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Go-Ahead goes international

Operating profit fell, but the transport company is now targeting international expansion as a source of growth
September 11, 2017

Despite a small revenue uplift, Go-Ahead (GOG) revealed a 7.4 per cent drop in operating profit for the full year ending 1 July, in line with what chief financial officer Patrick Butcher termed a difficult and challenging market for UK transport. Perhaps it was no surprise, therefore, to see the shares fall in early trading. 

IC TIP: Hold at 1,587p

Rail achieved a sales improvement of 3.2 per cent but margins are at “historically low levels”, dragged down by the GTR division – which includes Southern Rail, Gatwick Express, Thameslink and Great Northern. Discussions continue between GTR and the Department for Transport regarding service changes; Go-Ahead expects future rail profits could be impacted by plus or minus £5m as a result.

Total bus revenue rose by 4.5 per cent to £902m. The strong performance from London was dampened by challenges in Oxford, where multiple bus accidents lifted costs. And there were lower passenger numbers in the north-east region. But Mr Butcher says the bus division delivered sector-leading operating margins, specifically 8.3 per cent in London.

The group is also starting to target international expansion, with contracts already won representing £200m in potential annualised revenue.

Analysts at Investec forecast pre-tax profit of £110m and EPS of 178p for FY2018, down from £137m and 207p in 2016.

GO-AHEAD (GOG)   
ORD PRICE:1,587pMARKET VALUE:£684m
TOUCH:1,585-1,587p12-MONTH HIGH:2,344pLOW: 1,568p
DIVIDEND YIELD:6.4%PE RATIO:8
NET ASSET VALUE:469p*NET DEBT:126%
Year to 1 JulTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20132.5763.110881.0
20142.7091.216484.5
20153.2278.712290.0
2016*3.3614521895.9
20173.48137208102
% change+4-6-5+51
Ex-div:9 Nov   
Payment:24 Nov   
*Includes intangible assets of £91.5m, or 212p a share   **2016 figures restated