Half-year Report

Network Rail half-year results 2025/2026

Network Rail publish its half year financial results to 30 September 2025

10 December 2025

Financial highlights

Commentary

Summary

These results reflect our financial performance six months into the second year of Control Period 7 (CP7), the five-year funding plan running from April 2024 to March 2029. Network Rail reported a loss for the period, primarily driven by higher debt costs. Nevertheless, the business continued to generate strong operational cashflows, all of which were reinvested into our railway improvement programme.

In CP7, we committed to delivering £3.9bn of efficiencies. Eighteen months into the plan, we remain firmly on track, having already achieved savings of over £600m.

We are encouraged by recent industry data showing passenger numbers have grown by approximately 7% year-on-year and are now close to pre-Covid levels (around 90% excluding the Elizabeth Line). Sustaining this growth requires continued improvements in train performance, particularly reliability and punctuality. During the period, key factors affecting performance included infrastructure failures, adverse weather events, trespass incidents, and train crew shortages.

Financial summary

Revenue for the period increased by £198m to £5,481m (2024: £5,283m), driven primarily by higher government grant income.

Operating costs rose by £46m to £4,059m (2024: £4,013m), largely due to an additional £38m in depreciation and amortisation charges. Excluding this, operating costs absorbed general inflation and were only marginally higher - up £8m, representing a fraction of one per cent.

As a result, Network Rail delivered an operating profit of £1,422 million (2024: £1,270 million). Finance costs increased to £1,835 million (2024: £1,267 million), reflecting an additional £312 million from the revaluation of RPI-linked debt and an additional £272 million due to higher borrowing rates. The business recorded a loss before tax of £392 million (2024: profit of £3 million).

Borrowings

Network Rail does not plan on issuing any new debt in the foreseeable future. Net debt increased to £61.7bn from £60.9bn at 31 March 2025 primarily due to the revaluation of RPI-linked debt.

Assets

The railway network is valued using an income-based approach aligned to the regulatory asset base. As at 30 September 2025, the valuation increased to £92.4bn from £88.9bn at 31 March 2025. This uplift of £2.9bn reflects prevailing inflation rates and updated forecasts for revenue and operating costs. Further details are provided in Note 6 to the Interim Financial Statements.

Investment

Investment in the first six months of the year was £2.8bn (2024/25: £3.0bn). Enhancement investment of £1.1bn (2024/25: £1.3bn) included some of our flagship programmes to improve the network such as the Transpennine Route Upgrade. Renewals of £1.7bn (2024/25: £1.8bn) included £0.4bn on track renewals, signalling £02.bn, civils £02.bn, drainage £0.1bn, buildings £0.2bn, electrification £0.2bn and telecoms £0.1bn.

Risks and Uncertainties

The principal risks and uncertainties affecting the business activities of the group were set out on pages 98 to 103 of the annual report and accounts for the year ended 31 March 2025, a copy of which is available on the group's website www.networkrail.co.uk. The group's key risks and uncertainties are summarised under the headings: safety; performance; and value.

In the view of the board, the key risks, and uncertainties for the remaining six months of the financial year continue to be those set out in the risks and uncertainties section of the 31 March 2025 annual report and accounts. It should be noted that the autumn and winter seasons provide additional performance risks, due to increases in weather-related and track adhesion-related delays.

The critical accounting judgements and key sources of uncertainties relating to these interim financial statements are set out on page 16.

Outlook

Network Rail is building on the £4bn of efficiencies achieved during the 2019-2024 period. We remain firmly on track to deliver the £3.9bn of efficiencies required over the current five-year control period. While it is still early in the cycle and significant work lies ahead, our commitment to delivering more for less continues to make the railway more affordable for both taxpayers and passengers.

Alongside these cost efficiencies, we are investing extensively across the network. Our priorities include enhancing safety, improving train performance, introducing modern technologies, and allocating substantial resources to address the challenges of climate change.

