Railtrack shares soar on huge profits leap

Shares in Railtrack soared more than 10 per cent yesterday as the newly privatised company reported a huge leap in profits helped by windfall property gains and unveiled new plans to tackle the problem of leaves on the line.

In its first set of results since the company was floated in May, Railtrack, the owner of the country's railway track, signalling and stations announced a 75 per cent rise in profits to pounds 173m in the half year to the end of September. A pounds 23m profit from the disposal of properties in Shepherds Bush, west London, Oxford and Bradford, contributed to the increase.

Railtrack shares roared ahead on the announcement, closing 38p higher at 323p - a gain of 13 per cent. They were sold by the Government at 200p six months ago.

The increase in pre-tax profits was flattered by a sharp drop in interest charges following the Government's agreement to write off more than half Railtrack's pounds 1.7bn debt. Operating profits rose by a more modest 12 per cent to pounds 169m.

The improvement came despite an increase in operating costs from pounds 988m to pounds 1.03bn and a marked deterioration in the performance of its freight service customers. Figures released by Railtrack show that delays caused by freight train operators were 75 per cent higher rose in September this year compared with the same month last year.

"Our freight customers have to do rather better, to put it frankly," said John Edmonds, Railtrack's chief executive.

However, he said that passenger train delays were down by 17 per cent while delays attributable directly to Railtrack were down by 30 per cent. The improvement in performance enabled Railtrack to net profit of pounds 4m in the half year from access charge supplements to train operating companies. It expects the figure for the year to be pounds 9m.

Railtrack is in negotiations with the infrastructure maintenance companies that repair and service the rail network to agree new cost saving targets for next financial year. Railtrack has been told to achieve efficiency improvements of 3 per cent a year by the Rail Regulator John Swift.

Meanwhile the company said that it was testing out a new German-designed system for eradicating the problem of leaves on the line. The Geismer system involves removing the leaf mulch from rail lines using a high pressure water cannon. At present, Railtrack tackles the problem by applying a gravel-like paste to the tracks to improve traction The system has been used successfully in France and Sweden. The trials, costing pounds 250,000, are taking place in the South-west and East Anglia.