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Rising fuel costs have put the brakes on rail and bus operator Go-Ahead's profits. Reduced rail subsidies and a profit share with the Department for Transport at its Southern rail franchise have also put pressure on earnings growth. Despite the headwinds, management says that demand for its services remains strong, with increased revenue at bus, rail and aviation services.
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Chairman Sir Patrick Brown says that Go-Ahead's bus division is likely to be adversely affected by the increased fuel costs. Specifically, the bus unit's fuel bill increased by about £1.5m in the first half of the year and analysts at Brewin Dolphin expect fuel costs to trim second half earnings by a further £4m. At rail, revenues from the London Midland rail franchise, which Go-Ahead took over in November, have been ahead of target. And, combined with three new bus operations acquired during the six month period, new services contributed £68.6m of additional revenue and £2.4m of operating profit. Losses at Go-Ahead's aviation operation decreased from £4.2m to £0.6m.
Brewin Dolphin expects full-year fully diluted EPS of 152.5p (2007: 138.9p), rising to 179.5p in 2009.
GO-AHEAD (GOG) |
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|---|---|---|---|---|
| ORD PRICE: | 1,888p | MARKET VALUE: | £806m | |
| TOUCH: | 1,884-1,888p | 12-MONTH HIGH: | 2,822p | LOW: 1,843p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 102p* | NET DEBT: | 364% | |
| Half-year to 29 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Net div per share (p) |
|---|---|---|---|---|
| 2006 | 0.92 | 46.9 | 61.6 | 23.0 |
| 2007 | 1.03 | 45.2 | 57.4 | 25.5 |
| % change | +12 | -4 | -7 | +11 |
Ex-div: 26 Mar Payment: 11 Apr *Includes intangible assets of £143m, or 336p a share |
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Prospects at Go-Ahead are mixed, with high fuel costs likely to remain a headache. However, the shares have fallen sharply since the summer and - trading on a prospective full-year earnings multiple of 12 - they now reflect this. Fairly priced.
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
