Buses help drive up results at Go-Ahead

Sep 4 2009 by Iain Laing, The Journal

TRANSPORT group Go-Ahead beat expectations with a strong performance for its bus business despite seeing profits fall as rail revenues continue to suffer.

The Newcastle company, which operates the Southern, Southeastern and London Midland franchises, said it does not expect any “significant” growth during the year to June 2010 as demand slides in the recession.

The firm said its three franchises were “relatively robust” but expects rail profits to be below the £61.5m seen in the year to June 30 – itself a 20% a fall on the previous 12 months.

Revenues are being hit by falling subsidy support and cuts to regulated fares on two franchises linked to the Retail Prices Index inflation benchmark, which are currently negative.

Its jointly-owned Govia subsidiary, which runs the services, won the franchise to run the Southern Central franchise in London and the South coast earlier this year.

The firm has cut up to 300 jobs at the franchise and hopes the measures will offset the lack of revenue growth, alongside higher fares from new high-speed services beginning in December. But chief executive Keith Ludeman said that in the rail division “it is inevitable that we will see more positions disappear.”

Go-Ahead, which also runs trains and handles cargo and car parking at 15 airports, reported a £147m rise in revenue to £2,346.1m for the year to June 27.

But profits across the whole group were down by 15% to £112.1m. They were slightly better than industry experts had expected after the bus division made record profits of £66.2m. But it kept its dividend and the share price went up 5% to 396p as the company delivered its bullish statement.

Chairman Sir Patrick Brown said: “The effects of the economic downturn during the past 12 months have demanded exceptional effort to stay on track. We have achieved that and have delivered a good set of results as a consequence.

“We believe we are well placed for the year ahead, although we continue to assume economic conditions in the UK will remain difficult over the next 12 months.”

Go Ahead saw a record business in its bus division despite a £10m rise in the fuel bill for the 3,500-strong fleet. Pension and accident claim costs were also up, although the division made around £2.5m in cost savings.

It carries around 1.6m bus passengers every day on six bus companies in the North East – the region is the biggest user of buses per head of population – London, the South and Midlands.

It recently snapped up East Thames Buses in London for £5m and paid the same amount for rival Arriva’s buses in Horsham, West Sussex.

The effects of the economic downturn during the past 12 months have demanded exceptional effort to stay on track.