As we prepare for the transition to Great British Railways, we will continue to strengthen collaboration with industry partners. Rail remains a cornerstone of the nation's infrastructure and a vital driver of clean, green, and safe economic growth.

Consolidated Income statement

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

*Other reserves of £249m (2024: £249m) include a £242m vesting reserve on privatisation.

There has been no movement in the current or prior year affecting the statement of changes in equity for the company.

Balance Sheet

at 31 March 2025

This interim financial report was approved by the board of directors on 4 December 2025 and authorised for issue on the date of the Independent Auditor's Review Report.

They were signed on 8 December 2025 on its behalf by:

Paul Marshall (Chief Financial Officer)

Consolidated cash flow statement

*Balance includes the net interest on derivative financial instruments

Notes to the interim financial statements

for the year ended 31 March 2025

1. General information

This condensed consolidated interim financial information does not comprise statutory financial statements within the meaning of Section 434 of the Companies Act 2006. Statutory financial statements for the year ended 31 March 2025 were approved by the board of directors on 18 July 2025 and delivered to the Registrar of Companies. The auditors' report on these accounts was unqualified, did not contain an emphasis of matter paragraph and did not report any matters by exception under Section 498 of the Companies Act 2006.

The condensed consolidated interim financial statements are prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom Financial Conduct Authority and International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the United Kingdom.

The condensed financial statements present the results for the first half of the year. The nature of Network Rail's business means there are seasonal impacts. The impact of the performance regime (Note 2) Can vary across the year and the performance regime result in the first half of the year may not be indicative of performance in the second half of the year. However, due to the grant funding arrangements, the impact of this and any other seasonality would be expected to be minimal on profit or loss before tax.

This condensed consolidated interim financial information has been reviewed not audited. The condensed consolidated interim financial information should be read in conjunction with the annual report and accounts for the year ended 31 March 2025, which have been prepared under International Financial Reporting Standards 'IFRSs' in conformity with the requirements of the Companies Act 2006. A copy of this document is available on the group's website: www.networkrail.co.uk.

Material accounting policies

The accounting policies adopted in this condensed set of financial statements are consistent with those set out in the annual financial statements for the year to 31 March 2025.

There are no IFRS or IFRS Interpretation Committee interpretations not yet effective that would be expected to have a material impact on the group.

Prior year restatement

In the 31 March 2025 financial statements, Network Rail restated the 2024 financial statements and opening balance sheet following a change in our accounting for unused tax losses. IAS 12 (Income Taxes) requires that tax losses be recognised as a deferred tax asset only where their utilisation is probable. Network Rail is not expected to generate taxable profits in any foreseeable future period and therefore previously had concluded that the probability criteria was not met.

Following a revised reading of the standard and IFRIC updates, Network Rail now concludes that where a deferred tax liability exists and is expected to reverse in the same period and jurisdiction, then a deferred tax asset in relation to unused tax losses is required to be recognised. With this view, the reversal of the deferred tax liability is sufficient evidence to meet the probability criteria.

Following the restatement in the 31 March 2025 financial statements, the interim balance sheets for the periods ended 30 September 2024 and 30 September 2023 have also been restated to present deferred tax liability, net of deferred tax asset recognised.

The retrospective impact of this change to the amounts presented for HY25 is a decrease in deferred tax liability by £720m, thus an increase in net assets by £720m.

The deferred tax liability at 30 September 2023 was reduced by £574m with a corresponding increase in retained earnings.

Going concern

The directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the interim financial statements.

The directors took into account the publication of the Plan for Rail Review and its plans to reform the rail industry. This proposes that a new public body, Great British Railways, will integrate the railways, owning the infrastructure, collecting fare revenue, running, and planning the network, and setting most fares and timetables.

It is planned that Network Rail will be absorbed into the public body to bring about single, unified, and accountable leadership for the national network. At this stage it is not likely that this reform will involve the winding up of Network Rail Limited but in any event Great British Railways will assume the existing functions of Network Rail Limited as well as have a wider range of powers and functions. The transformation programme is dependent on further activities including legislation and will take time to fully deliver.

