EWS chief signals ambitious track ahead

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The chief executive of Britain’s biggest rail freight operator has said that the company would have to seek fresh capital – possibly through a stock market flotation – to finance ambitious development plans.

In an interview with the Financial Times, Keith Heller, chief executive of EWS, said it was seeking to grow significantly and become more efficient in the UK and to expand in continental Europe.

He did not yet know whether that would mean the company had to float on a stock exchange, seek a recapitalisation or undertake some other transaction. But he said: “We are likely going to need more money. This is a cash-positive business, but we are probably going to want to grow in Europe faster than we could only using self-generated funds.”

It is not clear how much EWS might be worth in any transaction since there are few pure listed freight operators that, like EWS, own no rail infrastructure.

However, listed North American rail freight operators – which own significant amounts of track – usually command valuations of between five and seven times earnings.

EWS, which generated £45m of earnings before interest tax and depreciation and amortisation (ebitda) last year on revenues of £495m, is owned 31 per cent by Canada’s Canadian National, which acquired the stake through its 2001 takeover of Wisconsin Central of the US.

With ebitda this year expected to be about £50m, that would imply a value of £250m to £350m.

The remaining shares in EWS are held by two private equity firms – Boston-based Berkshire Partners and Geneva-based Fay Richwhite.

The company has been seeking for some time to start its own business in France, partly to overcome the problems caused for its Channel Tunnel operations when trains are handed over to the freight division of France’s SNCF, which has a poor reputation for quality.

It received the safety certificate for its French subsidiary – Euro Cargo Rail – on October 26 and this winter expects to become only the second private train operator in France. The first – Connex – started running freight trains from eastern France to Germany in June.

Mr Heller, chief executive since January 2004, gave no indication when the cash might be needed or how much would be raised.

Private companies have recently increased competition against state-owned European railways in key freight markets.

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