17 June 2009
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:
- retained the Southern rail franchise
- announced a High Speed Rail preview service from the end of
June 2009 in Southeastern, six months in advance of the full launch
date
- continued to grow like-for-like revenue in bus and rail
- completed hedging of all bus fuel requirements to June
2011
- 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:
| The Go-Ahead
Group |
|
| Keith Ludeman, Group Chief
Executive |
020 7821 3920 |
| Nick Swift, Group Finance
Director |
020 7821 3922 |
| Jim Boyd, Group Corporate Affairs Director |
020 7821 3927 |
|
|
| |
|
| Citigate Dewe Rogerson
Limited |
020 7067 0700 |
| Michael Berkeley |
|
| Chris Barrie |
|
| Angharad Couch |
|
Notes to Editors
Go-Ahead
Go-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.
Bus
Go-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.
Rail
The 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 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 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.