Half-year results from transport operator Go-Ahead (GOG) show the group's bus business on track to hit ambitious three-year growth targets. A 15 per cent rise in operating profit to £40.6m encouraged management to reiterate its target of making £100m within the division by 2016.
Go-Ahead announced its 'Target 100' initiative to grow bus operating profits via organic sales growth and cost cuts back in October 2012. At 4 per cent, like-for-like revenue growth from its deregulated bus services was ahead of the three-year guideline, and the group also took £4.5m out of the cost structure. Finance director Keith Brown said the results proved Target 100 was "realistic and achievable".
The struggling rail business also exceeded market expectations, which were admittedly low. Operating profit rose to £10.5m - up from £6.7m the previous year - but profitability will come under pressure in the second half. It needs to rebid for three of its contracted rail franchises and an unprofitable seven-month extension to the Southeastern franchise will impact growth. Mr Brown said better terms for contract extensions would be a priority. May 2014, when a decision regarding the enlarged Thameslink franchise becomes clear, will be a crucial month for Go-Ahead. If successful, the group stands to add £1.1bn to passenger revenues.
Broker Investec Securities expects pre-tax profits of £75m for the full year, giving EPS of 140p (up from 117p in 2012-13).
| GO-AHEAD (GOG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,085p | MARKET VALUE: | £897m | |
| TOUCH: | 2,081-2,090p | 12-MONTH HIGH: | 2,136p | LOW: 1,355p |
| DIVIDEND YIELD: | 2.7% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 34.7p* | NET DEBT: | 265% | |
| Half-year to 28 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 1.29 | 30.8 | 53.4 | 25.5 |
| 2013 | 1.37 | 40.3 | 78.4 | 25.5 |
| % change | +6 | +31 | +47 | - |
Ex-div: 19 Mar Payment: 4 April *Includes intangible assets of £89.4m, or 208p a share | ||||