The group has considerable financial resources together with long-term contracts with many customers and suppliers. Network Rail does not expect to undertake any new borrowing in the next 12 months. Instead, its activities will be largely funded by grants from the Department for Transport (DfT) and revenue from customers. Network Rail has secured a £41.6bn loan facility with the DfT, which it draws upon to specifically refinance its' existing debt. This facility remains within its parameters.

Network Rail has nine separate grant agreements in place with DfT and Transport Scotland (TS) to fund activities in the period to 30 September 2025. These grants are: - with DfT - Network Grant; Enhancements Grant; Fares, Ticketing and Retail Grant, British Transport Police Grant; Financing Costs Grant for DfT interest; Financing Costs Grant for external interest (bonds and swaps); and Corporation Tax Grant - with TS - Network Grant and Enhancements Grant.

Business plans and financial models are used to project cash flows and monitor financial risks and liquidity positions, forecast future funding requirements and other key financial ratios, including those relevant to our network licence. Analysis is undertaken to understand the resilience of the group and its business model to the potential impact of the group's principal risks, or a combination of those risks. This analysis takes account of the availability and effectiveness of the mitigating actions that could realistically be taken to avoid or reduce the impact or occurrence of the underlying risks.

The board considers the likely effectiveness of such actions through regular monitoring and review of risk management and internal control systems. Further details are set out in the Viability Statement on pages 104 to 106 of the Network Rail Limited annual report and accounts 2024-25. In addition, Note 23 to those accounts includes the group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit, liquidity and foreign exchange risk.

After making enquiries, including those detailed above, the directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the interim financial statements.

Business segments

No segmental analysis is provided because the group operates one class of business; that of managing the national rail infrastructure and undertakes that class of business in one geographical segment, Great Britain.

Critical accounting judgements and key sources of uncertainty

The principal risks managed by Network Rail are unchanged from those set out in the Network Rail Limited 2024-25 annual report and accounts. This can be found in the Risk Management section on pages 95 to 103. There are also further details on funding and financial risk management in note 23 on pages 214 to 219 of those accounts.

(i) Property, plant and equipment - the railway network: the estimate of the fair value of the railway network is based on an income approach using the regulatory asset base, which equates to the discounted future cash flow associated with the network, adjusted for the net present value of the effects of any forecast variances from the Office of Rail and Road's determination using the building block model regulation. The methodology of the valuation and critical judgements therein are discussed in detail in Note 10 of the Network Rail Limited annual report and accounts 2024-25. Management have assessed the valuation methodology considering the ORR's Final Determination for CP7 and have concluded that it remains appropriate. The two key judgements are an estimate of November Consumers Price Index (CPI) used to index the regulatory asset base and a review to assess whether the weighted average cost of capital (WACC) has materially changed in the last six months. The CPI estimate increases the valuation by £3.4bn as at 30 September 2025 and there has been no material change to the WACC in the last six months. These are discussed further in note 6.

(ii) Investment property: For Network Rail Infrastructure Limited (NRIL), Jones Lang LaSalle (JLL) provided independent valuations of nineteen one-off individual properties and value the balance of the estate under the Beacon method by splitting the portfolio into seventeen homogeneous classes of property and areas. The method of calculation is the same as set out in Note 11 of the Network Rail Limited annual report and accounts 2024-25.

For London & Continental Railways Ltd (LCR), Collier International provided independent valuation of nine sites, with one site being internally valued by the Management. The valuations are prepared by considering the value in existing use together with the value to be derived from planned developments, discounted to reflect inherent risks, and considering where appropriate, net rental yields and, development and other costs.

