25th Apr 2008 07:01
Go-Ahead Group PLC25 April 2008 25 April 2008 The Go-Ahead Group plc ("Go-Ahead") Interim Management Statement The Go-Ahead Group plc today announces its Interim Management Statement for theperiod from 30 December 2007 to 24 April 2008. Highlights Trading for the third quarter of our financial year was strong. Highlights ofthe quarter were: •Double digit revenue growth in bus •Sale of Go West Midlands bus operations •Strong growth in rail passenger numbers and revenue •Further progress in aviation services •Additional fuel hedges put in place for one third of our 2008/09 bus requirement at 36p per litre Overall, we anticipate delivering a full year performance in line with ourexpectations and significantly ahead of our record results last year, reflectingthe underlying strengths of our business. Bus division Our bus division continues to perform well. We achieved double digit revenuegrowth in the quarter, in line with expectations, and anticipate a significantimprovement in operating profit and margin for the full year compared with lastyear. In our regulated London bus operations, revenue increases were similar to the11.9% achieved in the first half of the year, with around half the rise due tocontributions from acquisitions. Revenue from quality incentives was maintainedat the same high levels achieved in the first half and previous year. The performance of our deregulated businesses continued to improve compared withlast year, despite higher fuel prices. Underlying revenue increased in thequarter in line with the first half growth rate of 8.7%, and we expect furtherbenefit from the extension of the concessionary schemes on 1 April 2008.Underlying margins benefited from ongoing improvement initiatives and the saleof our Go West Midlands operations is expected to increase deregulated busmargins by a further 1% on an annualised basis. During the period, our Metrobus operations won an additional Transport forLondon (TfL) route and retained two other TfL routes as well as 13 routesoperated on behalf of West Sussex County Council. Solent Blue Line, part of ourGo South Coast operations, won a ten year contract with Southampton Universityworth over £2.5m a year. This is due to start at the end of September 2008. Fuel prices continued to increase, averaging 39p per litre in the quarter. Atpresent, we have fuel hedges covering half of our requirements for thisfinancial year at 29p per litre and during the quarter we have extended ourhedging to now cover one third of our requirements for next year at an averageprice of 36p per litre. Our aim is to hedge 75% of next financial year's volumeby 30 June 2008. While recent fuel price increases have been significant, fuelstill represents a relatively small part of the cost base of our bus operations,at around 10%. We are confident that over time we can recover these extra fuelcosts through a combination of improved consumption efficiency and fareincreases. Rail division The rate of growth in rail passenger numbers and revenue remained strong in thequarter. Underlying growth in passenger revenue in the quarter, excluding the impact ofthe unusually early Easter this year, continued at a similar rate to the 13.2%achieved in the first half of the year. In addition, we have made a strong startin our new London Midland franchise. We believe that the continued strength of demand for rail is a product ofimprovements in punctuality, frequency, service quality and investment, coupledwith high levels of road congestion. All three of our franchises improvedpunctuality and service quality in the quarter, with Southeastern benefitingfrom some significant timetable changes in December 2007. Investment continuesin each franchise, including additional gating to protect revenue in LondonMidland, together with cost reduction and efficiency initiatives. We are alsolooking forward to taking over the operation of the Gatwick Express service fromJune 2008. Our London Midland franchise is the only significant consumer of fuel in ourrail division through its diesel fleet, using approximately 12m litres perannum. We have hedged 100% of these requirements for the first six years of thefranchise at 27p per litre. As part of the Department for Transport's (DfT) preparations for the Thameslinkprogramme, in February 2008 Southern agreed to procure a further 11 four-carElectrostar units for the DfT. Under this agreement, Southern paid a 40% depositof approximately £20m from restricted cash at the end of March 2008, with thebalance due in March 2009. These amounts are expected to be reimbursed throughrefinancing later this calendar year to eliminate any net cashflow impact toSouthern. This confidential agreement also includes a reprofiling of the DfT'sprofit share in Southern from 1 January 2008 to September 2009. This is expectedto improve Southern's operating profit by around £2m in the second half of thisfinancial year. Aviation services division We continue to make progress in this division. In ground handling, year on year revenue growth has continued through acombination of net contract gains, price increases and service expansion withinexisting contracts. Cargo revenue rose in the quarter, in particular atHeathrow. The division has also benefited from improved cost control and revenuecollection in both our ground handling and cargo operations. In February we closed our ground handling operations in Durham Tees Valleyairport and half our cargo capacity at Gatwick. This resulted in an exceptionalcharge of approximately £1m and is expected to increase annualised operatingprofit by over £0.5m. We are working on a number of further restructuringopportunities to improve operating profit whilst maintaining high levels ofcustomer service. In parking, we secured our Heathrow airport parking contract for a further fiveyears, but our Stansted contract comes to an end in October 2008. The netadverse effect on next year's earnings is expected to be around £0.5m and we arelooking at various options to further reduce the scale of this impact. Cashflow Our operating cashflow was strong in the quarter, reflecting the cash generativenature of our business and our focus on cash management. Capital investmentspend was in line with our expectations and we repurchased 840,000 of our sharesfor £18.7m during the quarter. We have maintained gearing within our targetlevel, with net debt plus restricted cash at the end of the quarter at a similarlevel to the £308.6m at 29 December 2007. Outlook We have made good progress in the third quarter. We will continue to look to supplement organic growth with value addinginvestments. We will maintain our progressive dividend policy and will continueto use our buyback programme to regulate gearing. Our underlying performance, earnings progression and cashflows remain strong andthe board is confident of making further progress this year. -Ends-For further information: The Go-Ahead Group plcNick Swift, Group Finance Director Until 3pm: 020 7067 0446 Thereafter: 020 8929 8650 Weber Shandwick Financial 020 7067 0446Richard Hews / Rachel Martin / Hannah Marwood Notes to Editors BUSThe group's bus division operates over 3,600 buses, providing over 530 millionpassenger journeys and covering around 240 million vehicle kilometres each year.Operations consist of deregulated services in the north east; Oxford; the southeast and southern England; and regulated services for TfL in London. RAILThe group's rail division, consisting of the Southern, Southeastern and LondonMidland franchises, operates a fleet of 776 trains on which over 330 millionpassenger journeys are undertaken. We operate a mix of suburban commuter andmainline routes around London and the south east, from London to Birmingham andLiverpool, and in the West Midlands. The Southeastern franchise will include theoperation of new high speed trains on the domestic Channel Tunnel Rail Link intoSt Pancras from 2009 while the Southern franchise will include the operation ofthe Gatwick Express rail services from June 2008. AVIATION SERVICESThe group's aviation services division undertakes a wide range of supportservices for national and international airlines. Services provided includecargo handling, passenger check-in, baggage handling, information desks,executive lounges, ground handling and customs clearance. In the last year, weprovided services to around 44 million passengers as well as over half a millionaircraft movements. The division includes Meteor Parking which is one of thelargest parking companies in the UK, managing over 65,000 parking spacespredominantly at BAA airports, with a range of customers, including BAA, localauthorities, retail outlets, NHS trusts, hotels and rail stations. Well knownbrands include 'Pink Elephant', 'Park 1' and 'eparking'. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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