Railtrack hit by profits slump

Profits at Railtrack fell 31 per cent today as the embattled railways operator accepted it would have to pay out £250 million for re-railing after the Hatfield rail crash and in compensation to rail operators.

Profits at Railtrack fell 31 per cent today as the embattled railways operator accepted it would have to pay out £250 million for re-railing after the Hatfield rail crash and in compensation to rail operators.

Pre-tax profits at Railtrack in the six months to September 30 fell to £175 million, compared with £252 million at the same point last year, as the group spent £1.2 billion on improving the rail network.

Chief executive Gerald Corbett also said there would be a one-off charge in the second half of the year of £250 million to cover the cost of penalty payments to train operating companies for disruption following the Hatfield crash and for this autumn's extensive re-railing programme.

Railtrack spent more than twice the level of three years ago on improving the railways, an investment which had led to a 32 per cent reduction in broken rails, it said.

There had been a 30 per cent reduction in signals passed at danger in the six-month period, due to improved briefings, training, defensive driving techniques and work on signalling.

But the increased investment and safety programme meant Railtrack was unable to deliver on its performance targets, it added.

Railtrack's pre-tax profits figures cover the period before the Hatfield crash in October.

The company's performance for the first half of the year on all trains was 6 per cent worse than last year, with performance for freight trains 13 per cent better and passenger trains 10 per cent worse.

Although there had been 6 per cent fewer incidents of delays in the period, there was a greater number of delay minutes, said Railtrack.

Mr Corbett said: "The first half of the year has seen us achieve record levels of investment on the network as well as delivering against key safety indicators.

"The terrible accident at Hatfield means quite rightly we have to stand back and review everything.

"The accident has highlighted the huge pressures which face Railtrack of matching the investment needed to make up years of under-investment."

Mr Corbett said re-railing work would continue "slightly into the New Year" entailing "some more disruption".

But he insisted that the work was the right thing to do after the Hatfield crash.

He told BBC Radio 4's Today programme: "The rail will be better, the track will be better, there will be less broken rails, there will be better train performances.

"We can then get back on the agenda of growing the railways and implementing the Government's 10-year plan."

Mr Corbett played down reports that the repair programme would continue until Easter, saying he thought it would be completed much sooner.

He said: "I am pretty confident that most of it will be out of the way by January."

He defended the decision to pay increased dividends to shareholders, saying: "Because the next couple of months are going to be difficult doesn't mean the next five years are going to be difficult."

He said the increased dividends were "a vote of confidence in the future".

Asked about the compensation scheme for customers, he said: "We reckon that compensation to us the operators ...will be of the order of £150 million and the detail of that and how it gets through to the passengers will be worked out in the next couple of weeks."

Track circuit failures remained the prime cause of delays, but delays caused by fatalities on the line, people trespassing and security alerts also increased substantially.

To date 38 per cent of work to overhaul the West Coast Main Line had been carried out, with the £125 million remodelling of London's Euston station nearly completed and the £38 million upgrade of Birmingham's Proof House junction finished.

Schedule one of the Channel Tunnel rail link was proceeding on schedule, with 46 per cent of the work completed.

The first phase of the East Coast Main Line modernisation was also 51 per cent completed, with major works at Leeds and Doncaster South finished.

Shareholders will pick up a 5 per cent greater interim dividend, at 9.75p, despite City predictions that Railtrack would peg it at last year's 9.30p to head off claims shareholders were cashing in post-Hatfield.

Railtrack predicted it would return to a growth curve after the second half of the year.

But the £250 million charge in the wake of the Hatfield crash meant full-year profits for 2000/2001 would be "materially impacted".

Railtrack also hinted that the bill post-Hatfield could yet go higher, saying: "Estimates are inevitably broad and at an early stage."

Turnover in the period was also down, to £1.28 billion, against £1.29 billion last time.