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Go-Ahead warns on profits

The transport group has encountered difficulties in Germany
March 13, 2020

A mix of bad weather and profit underperformance in Go-Ahead’s (GOG) regional bus division have prompted a reduction to the transport group’s full-year profit forecasts. Rail operating profits fell to £14.7m from £17.6m, after the group’s German rail operations were affected by contractual performance penalties, the late delivery of new rolling stock and a shortage of drivers.

IC TIP: Sell at 1,137p

While Go-Ahead achieved a 2.3 per cent revenue increase in regional buses, its costs are outpacing this growth and eating into margins. Go-Ahead has encountered operational efficiency issues while its depreciation and engineering costs have also lifted, owing to the introduction of lower-emission buses. Restructuring costs linked to the withdrawal of an Oxford-London coach service contributed to a 17 per cent fall in regional bus operating profit to £19.1m.

The inclusion of lease liabilities on Go-Ahead’s balance sheet more than trebled its adjusted net debt figure, but despite rising capital expenditure, it represents a manageable 1.53 times cash profits and sits at the lower end of the transport group’s target range of 1.5 to 2.5.

Peel Hunt forecasts full-year 2020 adjusted pre-tax profits and EPS of £97.6m and 140.7p respectively, with profits set to fall to £94.1m and EPS to rise to 143.4p in 2021.

GO-AHEAD GROUP (GOG)

    
ORD PRICE:1,137pMARKET VALUE:£ 491m
TOUCH:1,137-1,144p12-MONTH HIGH:2,309pLOW: 1,137p
DIVIDEND YIELD:9.0%PE RATIO:10
NET ASSET VALUE:597p*NET DEBT:£1.05bn**
Half-year to 28 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20181.9244.260.730.17
20191.9749.064.630.17
% change+3+11+6-
Ex-div:26 Mar   
Payment:17 Apr   
*Includes intangible assets of £118.6m, or 275p a share **Includes lease liabilities of £630.4m