(iii) Retirement benefit obligations: The calculations include several judgements and estimations in respect of the expected rate of return on assets, the discount rate, inflation assumptions, the rate of increase in salaries and life expectancy, among others. Changes in these assumptions can have a significant effect on the value of the retirement benefit obligation. The key assumptions made are set out in Note 24 of the Network Rail Limited annual report and accounts 2024-25. At 30 September 2025, the discount rate has increased to 5.9% from 5.8% at 31 March 2025 in line with corporate bond prices and yields. The Retail Price Index and Consumer Price Index assumptions have remained the same at 3.1% and 2.8%, respectively.

A further key judgement in the retirement benefit obligation, is the recognition of the surplus in relation to the RPS scheme. This is discussed further in Note 9.

(iv) Taxation: the group recognises and discloses its deferred tax assets in accordance with IAS 12. Where it is considered to be probable that deferred tax assets can be matched to future taxable profits then deferred tax assets are recognised, or offset against the overall deferred tax provision as appropriate. When considering this criteria, the recognition of a deferred tax liability where that deferred tax liability is expected to reverse in the same period as any tax loss means that the probability criteria is met and hence a deferred tax asset is recognised for those losses.

2. Revenue

The effect of the performance regimes was a reduction in income of £48m (six months to September 2024: reduction of £29m).

3. Net operating costs

\* The average number of employees (including executive directors) in the six months ended 30 September 2025 was 42,034 (six months ended 30 September 2024: 41,038).

4. Finance income, finance costs and other gains and losses

5. Tax

Closing deferred tax is calculated at a rate of 25 per cent (31 March 2025: 25 per cent, 30 September 2024: 25 per cent). The amount at which timing differences crystallise is sensitive to the decision on future tax laws to be taken by Parliament.

UK corporation tax is calculated at 25 per cent (31 March 2025: 25 per cent).

6. Property, plant and equipment - the rail network

Given the economic and physical interdependency of the assets comprising the rail network, the company has concluded that the rail network is considered as a single class of asset. The rail network is carried at its fair value.

As there is no active market in railway infrastructure assets, the company has derived the fair value of the rail network using an income approach.

When valuing the network, management is required to consider the value a knowledgeable willing party would place on the network in an arm's length transaction. On the grounds that third-party investors are known to value the assets of regulated companies by reference to the Regulated Asset Base (RAB), and that the cash flows associated with the regulatory framework are considered sufficiently stable and robust to form the basis of a third-party valuation, management has used the RAB as the starting point for its valuation.

Under this approach the cash flows that a network licence holder expects to generate from the rail network are assessed using a market rate of return. This valuation is conducted twice a year and revaluation gains and losses are reflected in other comprehensive income.

Under this model the network licence holder's annual income (received in the form of the network grant and track access charges) would comprise:

a) The regulator's assessment of the efficient costs of operating and maintaining the network.

b) An allowance for RAB amortisation - qualifying capital expenditure is added to the RAB as incurred and recovered by the company through future amortisation allowances (in order to spread the cost to customers and stakeholders of investment in the rail network over many years)

c) An allowed return on the RAB - calculated by applying the rate of return permitted by the ORR (based on its assessment of the market's cost of capital) to the RAB balance.

Future cash flows under (a) are assumed to be equivalent over time to the network licence holder's actual costs of operation and maintenance, on the basis that the regulator aims to set targets which are ambitious but achievable. These therefore have no net impact on forecast future cash flows, or the valuations. The allowed return (c) is based on a cost of capital which would be offset in a discounted future cash flows model. The economic rights inherent in ownership of the regulated rail network asset are therefore vested primarily in the value of the RAB, which will be recovered through future regulated income as the RAB is amortised (b).

This means that it is possible for the RAB itself to be used as the starting point for a discounted cash flow valuation. The RAB fluctuates in valuation; increasing in value principally because of allowances for capital expenditure and inflation indexation, whilst reducing for amortisation. The adjustments may give rise to upwards or downwards revaluations. Further changes are subject to:

a) Adjustment for any difference between regulatory rate of return and the market cost of capital that a third-party investor would use to assess the value of the network (the rate of return and market cost of capital are currently assessed as fully aligned); and

b) Adjustment for forecast future under or out performance against the regulatory determination over the remainder of the current control period. No adjustment is made in respect of future control periods on the expectation of the regulator setting, over the long term, ambitious but achievable determination.

