Railways on line for record profits

Date: 11/06/1998

By Chris Johnstone

SEPARATE and sell off was the British model for dealing with a monolithic railway.

Although arguments still circulate about the rights and wrongs of this, the market has made up its mind.

Last week, UK rail infrastructure company Railtrack reported record profits of more than 500 million ecu. Its share price has more than tripled since it was sold off three years ago on the back of a generous cancellation of debt.

Although most analysts now agree that shares were initially too cheap, part of the increase stems from what the company has done since and the perception that history is running in the railways' favour rather than against.

“What the government is trying to do on transport will favour the railways,” says Matthew O'Keeffe, an analyst with London-based Bankers' Trust. “Railways knew 50 years of decline. What we are seeing now is unprecedented.”

The myriad rail companies which run services on Railtrack's lines, and are more exposed to traffic's ups and downs, are nevertheless also posting profits, with operating companies reporting a 7&percent; surge in use.