Go-Ahead profits up but fears for future send shares plunging

Train and bus operator Go-Ahead Group saw its share price fall yesterday despite an 11 per cent rise in profits on fears that business will decline next year unless it wins new franchises.

The group, which has a fleet of 3,800 buses and is part of a joint-venture responsible for Southern, Southeastern and London Midland rail services, said pre-tax profits rose to £97.6 million in the 12 months to 2 July. Revenues were up 6 per cent to £2.3 billion.

The firm benefited from a surge in passenger numbers as the high cost of fuel forced more motorists on to public transport.

But Go-Ahead’s shares fell 87p, or 5.5 per cent, to 1,496p, making it one of the largest fallers on the FTSE 250 yesterday.

Analyst Paul Hickman, at Peel Hunt, said the company’s prospects were dependent either on long-promised bus acquisitions or on replacing expiring rail franchises.

He forecast that, in the absence of those factors, Go-Ahead’s earnings would fall 4 per cent next year. “Given those uncertainties, the stock is not cheap,” he said.

Underlying profits at its rail division rose 29 per cent to £48m, after a 4.2 per cent rise in passenger numbers and higher ticket prices. Operators across the UK implemented average hikes of 6.2 per cent in January, although some Southeastern fares went up by as much as 12.8 per cent.

Go-Ahead has claimed it does not benefit from the rises as they are effectively passed on to the government in reduced subsidies.

Profits from its bus business rose on non-regulated bus services, but the firm saw a slight reduction in revenues from its regulated bus services in London, which were hit by changes to its contracts.

Chairman Sir Patrick Brown said: “Our bus and rail operations remain fundamentally strong and have benefited from passengers leaving their cars at home and choosing better-value public transport alternatives.”