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What problems? Go-Ahead shakes off timetable chaos to post rise in annual profits

The FTSE 250-bus and rail operator topped expectations with its full-year results, thanks to a handful of disposals in its rail division and a strong performance from its London buses
commuters waiting at station
May’s timetable changes led to hundreds of trains being cancelled or delayed

Govia Thameslink owner Go Ahead Group PLC (LON:GOG) saw profits rise last year despite a calamitous timetable overhaul which led to hundreds of its trains being cancelled or severely delayed.

The FTSE 250 group, which also runs the Southern and Great Northern franchises, reported a 6.5% jump in pre-tax profits to £145.7mln (2017: £136.8mln) for the year to the end of June. That was despite revenue falling slightly to £3.46bn, from £3.48bn a year earlier.

READ: Investors share commuters' misery as rail problems worsen

Go-Ahead apologised for the disruption caused by the disastrous timetable changes brought in in May but refused to take all of the blame, instead citing “collective industry failures”.

It did concede that the performance of Govia Thameslink Railway (GTR) had been “below certain contractual thresholds” though and warned that the government could choose to issue a fine or cancel the contract altogether.

Operating profits within the rail business actually fell year-on-year, largely due to the loss of the London Midland franchise in December, but a handful of disposals led to a better performance than originally expected.

Also helping to drive growth was the bus division, which eked out a small rise in operating profits as a stronger performance in London more than offset continued weakness in the regional bus business.

Part of the problem for Go-Ahead is that fewer and fewer people in rural areas are using buses, making it difficult to turn a profit on certain routes.

“I'm pleased to report full year results that are ahead of our expectations,” said chief executive David Brown.

He added: “For the group overall, we expect to deliver a robust performance in 2018/19, taking into account the expiry of the London Midland franchise last year which contributed positively for the first six months of 2017/18.

“We expect free cash flow generation to be strong, resulting in a further reduction in net debt excluding restricted rail cash.”

Strong free cash flow has underpinned the dividend, which was kept steady at 102.08p.

Shares were up 16.1% to 1,898p in early deals on Thursday.

‘Don’t get carried away’

“The results were modestly ahead of expectations at the operating level, but below at the EPS level,” said Liberum analyst Gerald Khoo.

“Overall trading trends appeared largely as expected, and the dividend was maintained.

“However, there were a number of exceptional charges (impairment, tax investigation) that were masked by an expected pensions credit (CPI/RPI change).”

He added: “The outlook appears mixed, with Bus largely as expected with challenges continuing, but Rail still facing uncertainty on the eventual fallout from recent operational problems at the GTR franchise.”

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