Go-Ahead Group ends year ahead of expectations despite rail struggles

Go-Ahead Group issued its results for the year ended 30 June on Thursday, reporting a 0.6% fall in revenue to £3.46bn, and a 9.8% drop in operating profit pre-exceptional items to £135.9m.

The FTSE 250 passenger transport operator said its profit before tax was up 6.5% at £145.7m, although basic earnings per share pre-exceptional items were 12.5% lower at 181.6p.

Basic earnings per share after exceptional items fell 0.2% year-on-year to 207.2p.

The Go-Ahead board proposed a full-year dividend per share of 102.08p, in line with the distribution paid after last year’s final results.

On the operational front, the firm said it had made “good progress” across its three strategic pillars - to protect and grow its core; to win new bus and rail contracts; and to prepare for the future of transport.

It said its overall results were indeed ahead of expectations.

The company’s bus operating profit pre-exceptional items was £91.4m, up from £90.7m, with the board noting that its regional bus operations achieved their highest ever passenger satisfaction score of 91%.

Rail operating profit fell to £44.5m from £59.9m, which was due in part to the expiry of the London Midland franchise in December.

The firm’s Govia Thameslink Railway venture was also impacted by the botched implementation of a new timetable in May, with the board claiming that reliability had “significantly improved” since a subsequent timetable amendment in July.

Its Southeastern rail franchise was extended to 1 April 2019, and the company was shortlisted for the replacement franchise.

Further progress was also reported towards Go-Ahead’s international target, as it won its second bus contract in Ireland and its fourth rail contract in Germany.

“I'm pleased to report full year results that are ahead of our expectations,” said group chief executive David Brown.

“Our bus operations performed resiliently with profits slightly up on last year despite a challenging market environment.

“Rail profits fell partly due to the expiry of the London Midland franchise in December, but one-off disposal gains at the end of the franchise and some cost improvement benefits at Southeastern led to a better performance than originally expected.”

Brown noted that the regional bus business received customer satisfaction levels of 91% - the highest ever recorded in the sector.

He also said its London bus business improved its operational performance with punctuality levels 12.5% better than last year.

“In rail, the timetable change in May was the largest in decades and will deliver substantial customer benefits,” Brown said of the new timetable which resulted in major disruption for thousands of commuters.

“In Southern, the timetable change supported continuing improvement, with services now operating at the highest level of reliability since before the start of the current franchise.”

Brown said that in Thameslink and Great Northern, “collective industry failures” over the timetable change resulted in a period of service performance which was severely below the board’s expectations and those of Go-Ahead’s customers.

“We are sorry for the significant disruption that the change caused to our passengers and are working very hard with the rest of the industry to improve the service.

“The interim timetable that has been in place since mid-July is providing a much improved train service in terms of both reliability and punctuality.

“More services will be introduced over the coming months.”

Go-Ahead’s international strategy progressed well during the year, Brown noted, with two further contract successes - a second bus contract in Ireland and a fourth rail contract in Germany.

Annualised revenue from the seven international contracts secured to date was now around £250m, and there was a good pipeline of upcoming opportunities in the firm’s target markets according to the chief executive.

He said the firm remained on track to meet its target of generating 15% to 20% of group operating profit from international operations by 2022.

“As we look ahead, we recognise that future transport needs of customers and society are changing, and we are actively pursuing initiatives to further benefit our customers.

“Projects include the launch of the UK's largest demand responsive bus transport trial of high-quality minibuses in Oxford, working with logistics partners on utilising our spare depot capacity, environmentally friendly car sharing schemes, developing mobility-as-a-service apps for end-to-end journeys, and launching a business accelerator programme for start-up and scale-up businesses looking to shape the future of transport.”

Looking ahead, Brown said that for the group overall, it expected to deliver a “robust” performance in 2018/19, taking into account the expiry of the London Midland franchise last year which contributed positively for the first six months of 2017/18.

“We expect free cash flow generation to be strong, resulting in a further reduction in net debt excluding restricted rail cash.

“Looking forward, we remain confident that we are in a good position to deliver long term value for all our stakeholders and deliver our vision of a world where every journey is taken care of.”