BOSSES at beleaguered Railtrack were today preparing to sue the Government as results revealed the company was making big profits immediately prior to its Whitehall-imposed shake-up.

Finance director David Harding said the company, which has regional headquarters in York, was taking the first steps in preparing legal action against the Government.

New figures released by the rail infrastructure firm show it made a pre-tax profit of £292 million for the six months to September 2001.

These profits, up nearly £120 million from the same period last year, indicate that Railtrack was far from bankrupt when it was placed in administration in October.

Transport Secretary Mr Byers applied to the High Court for the administration order claiming Railtrack, which manages and maintains the country's rail network, was in "financial meltdown".

Steve Marshall, chief executive of the Railtrack Group, said these results confirmed the company was not in financial difficulty.

"Railtrack was trading profitably, in line with expectations, and the contingent liabilities outlined at the 2001 year end were being addressed," he said.

"As we have said consistently, Railtrack PLC was NOT insolvent until the Secretary of State chose to make it so. No financial meltdown was in sight."

Mr Harding added: "Nobody wants to get into litigation, but as far as legal action is concerned the board will do whatever it takes.

"We are not finger-pointing. These results support our view that we were solvent. The Secretary of State chose to act in the way that he did.

"A deal needs to be done to remedy the injustice to our shareholders. We expect to put Mr Byers on notice of our intentions soon."

But at the Transport Salaried Staffs' Association, one the country's biggest transport unions, chiefs claimed the Government was "quite right" to have taken the action it did.

A spokesman for the union, which has an office in Micklegate, York, said: "If Railtrack was doing so well, why was it constantly coming back to the Government for more and more money?

"The company behaved as though the taxpayer would always foot the bill. The Government decided, quite rightly, that this was simply not sustainable.

"Instead of profits, we ought to be talking about spending money on much-needed improvements to the network.

"Whatever replaces Railtrack must be a not-for-profit company and must spend all its time and money on getting the trains to run on time."

Accountants Ernst and Young will decide whether private sector bids or a Government-backed not-for-profit company should take over from Railtrack.

Peter Davis, the Yorkshire chairman of pressure group Railfuture, added: "I was a bit startled to hear of this news.

"It is a very great shame that Railtrack has been put into administration. The public should be demanding answers.

"There seems to be a bit of a mystery surrounding Railtrack, especially now it appears it has been making a profit."

Updated: 10:54 Tuesday, December 18, 2001