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Go-Ahead downgrades full-year expectations

As issues persist with its management of the Southern Rail franchise, cracks are starting to show elsewhere too
February 28, 2017

Southern Rail users were probably pleased to see Go-Ahead (GOG) shares plunge 13 per cent on the back of these results. But the bad news is the fiasco with that franchise - which is run by Go-Ahead's Govia subsidiary - looks set to continue, despite ongoing negotiations with the Department for Transport (DfT) and trade unions. As far as investors are concerned, management has lowered its guidance for the full financial year, citing a potential £15m profit hit as a result of weaknesses in passenger volumes from the regional bus division, higher insurance claim costs and, of course, escalating costs from the Southern situation.

IC TIP: Hold at 1,980p

Chief executive David Brown described the Govia Thameslink Railway franchise - that's Southern to you and me - as "challenging from the outset" and insisted that passengers would eventually feel the benefits of the group's investment programme. On the bus side, both divisions - regional and London - actually reported good profit growth, largely thanks to an improvement in regional margins and stability in London margins.

Analysts at Liberum expect pre-tax profits of £144m for the year ending June 2017, giving EPS of 214p, compared with £148m and 222p in FY2016.

 

GO AHEAD (GOG)
ORD PRICE:1,980pMARKET VALUE:£851m
TOUCH:1,976-1,980p12-MONTH HIGH:2,722pLOW: 1,775p
DIVIDEND YIELD:4.9%PE RATIO:13
NET ASSET VALUE:410p*NET DEBT:136%

Half-year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20151.6775.911528.33
20161.7267.010830.17
% change+3-12-7+6

Ex-div: 30 Mar

Payment: 21 Apr

*Includes intangible assets of £84.1m, or 196p a share