15th Dec 2009 07:00
The Go-Ahead Group plc ("Go-Ahead" or "the Group")
PRE-CLOSE TRADING UPDATE
Significant operational achievements and progress in delivering strategy.
Trading in line with expectations.
Go-Ahead announces its pre-close trading update for the six months ending 2 January 2010, ahead of its half year results which will be released on 25 February 2010.
The first half of this year consists of 27 weeks, compared to 26 weeks in the first half of last year. The additional week, from 27 December 2009 to 2 January 2010, is estimated to account for around 2-3 percentage points of the growth rates described below.
Overall:
In the last six months we have:
Retained the Southern rail franchise
Launched the UK's first domestic high speed rail service
Invested £30m in three bus acquisitions (East Thames, Horsham and Plymouth CityBus)
Established a yellow school bus joint venture in North America
Agreed to sell the majority of our ground handling and cargo operations
We are pleased with these achievements, which mark significant progress in delivering our strategy.
We remain on track to report a profit before tax and exceptional items for the first half of the year in line with our expectations.
Bus:
Our bus operations continue to perform well and the first half operating profit* is now expected to be slightly ahead of the first half of last year (H1 2008/9: £31.4m).
In our regulated London bus operations, first half revenue growth is anticipated to be 6-7% and mileage to be up around 5%, of which contribution from acquisitions represents around 1 percentage point since completion on 1 October 2009. Underlying growth is benefitting from an increase in mileage, in part due to the phasing of contract wins and losses. Quality incentive targets continue to become more challenging, although our performance to date has been particularly strong and quality incentive revenue for the first half of this year is likely to be slightly ahead of the first half of last year (H1 2008/9: £6.7m).
Our deregulated bus operations are also performing well, with first half revenue growth expected to be around 7% and passenger numbers to increase by approximately 5%, of which around 1 percentage point is due to the acquisition of Plymouth CityBus from 1 December 2009. Underlying demand continues to grow from both concessionary passengers and fare paying passengers.
Fuel costs are fully hedged for this year at 47 pence per litre (ppl) compared to 43 ppl last year. This will produce a first half cost increase of around £2m given we consume around 110m litres of fuel pa. We continue to recover the additional fuel cost from fares and consumption improvements. The cost of providing for accident claims is slightly below the same period last year, offset by slightly higher pension costs. Overall, cost control remains firm and we continue to make good progress with our cost saving initiatives.
Rail:
We own 65% of our three rail franchises through the holding company, Govia.
Management action has ensured a good start to the new Southern franchise, a successful launch of the high speed services in Southeastern on 13 December 2009, operational performance improvement in London Midland and cost reductions of over £20m in the period across all three franchises.
To date, the overall economic impact on rail demand has been in line with our expectations. First half passenger revenue growth is anticipated to be around 10% in Southern and London Midland and 4% in Southeastern and passenger numbers to have increased by 3-4% in Southern and London Midland, and reduced by around 2% in Southeastern. These changes in passenger revenue and numbers include the impact of revisions to timetables this calendar year which have transferred around 2% of passengers from Southeastern to Southern in the period, and added around 2% in the period to London Midland following improvements to the West Coast Mainline.
As previously stated, the benefit from the above will not be sufficient to offset the reductions in net franchise subsidies from the government, and we continue to expect that first half operating profit* will be broadly half of the first six months of last year (H1 2008/9: £34.9m).
Aviation services:
As announced on 3 December 2009, we have recently agreed to sell the majority of our aviation ground handling and cargo operations to Dnata and Servisair. These transactions are expected to complete at the end of January 2010.
After completion, this division will consist of a limited number of aviation services operations at Heathrow Terminal 1 (required until 2011) and our Meteor parking operations.
The first half operating profit* for this division is expected to be close to breakeven (H1 2008/9: loss of £1.7m), as is the full year operating profit* (2008/9: loss of £4.5m).
Other items:
First half exceptional charges are expected to be around £41m (H1 2008/9: £58.4m), consisting of the previously reported non cash impairment charge for aviation services of around £35m and around £6m of restructuring costs to date.
Our tax rate is expected to remain at around 27% and the weighted average number of shares remains at 43.0 million. Cash management remains strong, with operating cashflow exceeding operating profit* before depreciation to date. First half capital expenditure is in line with our expectations at around £50m and acquisition investment totals £30m to date. We will continue to invest in our operations and our full year capital expenditure is expected to be approximately £70m.
Outlook:
At this stage of the year, we have not changed our expectations for the full year results.
We continue to believe that the economic climate will remain difficult and we will take management action accordingly.
We expect our bus operations to remain strong in the second half of this year and to benefit from a full year of acquisition contributions, and a fully hedged reduction in fuel costs of around £6m, in the next financial year.
In rail, we expect revenue growth before initiatives to be modest in the second half given the low fare increases in January 2010. We will continue to target mid single digit percentage increases in full year passenger revenue in Southern by delivering bid initiatives and in Southeastern from the new High Speed timetable. Progress in both these areas will become clearer as we move through the second half of the financial year and, if required, Department for Transport revenue support is available in Southeastern from 1 April 2010.
Our cashflow and balance sheet remains strong and underpins our dividend policy, and our financing is secure through to 2012. We will continue with our focus on service quality, cost savings and financial discipline and remain confident in the underlying strengths of our business.
*operating profit before exceptional items and amortisation
- End -
For further information, please contact:
|
The Go-Ahead Group Keith Ludeman, Group Chief Executive Nick Swift, Group Finance Director |
020 7821 3920 020 7821 3922 |
|
Citigate Dewe Rogerson Michael Berkeley Chris Barrie Angharad Couch |
020 7638 9571 |
Notes to editors
Go-Ahead Go-Ahead is a leading UK public transport operator, providing high quality services in the bus and rail sectors. Employing around 27,000 people across the country, almost one billion passenger journeys are undertaken on our services each year. We are committed to operating our companies in a socially and environmentally responsible way and are proud to have been awarded the Carbon Trust Standard after taking action on climate change. In addition to the travelling public, our customers include the Department for Transport, Transport for London (TfL) and local authorities.
BusGo-Ahead is one of the UK's largest bus operators. With a fleet of over 3,500 buses, we carry, on average, around 1.6 million passengers every day. Our operations are focused on high density commuter markets. We have a strong presence in London, with around 21% market share, where we provide regulated services for TfL. We operate deregulated services in the north east, Oxford, the south east and southern England. We recently expanded our UK bus operations with the acquisition of Plymouth CityBus.
RailThe rail operation, Govia, is 65% owned by Go-Ahead and 35% by Keolis. It is the busiest rail operation in the UK, responsible for nearly 30% of all UK passenger rail journeys through its three rail franchises: Southern (which includes the Gatwick Express), Southeastern and London Midland. On 13 December 2009, Southeastern will launch the UK's first high speed domestic rail service between Kent and London, significantly reducing current journey times. Southeastern is currently running preview services.
Aviation Services The Group's aviation services division is one of the UK's largest independent providers of cargo services (primarily Plane Handling), ground handling (primarily aviance UK) and car parking (Meteor). The division operates from 14 airports and services major airline operators such as British Airways (BA), Virgin and bmi. Go-Ahead recently announced that it had exchanged contracts to sell the majority of its aviation ground handling and cargo operations. Completion is expected at the end of January 2010.
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