades is required to maintain this infrastructure.

Capital Investment

Capital expenditure 2020£m

2019£m

Trains 8.6 6.2Land and buildings 15.8 15.8Infrastructure 35.3 14.5Other 8.5 6.6Total 68.2 43.1

KPIsFleet size – rolling stock sets 45 45

Expenditure of £8.6m on trains relates to the overhaul of the Class 3000, Class 4000 and Enterprise trains (£5.2m), the commencement of the Class 3000 midlife refresh (£1.9m) and the purchase of 21 additional Class 4000 carriages. An advance payment of £2.3m in respect of the additional carriages has also been made to Construcciones Y Auxiliar De Ferrocarile SA and is disclosed under prepayments. Land and buildings additions of £15.8m includes the completion of phase 1 of the North West Multi Modal Transport Hub and the commencement of phase 2 (£10.5m), completion of Portrush Railway Station (£1.1m), completion of the Permanent Storage facility at Bellarena (£0.4m) and the progression of the upgrade works at Coleraine Integrated Station (£0.3m). Infrastructure expenditure of £35.3m includes £9.3m on Lurgan Area Track Renewals, £3.6m on signalling for the North West Multi Modal Transport Hub, £2.3m on Rail Enhancement and Assurance projects, and other infrastructure improvement projects. Included in other capital expenditure of £8.5m is £6.3m on the Future Ticketing System.

9

Income Statement

Year ended 29 March 2020Infrastructure

ManagerRailway

UndertakingTOTAL

£’000 £’000 £’000

Turnover excluding PSO 5,812 51,907 57,719PSO 13,031 6,889 19,920Total Turnover 18,843 58,796 77,639

Operating costs (18,511) (34,605) (53,116)Engineering costs (740) (21,126) (21,866)

Net contribution (408) 3,065 2,657

Overheads incl net depreciation

(3,373) (5,260) (8,633)

Operating loss before impairment

(3,781) (2,195) (5,976)

Impairment credit 178 20 198

Operating loss after impairment

(3,603) (2,175) (5,778)

Other operating income - 270 270

Operating loss (3,603) (1,905) (5,508)

10

Income Statement

Year ended 31 March 2019Infrastructure

ManagerRailway

UndertakingTOTAL

£’000 £’000 £’000

Turnover excluding PSO 5,826 55,226 61,052PSO 13,967 3,057 17,024Total Turnover 19,793 58,283 78,076

Operating costs (17,176) (33,426) (50,602)Engineering costs (728) (20,368) (21,096)

Net contribution 1,889 4,489 6,378

Overheads incl net depreciation

(2,810) (4,890) (7,700)

Operating loss before impairment

(921) (401) (1,322)

Impairment credit 326 23 349

Operating loss after impairment (595) (378) (973)

Other operating income - 227 227

Operating loss (595) (151) (746)

11

Extract from Balance Sheet Net of Impairment

As at 29 March 2020Note Infrastructure

ManagerRailway

UndertakingTOTAL

£’000 £’000 £’000

Tangible fixed assets 1/2 193,074 145,753 338,827Deferred government grants 3/4 (192,433) (170,619) (363,052)Stocks 2,483 2,427 4,910

TOTAL 3,124 (22,439) (19,315)

As at 31 March 2019Note Infrastructure

ManagerRailway

UndertakingTOTAL

£’000 £’000 £’000

Tangible fixed assets 1/2 172,025 145,873 317,898Deferred government grants 3/4 (170,897) (167,776) (338,673)Stocks 2,428 2,469 4,897

TOTAL 3,556 (19,434) (15,878)

These financial statements were approved and authorised for issue and were signed on its behalf by:

Paddy AndersonChief Financial Officer24th September 2020

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Notes to the balance sheet extract

1. Tangible Fixed Assets Infrastructure Manager

LongLeaseholdbuildings

Permanentway

signallingand bridges

Rollingstock

MotorVehicles

Plant andequipment Total

£’000 £’000 £’000 £’000 £’000Cost or valuation:

At 31 March 2019 161,279 386,299 - 18,167 565,745Additions 15,571 35,297 - 921 51,789Disposals (460) - - (90) (550)Net Group transfers

(53) - - (130) (183)

At 29 March 2020 176,337 421,596 - 18,868 616,801

Depreciation:

At 31 March 2019 158,471 223,533 - 11,716 393,720Charge for year 156 13,814 - 1,103 15,073Provision for impairment

15,434 24 - 2 15,460

Disposals (338) - - (87) (425)Net Group transfers

- - - (101) (101)

At 29 March 2020 173,723 237,371 - 12,633 423,727

Net book valueAt 29 March 2020 2,614 184,225 - 6,235 193,074

At 31 March 2019 2,808 162,766 - 6,451 172,025

13

Notes to the balance sheet extract (continued)

2. Tangible Fixed Assets Railway Undertaking

LongLeaseholdbuildings

Permanentway

signallingand bridges

Rollingstock

MotorVehicles

Plant andequipment Total

£’000 £’000 £’000 £’000 £’000Cost or valuation:

At 31 March 2019 16,065 - 269,349 41,425 326,839Additions 221 - 8,577 7,649 16,447Disposals - - (10,816) (130) (10,946)Net Group transfers

86 - - (406) (320)

At 29 March 2020 16,372 - 267,110 48,538 332,020

Depreciation:

At 31 March 2019 16,065 - 138,641 26,260 180,966Charge for year - - 13,583 2,272 15,855Provision for impairment

307 - - (1) 306

Disposals - - (10,816) (130) (10,946)Net Group transfers

- - - 86 86

At 29 March 2020 16,372 - 141,408 28,487 186,267

Net book valueAt 29 March 2020 - - 125,702 20,051 145,753

At 31 March 2019 - - 130,708 15,165 145,873

3. Deferred Income Infrastructure Manager

Deferred government grants2020 2019£’000 £’000

At start of period 170,897 169,963Grants receivable 52,042 30,974Transferred to Group undertaking (155) 1,397Write off/disposals (365) (1,027)Transferred to profit and loss account: - -In respect of depreciation (14,625) (14,511)In respect of impairment of assets (15,361) (15,899)At end of period 192,433 170,897

14

Notes to the balance sheet extract (continued)

4. Deferred Income Railway Undertaking

Deferred government grants2020 2019£’000 £’000

At start of period 167,776 154,541Grants receivable 18,811 32,867Transferred to Group undertaking 100 (4,275)Write off/disposals (26) (245)Transferred to profit and loss account: - -In respect of depreciation (15,698) (15,112)In respect of impairment of assets (344) -At end of period 170,619 167,776

kpmg · web view2020. 11. 18. · turnover for the railway undertaking is all other turnover...

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