Merseyrail faces penalties over forced timetable cuts

Aug 31 2007 by Tony McDonough, Liverpool Daily Post

THE joint venture company running the Merseyrail network faces a race against time to avoid financial penalties for implementing a reduced timetable because of its train maintenance crisis.

A sudden rise in excessive wheel wear has disabled 21 trains from Merseyrail’s 59-strong fleet, causing the company to run an emergency timetable on the Northern and Wirral lines.

The misery caused to rush-hour commuters across Merseyside could potentially get worse next week when school and college terms start after the summer break.

Merseyrail Electrics is a joint venture between services group Serco and Ned Railways. It signed a 25-year franchise agreement which began in July, 2003, and was believed to be worth £3.6bn over the life of the contract.

A local transport source has told the Daily Post that if the crisis, already more than a week old, were to continue for as long as four to six weeks then Merseyrail Electrics could face financial penalties under the terms of the deal.

However, it is believed the company is confident the problem can be addressed and the normal timetable re-implemented well before that becomes an issue.

Yesterday, Serco, which also operates the Northern Rail franchise and London’s Docklands Light Railway, reported a 16% rise in pre-tax profits for the six months to the end of June to £52m.

The figures prompted City analysts to upgrade the company’s full-year forecasts and sent its shares upwards.

“Interim figures were slightly better than our and market expectations. Shares remain attractive,” Panmure analyst Mike Murphy said, maintaining a buy recommendation and 500 pence price target on the stock.

Serco said revenues for the half-year period grew 9.1% to £1.35bn and it raised its interim dividend 17% to 1.23 pence per share.

“We are extremely pleased with the group's performance in the first half of 2007.

“We have very strong markets, we have a great track record and very focused on driving efficiency," chief executive Christopher Hyman said.

Cazenove analyst Robert Plant added: “A good set of results from Serco. We believe that estimate momentum remains positive and the upbeat outlook statement should help Serco move back towards its May highs.”

tonymcdonough