18th Jun 2009 07:00
Go-Ahead Group PLC
Pre-close trading update
The Go-Ahead Group plc today announces its pre-close trading update for the year
ending 27 June 2009.
Overview:
Since our last Interim Management Statement on 23 April 2009 we have:
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retained the Southern rail franchise |
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announced a High Speed Rail preview service from the end of June 2009 in Southeastern, six months in advance of the full launch date |
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continued to grow like-for-like revenue in bus and rail |
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completed hedging of all bus fuel requirements to June 2011 |
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held operating results for ground handling and cargo in line with the first half despite difficult trading conditions |
Overall, we remain confident that we will deliver a full year operating performance in line with our expectations.
Bus division
Revenue continues to grow in both our regulated and deregulated bus operations which we believe is in part due to our local focus and high quality service.
More than half of our bus revenue is generated by our regulated operations in London and is expected to show full year revenue growth of around 6%, based on a small increase in full year operated mileage and positive contract price adjustments. Our high levels of service quality have meant that the current year revenue from quality incentives is expected to exceed last year's record level (2008: £13.7m) despite progressively more demanding targets as contracts are renewed.
Like-for-like revenue in our deregulated bus operations continues to grow broadly in line with the 6.6% increase in the first half of the year. Around half of this growth is due to an increase in passenger numbers, the majority of which was from concessionary passengers, with the remainder being additional fare paying passengers.
We have been able to recover the £10m increase in this year's fuel cost through a combination of fare increases and consumption savings. We have hedged all of our fuel requirements for next financial year at 47p per litre (ppl), compared with 43 ppl this year, and have recently completed fully hedging the financial year ended June 2011 at 41ppl. We consume around 110 million litres of fuel each year.
Overall, we have held operating profit for the bus division at similar levels to last year (2008: £66.2m) with the exception of the following, previously reported items; the provision for the cost of accident claims continues to rise, despite fewer incidents, and we expect the full year cost to be some £4m higher than last year; this year's operating profit includes additional pension costs of around £3m; and last year's operating profit included a loss of around £4m for Go West Midlands (which was sold in February 2008).
Rail division
Our rail division operates the Southern, Southeastern and London Midland franchises through our 65% owned subsidiary Govia.
As expected, like-for-like passenger revenue continues to grow in all three franchises, albeit at a slower rate than last year.
In Southern (excluding Gatwick Express which we started operating at the end of June 2008) full year passenger revenue is expected to increase by around 7-8%, of which approximately half is due to additional passengers. As previously reported, Gatwick Express revenue and passenger numbers are below last year due to the reduction in aviation traffic.
Southeastern is also performing as anticipated, with mid single digit percentage passenger revenue growth expected for the full year based on a small increase in full year passenger numbers.
Like-for-like passenger revenue in London Midland (franchise started on 11 November 2007) is expected to show high single digit percentage growth for the full year, of which around half is due to higher passenger numbers.
On 1 April 2009 changes to the Network Rail access charging regime across the industry reduced our access costs. These changes have been offset by a corresponding adjustment to the franchise subsidy / premium, and therefore have no net impact on profit. Operating costs have benefited from ongoing cost saving initiatives, including restructuring, procurement and reduced energy consumption.
On 9 June 2009 the Department for Transport announced that Govia had retained the next Southern franchise (running from September 2009 to July 2015, with a possible two year extension). The new franchise will deliver benefits to a wide range of stakeholders and is expected to contribute around £10m of operating profit to next financial year from September 2009. The bid costs of around £4m are included in the current year's operating results.
We have also announced that we will be introducing a preview service for our High Speed trains in Southeastern from the end of June, prior to the full service starting on 13 December 2009. This will be the UK's first domestic high speed service, travelling at up to 140 miles per hour and transforming journey times between Kent and London. Fares are expected to be priced at 20-30% above the conventional Mainline services which, for example, is equivalent to an increase of around £4 per day between London and Ashford for a saving of an hour and half on a return journey.
Overall, rail is on track to report a full year operating profit in line with our previous expectations.
Aviation Services division
The Aviation Services division accounts for less than 10% of the group's revenue and consists of ground handling and cargo, and parking.
Conditions remain difficult for our ground handling and cargo operations, although the rate of decline in demand appears to have stabilised. Compared with last year, like-for-like full year aircraft turnarounds (excluding our Gatwick ground handling operations, closed in August 2008) are expected to be down by around 10% and cargo volumes down by around 25%. Despite these significant reductions in volume, we have maintained operating results for the second half of the year broadly in line with the first half (H1 2008/9: operating loss excluding parking of £2.5m) through further restructuring and cost control.
Our parking operations are expected to report an operating profit for the year of around £1m. We were recently unsuccessful in retaining the BAA Heathrow airport parking contracts beyond September 2009, although we believe we can offset the impact of over £1m on next year's earnings by other initiatives, including cost savings.
Other items
Our operations remain highly cash generative. We expect full year operating cashflow to be broadly in line with operating profit before depreciation and amortisation and capital expenditure to be around £60m for the full year against a depreciation charge of around £50m.
Second half exceptional costs before taxation are expected to be around £5m, primarily due to previously announced restructuring in aviation and rail which typically has a one year payback period.
The full year tax rate is expected to be around 28%, in line with first half estimates, and the weighted average number of shares during the year was 42.9 million.
Summary
We continue to assume that economic conditions will remain difficult and are pleased with progress since April. Our operations are performing as expected, we were successful in retaining the new Southern rail franchise and preparations for both the new franchise and the high speed rail service in Southeastern are well underway.
We will continue to emphasise service quality, cost savings and financial discipline. Our cashflow remains strong, our balance sheet is robust and we have financing secure to 2012. We look forward to reporting our full year results on 3 September 2009.
-Ends-
For further information, please contact:
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The Go-Ahead Group Keith Ludeman, Group Chief Executive Nick Swift, Group Finance Director Jim Boyd, Group Corporate Affairs Director |
020 7821 3920 020 7821 3922 020 7821 3927 |
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Citigate Dewe Rogerson Limited Michael Berkeley Chris Barrie Angharad Couch |
020 7638 9571 |
Notes to Editors
Go-AheadGo-Ahead is one of the UK's leading providers of passenger transport services operating in the bus, rail and aviation services sectors. Employing over 27,000 people across the country, around 920 million passenger journeys are undertaken on our services each year. In addition to the travelling public, customers include the Department for Transport (DfT), Transport for London (TfL), local authorities, British Airports Authority (BAA) and major airlines.
BusGo-Ahead is one of the UK's largest bus operators. With a fleet of over 3,400 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 20% market share, where we provide regulated services for TfL. We operate deregulated services in the north east; Oxford; the south east and southern England.
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 companies: Southern (which includes the Gatwick Express), Southeastern and London Midland. The Southeastern franchise will include the operation of new high speed trains on the domestic Channel Tunnel Rail Link into St Pancras International from 2009, significantly reducing current journey times.
For further information about our rail franchises please visit our factsheets:
http://www.go-ahead.com/goahead/ir/factsheets_rail/
Aviation ServicesThe 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 15 airports and services major airline operators such as British Airways (BA), Virgin and bmi. Market leading services within Meteor include 'Meet & Greet' and 'Pink Elephant' services.
Related Shares:
GOG.L