Revaluation

The valuation includes a £2.9bn upward movement in the value of the railway. The key drivers for the valuation are:

· The impact of indexation inflation (£3.4bn increase in the valuation).

· Negative forecast future cashflow adjustments have decreased by £0.1bn (£0.1bn increase in the valuation).

· The rate at which assets are amortised in the RAB and assets are depreciated under IAS 16 (£0.5bn decrease in the valuation).

Impact of indexation inflation

Indexation inflation was based on management's forecast for November CPI, of 3.8 per cent. This has added £3.4bn to the valuation of the Regulatory Asset Base.

The valuation is sensitive to the CPI assumption. If CPI varied by 1 per cent, this would result in a £0.9bn change in the valuation of the network.

Third party funding

Additions to the railway network funded by capital grant, rather than via the RAB funding mechanism, are included in the valuation at cost. The carrying value of property, plant and equipment is calculated after netting off associated grant funding received or receivable.

Disposals

Disposals are because of property sales in the usual course of business. In line with Regulatory Accounting Guidelines the net proceeds of sales are deducted from the RAB, reducing the valuation of the Railway Network Valuation. The valuation of the disposals is assessed as being equal to the reduction in the valuation of the Railway Network relating to property sales. Renewals are completed at the end of the useful life of the asset and hence there is no value attributable to the item being renewed that needs to be derecognised from PPE. £3m of disposals were made for the period to 30 September 2025 (30 September 2024: £nil)

Depreciation

The depreciation charge for any year is calculated using the average carrying value for the year and the estimated remaining weighted average useful economic life of the rail network. The remaining weighted average useful economic life of the rail network was calculated using the engineering assessment of serviceable economic lives of the major categories that comprise the rail network. The estimated remaining weighted average useful economic life of the network is currently 40 years (2024: 40 years).

Forecast performance variations

In assessing the value of the rail network, management considers that a knowledgeable willing third party would consider the perceived fairness and deliverability of the current regulatory determination. Accordingly, management makes an addition (or deduction) to the valuation for its assessment of the likely ORR determination in respect of the financial consequences of anticipated future out (or under) performance against the regulatory determination.

Cost outturns on capital work (renewals and enhancements) have an impact on future cash flows under the regulatory framework, since only efficient overspending in excess of regulated cost targets can be added to the RAB.

At 30 September 2025, the valuation included a reduction of £100m to £250m for projected financial under performance.

Capital commitments

At 30 September 2025, the group had entered into contractual commitments in respect of capital expenditure amounting to £3,825m (31 March 2025: £3,801m).

7. Net Borrowings

The proceeds and repayment of borrowings lines above differ to the values included in the cash flow statement due to the presentation of drawdowns and repayments of loans with DfT. The items above include items where cash has not been exchanged whereas the cash flow statement includes only those items where cash was exchanged.

8. Notes to the cash flow statement

Cash and cash equivalents (which are represented as a single class of assets on the face of the balance sheet) comprise cash at bank and commercial paper, all of which are on call except for short-term deposits. There were £1,048m (excluding offsetting clearing accounts) of short-term deposits with the government banking scheme ("GBS") held as at 30 September 2025 (31 March 2025: £631m).

9. London & Continental Railways

On 1 April 2025, the group completed the acquisition of London & Continental Railways Limited (LCR). The group acquired 100% of the share capital. LCR specialises in the management, development and disposal of property assets within a railway context and, in particular, property assets associated with major infrastructure projects. The acquisition is part of the wider reforms within the industry.

As part of the wider rail reforms, LCR was transferred to Network Rail for nil consideration from the Department for Transport. The difference between the consideration and the net assets of LCR at acquisition is accounted for as a government grant. The government grant of £210m is included in deferred grants. Since acquisition, LCR has recorded a loss of £1.9m.