Stagecoach calls for £100m rail investment in Waterloo

A large part of London's Waterloo station will lie idle after 2007 unless the Government spends at least £100m on a massive programme of engineering, according to a train company chief.

A large part of London's Waterloo station will lie idle after 2007 unless the Government spends at least £100m on a massive programme of engineering, according to a train company chief.

It had been thought that a decision by Eurostar to abandon Waterloo International and run all its trains into St Pancras would facilitate a substantial expansion in South West Trains' (SWT) domestic services.

But yesterday Graham Eccles, the chairman of SWT, a subsidiary of Stagecoach, said Eurostar's decision would have only a "very marginal effect" on its business unless "big bucks" were spent on the infrastructure. He said only a small number of trains from Reading would be able to use the five platforms left after the departure of Eurostar unless a series of points were constructed and a rail "flyover" built.

Such a project would enable Britain's busiest rail commuter company to boost revenue by running more suburban trains into Waterloo. SWT could also put on extra coaches, taking advantage of platforms which are a quarter of a mile long.

If the investment is not forthcoming, Waterloo International, which is alongside the main station, could become a "white elephant", rail insiders believe. The award-winning Eurostar complex, built at a cost of £130m in 1993, handles services from Paris and Brussels, but when the second phase of the Channel Tunnel Rail Link is complete in three years, all international trains will run into St Pancras.

Mr Eccles' comments came as the Stagecoach share price rose to 114p - their highest level since March 2000 - after first half profits comfortably beat expectations. Pre-tax returns in the six months to 31 October were up from £44.8m to £57.2m and the chief executive, Brian Souter, predicted further growth. Earnings per share were up from 3.2p to 4p and the interim dividend rose by 11.1 per cent.

Mr Souter said "strong underlying growth" had been achieved across the business and he declared his confidence that "cash-generative" businesses would continue to deliver growth. His optimism was based partly on buoyant returns from the rail industry where he said demand had returned to the levels experienced before the Hatfield disaster in 2000.

He said passenger growth was based on a better performance from the state-backed infrastructure organisation Network Rail, general economic growth, greater confidence in the industry and higher levels of road congestion. He said train operating companies were now being "very positive" about the state of the industry.

The outlook for earnings for its joint rail venture with Sir Richard Branson's Virgin Group, however, was more difficult to predict, he said. The Virgin Rail Group, of which Stagecoach owns 49 per cent, was still in talks with the Strategic Rail Authority (SRA) over the future of the West Coast Main Line and CrossCounty franchises which are being run under management contract rather than on a purely commercial basis.

Stagecoach also holds a 50 per cent stake in a second consortium with Virgin, which on Monday submitted a bid to run the East Coast Main Line licence currently held by Great North Eastern Railways, a subsidiary of Sea Containers.

Stagecoach reported that high fuel prices had a negative impact on its bus interests, adding £5m to costs in the first half.

The group announced that emission levels are to be reduced on its 7,000 buses by the introduction of a special "green" fuel additive, Envirox. Mr Souter said: "We are excited about the potential of this product."