26 April 2007
Go-Ahead announces its trading update for the third quarter ended 31 March 2007.
Overall trading during the third quarter has been strong.
Trading in the bus division has been robust despite the recent increase in fuel price, driven by revenue growth and contributions from new acquisitions. In London, the business has continued to perform strongly and win new contracts in a competitive market. Our operations continue to deliver a high quality of service, recognised in the quality incentive bonus scheme, and achieve cost efficiencies. In the deregulated bus business, we have seen the continued benefit of passenger growth (excluding concessionary fare schemes), albeit at lower levels in this last quarter. We have also continued to make progress with network design and marketing initiatives geared to increase revenue and reduce costs. Transition costs persist in the West Midlands although these are expected to decrease following the launch of the new commercial strategy at the end of this month.
The performance of the Group's rail business has been particularly strong, benefiting from continuing high levels of passenger volume growth in Southern and Southeastern (up 9.6% and 6.4% respectively in the quarter compared to the same quarter last year) despite fare increases in January. Accordingly, Southern is now accruing profit share payments due to the Department for Transport ("DfT") at a rate of 80%. Southeastern's performance is also significantly ahead of plan as revenue growth is exceeding the phased increase in operating costs needed to deliver franchise commitments. In addition, a number of one-off contractual issues have been, or are expected to be, favourably resolved to the benefit of the year's result.
Notwithstanding current buoyant market conditions, the declining subsidy profile and cost pressures, such as traction electricity charges, will have an impact going forward. Through ATOC, the Group has negotiated a new basis of charge for electricity with Network Rail. The annualised increase from this month is now approximately £3.5 million (down from the previously reported figure of £16 million) and accrued compensation by the Group to Network Rail of approximately £7 million will be treated as an exceptional item in the current financial year.
Detailed discussions are continuing with Transport for London and the DfT regarding both the London Rail Concession and West Midlands franchise respectively, where Govia is one of two short listed bidders for both franchises. Govia has also commenced detailed contractual negotiations with the DfT for the incorporation of the Gatwick Express franchise into the Southern franchise from May 2008.
Market conditions in aviation services remain difficult and, in the light of this, together with a number of contractual delays and disappointments with new customers, management's expectations for the remainder of the year have been reduced. Whilst aviance's discussions with Air Canada have now been terminated, the contractual negotiations with British Airways regarding the outsourcing of its ground handling services at Aberdeen, Edinburgh, Glasgow and Manchester airports are at an advanced stage. Meteor continues to refocus its business towards off-airport services and a small acquisition was completed in the quarter expanding its security services.
As a result of the good performance in rail and non-recurring benefits outlined above, the outturn for the full year is expected to be ahead of management's previous expectations.
A pre-close trading update will be announced in late June.
For further information, please contact:
The Go-Ahead Group plc
Keith Ludeman, Group Chief Executive: 020 8929 8650
Ian Butcher, Group Finance Director: 0191 232 3123
Weber Shandwick Financial: 020 7067 0700
Richard Hews/Rachel Taylor/Hannah Marwood
Note to Editors:
Bus
The group's bus division operates over 3,600 buses, providing over 505 million passenger journeys and covering around 236 million vehicle kilometres each year. Operations fall into four main geographical areas: deregulated services in north east; deregulated services in West Midlands; deregulated services in south east / southern England; and regulated services for Transport for London in the capital. The newest additions to this division are Dockland Minibuses and Marchwood buses acquired during the half year.
Rail
The group's rail division operates a fleet of 630 trains on which over 280 million passenger journeys are undertaken. Concentrated in the south east of England both our franchises, Southern and Southeastern, operate a mix of suburban commuter and mainline routes throughout south London, Kent, Surrey and Sussex. The Southeastern franchise will include the operation of new high speed trains on the domestic Channel Tunnel Rail Link into St Pancras from 2009.
Aviation Services
The group's aviation services division undertakes a wide range of support services for national and international airlines. Services provided include cargo handling, passenger check-in, baggage handling, information desks, executive lounges, ground handling and customs clearance. In the last year 45 million passengers were handled as well as over half a million aircraft movements. The division includes Meteor Parking which is the second largest parking company in the UK, managing over 58,000 parking spaces predominantly at BAA airports, with a range of customers, including BAA, local authorities, retail outlets, NHS trusts, hotels and rail stations. Well known brands include 'Pink Elephant', 'Park 1' and 'eparking'.