Network Rail: All change

Angela Jameson

Six years on from the nationalisation of railway infrastructure, the people who played a large part in creating what we now know as Network Rail are to move on — and not before time.

Sir Ian McAllister, the former chairman of Ford UK, was brought in as chair of Network Rail to be a steady guiding hand through the negotiations to take the rail group back into public ownership. His operational nous was also needed in the early rocky days when Network Rail had a mountain to climb to remove speed restrictions that were paralysing Britain's railways.

He was also there to steer the company through tricky negotiations to bring rail maintenance back in house, which cut off a lifeline of work to several private companies and to make sure that the hybrid organisation — certainly a state-backed company, but accountable to more than 100 so-called members, plucked from the industry — had a workable system of corporate governance.

He performed well in these tasks for the first few years but latterly his grip has slipped. In January when delays to Network Rail engineering works meant that hundreds of thousands of travellers suffered disruption, Sir Ian stayed away from the office, saying he did not want to get in the way. His attitude attracted scorn from the Transport Select Committee and only served to underline that Network Rail's ability to complete big engineering projects was patchy, at best.

Network Rail was fined a record £14 million for that fiasco but this summer only added insult to passengers' injury when it became clear that executives would still receive large bonuses.

There have been question marks over the governance of Network Rail for some time and the company is beginning to tackle those problems, appointing three new non-executive directors last month. A new chairman will give whatever new structure that is devised an untainted start.

But more important than corporate governance is that Network Rail has to get a firm grip on its major projects. Hundreds of millions of pounds of public money will be pumped into the rail infrastructure in the next few years, as stations are refurbished and notorious track bottleknecks improved. Whoever succeeds Sir Ian must be capable of managing a Network Rail team that has the skills but has been prone to losing direction at critical times.

Blacks: In the red

Nick Hasell

Things are going from bad to worse for Mike Ashley. Newcastle United remains in turmoil, shares in Sports Direct International, sit at an all-time low, and today, Blacks Leisure, the retailer where he owns a 29 per cent stake, issued a shock profits warning. Its shares fell 12 per cent.

That another summer of poor British weather has hurt sales of its boardwear brands — O’Neill and Freespirit — should not come as too much of a surprise. The extent of the decline might do: sales were down a hefty 16.1 per cent against comparisons last year. Moreover, the trends in its outdoor division — Millets and Blacks — were also worrying. Like-for-like sales fell 5.4 per cent over the first six months of its financial year, which implies a 13 per cent decline over the latest seven weeks.

The upshot is that Blacks expects to make a first-half loss of £4.5 million and has initiated a strategic review of boardwear — although it is not clear who might buy the division in the current environment.

In the short term, Blacks’s cost cutting efforts are running ahead of plan. This summer’s trading also confirms the wisdom of the longer-term strategy of Neil Gillis, Blacks’s chief executive, to reduce the chain’s dependence on the weather.

The problem for investors - Mr Ashley included - is that, with forecasts continuing to fall, and Blacks not expected to make a profit in the next two financial years, the shares, at 78p, are still not obviously cheap. Avoid.

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