Rail performance drags on Go-Ahead profits

Go-Ahead Group posted results “in line with expectations” on Thursday, reporting bus operating profit of £90.7m, down slightly from £91.2m, and rail operating profit of £59.9m, sliding from £71.4m in the prior year.

The FTSE 250 passenger transport operator put the rail profit slide down to ongoing industrial action at its Govia Thameslink Railway franchise - in particular, the Southern division - although it claimed service levels were now improving as the impact and level of industrial action reduced.

Its board reiterated that agreement had been reached in July with the Department for Transport on contractual variations on the Govia Thameslink franchise, relating to industrial action, which had since reduced the financial uncertainty around the franchise.

“We apologise to our Southern passengers who have been inconvenienced for many months by disruption caused by industrial relations issues,” said Go-Ahead’s chief executive David Brown.

“Service levels are beginning to improve but there is still a lot of work to be done to provide the level of service we and our customers expect.

“Our primary aim is to improve the experience for our passengers and we are resolute in this commitment.”

On the financial front, revenue was ahead 3.6% year-on-year at £3.48bn, with total operating profit down 7.4% at £150.6m for an operating profit margin of 4.3%, compared to 4.8% in the 2016 financial year.

Its profit before tax was down 5.7% at £136.8m, while basic earnings per share fell 4.8% to 207.7p.

The board still declared a 6.5% increase in the full-year dividend, to 102.08p.

“Go-Ahead's regional bus operation received the highest levels of customer satisfaction in the sector, up to 90% in the latest survey and exceeding the levels of satisfaction achieved by some of Britain's best-loved brands,” David Brown said.

“Our local bus businesses are focused on improving customer experience, including making it easier to pay for travel.”

Brown said that during the year, the latest contactless technology was introduced across a number of our operations.

“We plan for contactless payments to be available to every Go-Ahead bus customer by the end of the year.”

In bus operations, Go-Ahead said it maintained “sector-leading” performance in customer satisfaction in regional bus, with a score of 90%.

It also claimed Southeastern had achieved the “largest ever improvement” in customer satisfaction of any UK rail operator.

“As one of the UK's largest providers of public transport, Go-Ahead plays a vital role in building a thriving economy and connecting communities,” David Brown explained.

“By providing essential bus and rail services, we help people connect with each other and get where they want to go.

“We believe in creating shared value for our many stakeholders.”

Brown said the company “strived” to deliver high quality services for customers, as well as “sustainable returns” for shareholders.

“Our 29,000 employees, who are at the heart of the communities we serve, are key to our success and we believe in taking care of them.

“Effective partnership working is vital to delivering efficient transport systems; we work closely with key strategic partners to deliver improvement and change.”

Looking overseas, the company said it was progressing towards a new target for international operations to contribute 15% to 20% of group profit within five years.

Go-Ahead pointed out that its bus contract in Singapore had now commenced, and said it was delivering “high” performance levels.

Its third German rail contract had been secured during the year, and a bus contract was won in Dublin.

The company’s board said it was “actively exploring” further bus and rail opportunities in the Nordic region, as well as in Australia.

“The group remains in a good financial position, with a robust balance sheet, allowing us to invest in our core UK businesses and providing flexibility to pursue value-adding opportunities in new and existing markets,” David Brown said.