Rail and bus firm Go Ahead upgrades full-year outlook despite drop in profits

Profits at rail and bus operator the Go Ahead Group dropped by more than 50 per cent in the second half of last year due to the scrapping of its London Midland franchise and poor financial performance for Govia Thameslink Railway (GTR).

However, although rail operating profit fell from £40.3m to £17.6m in the six months ending 29 December 2018, this was ahead of expectations, prompting Go Ahead to raise its full-year guidance. 

Govia's London Midland franchise ended in December 2017 and was handed over to Abellio. 

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Pre-tax profits for the group fell to £44.2m in 2018, down from £79.7m the previous year. Revenue increased to £1.9bn, thanks to the company winning overseas contracts and good performance at Southeastern, which operates routes from London Victoria and Waterloo East stations.

Last year GTR was at the centre of the May timetable chaos, in which a timetable upgrade that was supposed to increase the frequency of trains went badly wrong and led to widespread delays, cancellations and overcrowding.

In December the Department for Transport ordered GTR to spend £15m on passenger improvements due to its "unacceptable performance" during the timetable change.

Chief executive David Brown said: "Our bus operations showed resilience with profits slightly up on last year despite a challenging market environment. Whilst overall rail profits fell due to the end of the London Midland franchise in December 2017 and a lower result at GTR, they were ahead of expectations. Southeastern delivered good financial performance, up on last year."

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He added that annualised revenue from from the ten international contracts the company secured will exceed £400m "when fully mobilised". 

“For the group overall, our full year expectations have increased, principally due to rail. We expect free cash flow generation to be strong, resulting in a reduction in net debt, excluding restricted rail cash, at year end and supporting the payment of dividends that are in line with our policy."