Bus and rail outstrip aviation for Go-Ahead

Oct 26 2007 by Iain Laing, The Journal

BUS and train operator Go-Ahead said yesterday first-quarter trading had been strong, as expected, causing its shares to jump by more than 5%.

The Newcastle company said its regulated bus division in London had performed well, as had all its deregulated bus businesses except the West Midlands operation.

First-quarter passenger revenues increased 12.7% at its rail division, which includes the Southern and Southeastern franchises, but this was partly offset by higher costs.

The company said it remained committed to improving the performance of its problematic aviation division, where cargo volumes grew in the first quarter.

Brewin Dolphin analysts said: “The ground handling contracts with British Airways have now passed to the group and, with transition issues having been resolved, we would expect a reasonable contribution from these contracts in the remainder of the year.”

Go-Ahead shares rose 7.1% to £26.98 yesterday morning, valuing the group at £1.2bn, before falling back slightly to close 5% up at £25.19.

Analyst Joe Thomas at Investec said: “The shares trade at a slight discount to the peer group for calendar 2008, on our forecasts. However, we think this is appropriate given the uncertainties over aviation services and the short remaining life of the Southern franchise.”

A strong performance from its rail business helped the company last month post an £8.2m rise in profits to £110.1m in the year to June 30.

The trade offset woes seen at its airport services operation, which suffered amid the security disruption at Heathrow and Gatwick.