A series of exceptional charges forced Go-Ahead's profits down but, even after these are stripped-out, adjusted operating profits fell 14.7 per cent year-on-year to £123.6m. What's more, slowing growth in the passenger rail division and higher fuel costs mean a cautious outlook.
The biggest dent in profits was made by a reduction in the carrying value of its airport cargo and handling operation, by £38.4m to £20m, which reflected general turmoil in the aviation market. Other charges included £10m relating to restructuring costs at the rail and aviation services operations. There was, however, a £107m fall in the debt pile year-on-year - although this reflected working capital changes at the rail division and is expected to reverse next year.
Rail is Go-Ahead biggest unit with sales of £1.55bn - it was also the single biggest reason for the decline in operating profit. Rail profits fell from £77.2m in 2008 to £61.5m as growth in passenger numbers stalled in the second half due to rising unemployment amongst central London commuters. Whereas last year the main Southern and Southeastern rail franchises registered average passenger growth approaching 13 per cent, growth this year tumbled to 7.9 per cent and 5.5 per cent respectively. Management doesn't see any real change in this trend before June next year. Annual savings at the division are estimated at £10m, but further cuts look unlikely because of rail's high operational gearing.
The bus division was surprisingly flat, with operating profits barely changed at £66.6m and a slightly reduced margin of 11.4 per cent (2008: 11.9 per cent). Although passenger growth and revenues were generally up, the fuel bill was £10m higher and the company had to book nearly £8m in additional pension contributions and accident provisions. Deregulated bus services saw like-for-like revenue growth of 6.4 per cent, with the bulk of this increase driven by a rise in concessionary passengers. Management was cautious about the bus division's prospects going forward, saying it was unlikely to match record levels of growth seen this year.
Prior to these figures, Arbuthnot Securities has been expecting EPS of 116p for 2010.
THE GO-AHEAD GROUP (GOG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,333p | MARKET VALUE: | £ 573m | |
| TOUCH: | 1,333-1,336p | 12-MONTH HIGH: | 2,058p | LOW: 845p |
| DIVIDEND YIELD: | 6.1% | PE RATIO: | 91 | |
| NET ASSET VALUE: | * | NET DEBT: | £91m | |
| Year to 27 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2005 | 1.30 | 93.9 | 114 | 48.0 |
| 2006 | 1.46 | 83.6 | 108 | 56.0 |
| 2007 | 1.83 | 94.8 | 124 | 70.0 |
| 2008 | 2.19 | 103 | 129 | 81.0 |
| 2009 | 2.34 | 42.0 | 14.7 | 81.0 |
| % change | +7 | -59 | -89 | - |
Ex-div:04 Nov Payment:20 Nov *Negative equity shareholders' funds | ||||
