The Go-Ahead Group plc today announces its pre-close trading update for the year ending 1 July 2017, ahead of its full year results announcement on 7 September 2017.
Overall expectations for the full year are unchanged. The Group remains in a strong financial position, with good cash generation and a robust balance sheet.
Expected full year like for like growth rates
Regional bus continues to deliver revenue growth broadly in line with our expectations and slightly ahead of wider industry trends. Strong growth in passenger journeys in some regions has been offset by softer performance in other operating areas. Growth in revenue and passenger numbers is also slightly subdued as a consequence of the restructuring of selected route networks to match passenger demand and reduce costs.
Through regular engagement with our customers we understand that people are looking for greater convenience when travelling by bus and in response we are continually developing our payment channels to give people more choice and flexibility. We continue our programme of implementing contactless payment options across the regional bus business with systems now operational in Oxford and parts of the north east. The first phase of roll out of the contactless system focused on these areas to respond to competitive pressures impacting performance. The initial customer response has been very positive, with strong take-up of this new payment channel which will be rolled out across our regional operations over the coming months; with contactless ticketing available on 2,000 Go-Ahead buses by the end of the calendar year.
Expected full year like for like growth rates
Reflecting the timing of known contract renewals, revenue growth slowed and mileage operated fell slightly, in line with our expectations for the full year. Our bus operation in Singapore continues to perform well, delivering high levels of punctuality on behalf of the Land Transport Authority.
The rail division operates the Southeastern, London Midland and GTR franchises through our 65% owned subsidiary Govia.
In Southeastern, passenger growth has continued to slow, putting pressure on passenger revenue. As previously reported, this pressure has been offset by a cost efficiency programme. The franchise continues to contribute to the Department for Transport (DfT) through its profit share mechanism. The DfT has started the tender process for the South Eastern franchise and Govia has expressed an interest.
London Midland’s financial performance remains strong; revenue and passenger numbers are growing ahead of the wider industry. This strong performance has enabled the franchise to continue making profit share payments to the DfT; which are expected to continue for the remainder of the contract, to October 2017. We await the DfT’s announcement regarding the outcome of the West Midlands franchise competition, for which we are shortlisted along with one other bidder.
There has been no significant industrial action on Southern services in the last five months and, consequently, service and performance levels have stabilised, allowing the company to deliver more reliable rail services to customers. Disappointingly, the ASLEF union has called for an overtime ban for Southern train drivers which, if it goes ahead, will result in unnecessary disruption for customers. GTR remains fully committed to resolving these issues to provide improved services for customers and reduce uncertainty for our stakeholders.
Progress is being made in the ongoing discussions with the DfT regarding a number of contractual variations; management’s judgement around these discussions and the potential impact on rail profitability remains consistent with previous guidance.
Bidding and mobilisation
Earlier this month, we were pleased to be awarded a 13-year rail contract by the Transport Ministry of Baden Württemberg in Germany. Operation of the commuter route, which will generate around €20m of annual revenue, will commence in December 2019, providing important links between Stuttgart and Nuremberg. This contract is a valuable addition to our growing portfolio of German rail businesses. The mobilisation of the two German rail contracts previously won and due to commence in 2019, is progressing well.
Bid activities in targeted international markets continue as planned; we are working on a bid for the latest bus contract to be announced for tender by the Land Transport Authority in Singapore, due to be awarded in late Autumn; and are considering a number of other opportunities in existing and new markets.
The process of refinancing our sterling bond is well underway and is scheduled to be complete later this month, ahead of its maturity in September 2017. As a result of lower interest rates, we anticipate finance costs to reduce in 17/18.
For further information, please contact:
The Go-Ahead Group
David Brown, Group Chief Executive
020 7799 8971
Patrick Butcher, Group Chief Financial Officer
020 7799 8973
Holly Gillis, Head of Investor Relations
020 7799 8984
Citigate Dewe Rogerson
Michael Berkeley/Chris Barrie/ Eleni Menikou/Toby Moore
020 7638 9571
Go-Ahead is a leading UK public transport operator, providing high quality services in the bus and rail sectors. Employing around 29,000 people across the country, over one billion passenger journeys are undertaken on our services each year. We are committed to operating our companies in a safe, socially and environmentally responsible way and are proud to have been accredited with triple Carbon Trust Standard for reductions in carbon, water and waste. In addition to the travelling public, our customers include the Department for Transport, Transport for London (TfL) and local authorities.
Go-Ahead is one of the UK’s largest bus operators. With a fleet of around 5,200 buses, we carry over two million passengers every day. Our operations are focused on high density commuter markets. We have a strong presence in London, with around 24 per cent market share, where we provide regulated services for TfL. Outside London, we operate services in Oxford, East Anglia, the South East, Southern and north east England. In September 2016, the Group began operating a bus contract in Singapore, on behalf of the Land Transport Authority.
The rail operation, Govia, is 65 per cent owned by Go-Ahead and 35 per cent by Keolis. It is the largest rail operation in the UK, responsible for over 30 per cent of all UK passenger rail journeys through its rail franchises: GTR (Govia Thameslink Railway) Southeastern and London Midland.
Certain statements included in this press release contain forward-looking information concerning the Group’s strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the sectors or markets in which the Group operates. By their nature, forward-looking statements involve uncertainty because they depend of future circumstances, and relate to events, not all of which are within the Group’s control or can be produced by the Group. Although the Group believes that the expectations reflected in such forward–looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Nothing in this press release should be construed as a profit forecast and no part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in The Go-Ahead Group plc or any other entity, and must not be relied upon in any way in connection with any investment decision. Except as required by law, the Group undertakes no obligation to update any forward looking statement.