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Rail stole the show last year at transport group Go-Ahead. It was the biggest contributor to profits and delivered a 56 per cent rise in operating profits to £66.1m, thanks to strong performance feess, a record contribution from the Southern franchise and a first full year from South Eastern. However, a repeat performance is unlikely this year, as government subsidies wind down and cost pressures build up.
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Finance director Nick Swift says there's no reason to hit the emergency stop button, though. This year will be up against strong comparatives, and subsidies naturally decline over the life of a franchise. Go-Ahead takes on the new West Midlands network in November and will integrate the Gatwick Express into its Southern franchise next May.
Profits at Go-Ahead's bus division were motoring, too, up 19 per cent to £55.8m which reflected positive momentum in its regulated and dereglated bus operations. But the group's troublesome aviation services operation reported a £3.8m loss - including £1.3m of restructuring costs - as the ground handling business felt the pressure of new security measures at airports. Mr Swift says this division should at least return to profitability this year.
Investec Securities expects normalised pre-tax profits of £129.7m for 2008 (2007: £111.9m), with adjusted EPS of 186.3p (147.3p).
GO-AHEAD GROUP (GOG) |
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|---|---|---|---|---|
| ORD PRICE: | 2,659p | MARKET VALUE: | £ 1,193m | |
| TOUCH: | 2,654-2,663p | 12-MONTH HIGH: | 2,822p | LOW: 1,819p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 316p* | NET DEBT: | 98% | |
| Year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2003 | 1.08 | 35.5 | 25.5 | 25.0 |
| 2004 | 1.22 | 19.7 | -32.1 | 38.0 |
| 2005 | 1.30 | 93.9 | 113.8 | 48.0 |
| 2006 | 1.46 | 83.6 | 108.1 | 56.0 |
| 2007 | 1.83 | 94.8 | 124.2 | 70.0 |
| % change | +25 | +13 | +15 | +25 |
Ex-div:31 Oct Payment:23 Nov *Includes intangible assets of £129.4m, or 288p a share |
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Although aviation services should improve, the rail business will come under pressure as subsidies decline. So, trading on a prospective PE ratio of 15, Go-Ahead's shares look fairly priced for now.
Last IC view: High enough, 2,658p, 30 May 2007
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