Annual Report and Accounts 2008
36 Commitments and contingencies
Operating lease commitments
The Group's total operating lease commitments are as follows:
| 2008 £m | 2007 £m | |||
|---|---|---|---|---|
| Future minimum rentals payable under non-cancellable operating leases: | ||||
| Within one year: | Land and buildings | 212.7 | 364.8 | |
| Plant and equipment | 206.3 | 198.4 | ||
| 419.0 | 563.2 | |||
| After one year but not more than five years: | Land and buildings | 401.1 | 1,031.4 | |
| Plant and equipment | 575.9 | 563.6 | ||
| 977.0 | 1,595.0 | |||
| More than five years: | Land and buildings | 12.1 | 13.5 | |
| Plant and equipment | 1.0 | 121.6 | ||
| 13.1 | 135.1 | |||
| 1,409.1 | 2,293.3 | |||
The majority of the Group's commitments arise in the UK Trains division. Trains division companies have contracts with Network Rail Infrastructure Limited for access to the railway infrastructure (tracks, stations and depots). They also have contracts under which rolling stock is leased. The TOCs' obligations to fulfil these commitments exist only as part of their franchise agreement. The table below reflects the commitments up to the current franchise end dates unless an extension or new franchise agreement has been signed. The commitments are based on charges advised by the Rail Regulator for the period starting on 1 April 2004. Commitments for future minimum rental payments under these contracts are shown below:
| Land and buildings | Plant and equipment | ||||||
|---|---|---|---|---|---|---|---|
| UK Trains division commitments | 2008 £m | 2007 £m | 2008 £m | 2007 £m | |||
| Future minimum rentals payable under non-cancellable operating leases: | |||||||
| Within one year: | Fixed track access | 148.9 | 302.9 | – | – | ||
| Rolling stock | – | – | 200.6 | 191.9 | |||
| Other | 49.6 | 50.3 | 1.5 | 1.8 | |||
| 198.5 | 353.2 | 202.1 | 193.7 | ||||
| After one year but not more than five years: | Fixed track access | 253.1 | 866.5 | – | – | ||
| Rolling stock | – | – | 563.7 | 551.6 | |||
| Other | 118.9 | 139.2 | 3.7 | 3.9 | |||
| 372.0 | 1,005.7 | 567.4 | 555.5 | ||||
| More than five years: | Fixed track access | – | – | – | – | ||
| Rolling stock | – | – | – | 120.8 | |||
| Other | 0.4 | – | 0.1 | 0.7 | |||
| 0.4 | – | 0.1 | 121.5 | ||||
| 570.9 | 1,358.9 | 769.6 | 870.7 | ||||
Fixed track access agreements have an average remaining life of 4.1 years (2007: 4.2 years), other land and buildings have an average duration of 4.0 years (2007: 3.6 years). Rolling stock agreements have an average life of 3.6 years (2007: 5.1 years) and other plant and equipment 4.2 years (2007: 4.8 years).
Outside of the UK Trains division the Group has entered into operating leases on certain properties, public service vehicles and various items of plant and equipment. Commitments for future minimum rental payments under cancellable operating leases are shown below:
| Land and buildings | Public service vehicles | Other | ||||||
|---|---|---|---|---|---|---|---|---|
| Other divisions’ commitments | 2008 £m | 2007 £m | 2008 £m | 2007 £m | 2008 £m | 2007 £m | ||
| Within one year | 14.2 | 11.6 | 3.9 | 3.6 | 0.3 | 1.1 | ||
| After one year but not more than five years | 29.1 | 25.7 | 6.9 | 6.5 | 1.6 | 1.6 | ||
| More than five years | 11.7 | 13.5 | 0.9 | 0.1 | – | – | ||
| 55.0 | 50.8 | 11.7 | 10.2 | 1.9 | 2.7 | |||
The average remaining life of operating lease commitments in the "Other Divisions" is 5.8 years (2007: 7.6 years) for land and buildings, 3.3 years (2007: 2.8 years) for public service vehicles and 1.4 years (2007: 2.9 years) for other plant and equipment.
Operating lease agreements where the Group is the lessor
The Group receives rent on properties as follows:
| 2008 £m | 2007 £m | |
|---|---|---|
| Future minimum rentals receivable under non-cancellable operating leases: | ||
| Within one year | 9.1 | 2.5 |
| After one year but not more than five years | 8.2 | 9.1 |
| More than five years | – | 2.8 |
| 17.3 | 14.4 |
The leases have an average unexpired duration of 2.5 years (2007: 5.7 years).
Finance lease commitments
The Group has finance leases for public service vehicles and various items of plant and equipment. These leases have terms of renewal but no purchase options and escalation clauses. Renewals are at the option of the specific entity that holds the lease.
| 2008 | 2007 | ||||
|---|---|---|---|---|---|
| Minimum payments £m | Present value of payments £m | Minimum payments £m | Present value of payments £m | ||
| Within one year | 57.8 | 52.4 | 37.5 | 30.4 | |
| After one year but not more than five years | 63.3 | 54.0 | 68.3 | 54.7 | |
| More than five years | 29.3 | 27.5 | 34.9 | 34.7 | |
| Total minimum lease payments | 150.4 | 133.9 | 140.7 | 119.8 | |
| Less future financing charges | (16.5) | – | (20.9) | – | |
| Present value of minimum lease payments | 133.9 | 133.9 | 119.8 | 119.8 | |
Capital commitments
| 2008 £m | 2007 £m | |
|---|---|---|
| Contracted | 42.7 | 34.2 |
The Group is committed to vehicle purchases and various land and buildings improvements.
Contingent liabilities
Bonds and letters of credit
In the ordinary course of business, the Group is required to issue counter-indemnities in support of its operations. As at 31 December 2008, there were UK Train performance bonds of £57.2m (2007: £78.3m) and UK Train season ticket bonds of £86.0m (2007: £79.4m). The Group has other performance bonds which include the £16.1m (2007: £15.5m) performance bond in respect of Inter-Capital and Regional Rail Limited, performance bonds in respect of businesses in the US of £76.6m (2007: £63.4m) and the rest of Europe of £24.7m (2007: £19.7m). Letters of credit have been issued to support insurance retentions of £86.2m (2007: £74.8m).
Claims
The Directors' Report discloses that Ray O'Toole is a defendant in proceedings being brought before the Supreme Court of New South Wales. These proceedings relate to a period of time when Ray O'Toole was a director of Bosnjak Holdings Pty Ltd, which was a subsidiary of the Group. The Company is also a defendant to these proceedings. The Directors believe no liabilities will arise from these proceedings and therefore no provision has been made at 31 December 2008 and 31 December 2007.