National Express makes pounds 20m profit on five rail franchises

NATIONAL Express, the country's biggest train operator, made profits from every one of its five passenger rail franchises last year after receiving pounds 500m in subsidies from the Government.

The transport group said yesterday that all its train operations beat their financial targets, achieving operating profits before restructuring charges of just under pounds 20m. National Express will receive a total of pounds 2.8bn in subsidies over the life of the five franchises - Gatwick Express, ScotRail, Midland Main Line, Central Trains and Silverline, formerly known as North London Railways.

The company also pointed out it was spending pounds 240m on new rolling stock, and in the case of Scotrail and Central Trains investment levels were above those set out in its franchise agreements.

The improved financial performance came on the back of a 6-9 per cent rise in passenger numbers and increased levels of reliability and punctuality.

Phil White, chief executive of National Express, said standards of service had outperformed pre-privatisation levels and, in some cases, also the requirements laid down in its franchise agreements.

National Express, a founder shareholder in London & Continental Railways, confirmed that it had submitted an "indicative bid" in partnership with British Airways to take over the Eurostar train service.

The group expects John Prescott, Deputy Prime Minister, to grant a further 30-day extension to LCR to assemble refinancing plans for the Channel Tunnel Rail Link when its current extension runs out at the end of this month.

National Express and BA are examining two options. One is to take over the Eurostar service between London, Paris and Brussels on a franchise basis, which would entail the Government providing subsidies in the early years to cover operating losses. Eurostar losses are currently running at pounds 180m a year.

The other option would be for the Government to contract out the operation of the service, in which case the two companies would be paid a management fee.

Colin Child, National Express finance director, said he did not believe it would be tainted by its involvement with LCR, which pulled out of its agreement to build the rail link in February after being refused a further pounds 1.2bn in subsidies.

He also said the two companies would address any competition problems that might arise because of BA's already dominant position in the air market between London, Paris and Brussels.

The group's results for 1997 were hit by a pounds 10.8m provision against its investment in LCR. This helped lower pre-tax profits from pounds 60.1m in 1996 to pounds 54.8m.

There were a further pounds 17.5m of charges to cover restructuring costs, mainly in its rail franchises where staffing levels fell by 700. A further 350 jobs will be shed in the rail division this year.