19th Jun 2008 07:00
19 June 2008
The Go-Ahead Group plc
Pre-close trading update
The Go-Ahead Group plc today announces its pre-close trading update for the year ending 28 June 2008.
Highlights
Continued strong revenue growth in bus
Excellent rail performance
Significant progress in restructuring aviation services
Bus fuel hedges now in place for 100% of next financial year's requirements at an average of 43p per litre
As a result, we now anticipate delivering a full year performance ahead of our previous expectations in April and significantly ahead of our record results last year.
Bus division
Our bus division is performing well. We have continued to improve margins, despite higher fuel costs, and expect to deliver a significant increase in operating profit for the full year compared with the £55.8m achieved last year.
In our regulated London bus operations, we expect full year revenue to grow at a similar rate to the 11.9% achieved in the first half of the year, with around half of the increase due to contributions from acquisitions. Revenue from quality incentives for the year should be similar to the high levels achieved last year.
Growth in second half revenue in our deregulated businesses is expected to remain strong, in line with the first half growth rate of 8.7%. This increase has been driven by growth in passenger numbers, including some early benefit from the national extension of the concessionary schemes on 1 April 2008, and increases in fares.
Fuel prices have continued to increase since the April update, resulting in a further net cost of around £1m for this year. We have now hedged 100% of our requirements for next financial year to June 2009 at an average price of 43p per litre and 50% of the following year at an average of 52p per litre. Although recent fuel price increases have been significant, fuel still represents a relatively small part of the cost base of our bus operations, at around 10%. We remain confident that over time we can recover these extra fuel costs through a combination of improved consumption efficiency and fare increases.
Rail division
The performance of our rail operations over the past two months has been excellent, with continued strong underlying revenue growth supplemented by a number of favourable cost settlements. As a result, we now expect the full year operating profit from this division to be ahead of the £66.1m achieved last year.
Full year like for like passenger revenue growth in Southern and Southeastern is expected to be similar to the 13.2% achieved in the first half of the year, and we have maintained the strong start in our new London Midland franchise. We continue to believe that this growth reflects the structural improvements in our rail operations resulting from sustained investment in better punctuality, frequency and service quality as well as the benefit from increased road congestion and higher fuel costs for motorists.
Our rail development activities continued in the fourth quarter. A high priority for the group is to retain our Southern rail operations. We have established a strong and experienced team to bid for the next Southern franchise, which runs for 5 years and 10 months from September 2009. A shortlist of bidders is expected to be announced in September 2008, with the franchise awarded to the successful bidder in early 2009. In addition, we were pleased to be shortlisted by the Department for Transport (DfT) as one of two parties to bid to provide services for the Pendolino Lengthening Project. The project will add rolling stock capacity to the West Coast Main Line and is expected to be awarded later this year. If successful, we would support the DfT throughout the design finalisation, manufacture, delivery, testing and commissioning of new Pendolino rolling stock through to the end of the current franchise in March 2012. Finally, we are due to begin operating the Gatwick Express service from Sunday 22 June 2008.
Aviation services division
Year on year revenue growth has continued in both ground handling and cargo through a combination of net contract gains, price increases and service expansion within existing contracts. This, together with improved cost control and revenue collection, means that we expect the results from these operations to be well ahead of last year.
We are pleased to have recently extended our ground handling services contract with bmi. The previous agreement was due to expire in March 2009. The terms of the new agreement are confidential, but secure our services through to 2011 and underline the strength of our relationship with bmi.
The restructuring of the business accelerated in the fourth quarter, resulting in exceptional costs of around £7m for the second half and securing significant financial benefits for next year and beyond.
Our Meteor parking operations continue to perform well.
Overall, we are on track to return this division to profitability by the end of this financial year.
Other items
Our operations continue to be highly cash generative and capital investment is expected to be similar to last year's £57.6m. We have maintained gearing within our target level, with our adjusted net debt to EBITDA ratio expected to be between 1.8x and 2.0x at the end of year.
Exceptional costs for the year are expected to be around £15m, comprising £8m for Go West Midlands reported in the first half and the £7m second half restructuring costs in aviation services.
The underlying tax rate is anticipated to be in line with the 25% achieved last year.
Summary
We are pleased with progress since April. We have fixed next year's fuel price per litre for our bus operations, delivered an excellent performance in rail, and significantly improved the structure of our aviation services division.
We continue to place particular importance on maintaining a progressive dividend policy, and look forward to reporting record results for the full year on 5 September 2008.
-End-
For further information:
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The Go-Ahead Group plc |
020 8929 8650 |
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Keith Ludeman, Group Chief Executive |
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Nick Swift, Group Finance Director |
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Weber Shandwick Financial |
020 7067 0700 |
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Richard Hews / Hannah Marwood |
Notes to Editors
The Go-Ahead Group plc
Go-Ahead is one of the UK's leading providers of passenger transport services operating in the bus, rail and aviation services sectors. Employing approximately 27,000 staff across the country, it provides services to over 900 million passengers every year. In addition to the travelling public, customers include the Department for Transport, Transport for London (TfL), local authorities, BAA and major airlines.
Website: www.go-ahead.com
Bus
Go-Ahead is one of the UK's largest bus operators. Operations consist of deregulated services in the north east; Oxford; the south east and southern England; and regulated services for TfL in London.
Rail Go-Ahead's rail operation is the busiest in the UK, responsible for nearly 30% per cent of UK passenger rail journeys through its three rail companies: Southern, 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 from 2009 while the Southern franchise will include the operation of Gatwick Express from 22 June 2008.
Aviation Services
The group's aviation services division undertakes a wide range of ground handling and cargo services for airlines in the UK. The division includes Meteor Parking which is one of the largest parking companies in the UK.
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