LONDON (Alliance News) - Go-Ahead Group PLC on Friday said its overall results in the past financial year were "slightly ahead of expectations" as it reported a rise in revenue and profit, leading the bus and train operator to raise its dividend.
Go-Ahead shares were up 9.7% to 2,192.00 pence per share, by far the best performer on the FTSE 250.
The UK-based public transport provider said pretax profit in its financial year to July 2 rose 27% to GBP99.8 million from GBP78.7 million. Adjusted profit, which excludes certain items, rose to GBP138.5 million from GBP99.1 million.
Revenue climbed to GBP3.36 billion from GBP3.21 billion a year ago and cashflow generated from operations in the year increased substantially to GBP212.4 million from GBP145.9 million, with free cashflow coming in at GBP68.2 million from GBP63.4 million once restricted cash is taken into account.
Go-Ahead's annual operating profit rose to GBP117.4 million from GBP96.8 million, while its adjusted operating profit increased to GBP157.4 million from GBP134.7 million.
The dividend for the year was increased 6.5% to 95.85 pence per share from 90.0p last year, following the declaration of a final dividend of 67.52p, up from 63.4p a year before.
"We consider our policy for capital structure and how surplus cash is to be deployed between ongoing operations, investment in new franchises and new businesses, ongoing dividends to shareholders and possible further returns to shareholders. Our objective is to retain an efficient capital structure, whilst maintaining financial flexibility in the event of downside scenarios or new investment opportunities, and to provide additional returns to shareholders where it is prudent to do so," the company said, explaining its dividend decision.
The improvement in cashflow allowed net cash to build and increase to GBP323.0 million at the end of the year from GBP292.2 million a year ago. On an adjusted basis that strips out restricted cash, however, that turns to a net debt figure of GBP239.3 million, still down from net debt of GBP244.7 million a year before.
Adjusted net debt was 1.36 times higher than earnings before interest, tax, depreciation and amortisation at the end of the year, slightly higher than the ratio of 1.32 last year.
"The group remains in a good financial position, with strong cash generation and a robust balance sheet, allowing flexibility to pursue value-adding opportunities. This strong position underpins the board's decision to propose an increased final dividend for the year, supported by increased profits in our bus business," Go-Ahead said.
Go-Ahead said adjusted operating profit from its UK regional bus unit rose 9.4% in the year, with passenger numbers climbing in the second half, whilst the London bus unit reported growth of 6.3% in adjusted operating profit, despite some income in the division declining in the period.
The adjusted operating profit from the rail division came in 37% higher than last year.
"It has been a year of financial progress in all three divisions. Our market positions have been strengthened, with organic growth supported by contract wins and extensions. As part of a targeted programme, we are pleased to have won new business in Singapore and Germany. We continue to explore similar opportunities in these and other selected markets," said Chief Executive David Brown in a statement.
Go-Ahead said profits from the bus division hit "record" levels in the year and hit internal targets, driven by its regional arm delivering "sector leading margins" and a solid customer satisfaction score. Go-Ahead remains the largest bus operator in London with a 24% market share.
The UK rail arm has had a more difficult year, resulting from the difficulties facing Southern Rail, part of the GTR franchise. Southern has suffered from disruption due to "restricted network capacity, strike action and increased levels of absence."
"We apologise to the people whose lives have been affected during this time. We continue to work closely with the Department for Transport, Network Rail and other suppliers and partners to operate the best service possible while delivering the long term improvements," said Brown.
On Thursday, UK Transport Secretary Chris Grayling laid out a plan of action to address the problems at Southern, appointing Chris Gibb to help implement action and act as a bridge between Southern and the rail operator. With 30 years experience in the rail industry, Gibbs will have GBP20.0 million to spend on the most important areas needed to be addressed to try to solve issues in the short term.
"Our rail division has delivered a robust financial performance, with strong results in Southeastern and London Midland offsetting weakness in GTR," said Brown.
Brown said the business has launched "one of the largest driver recruitment programmes ever undertaken in the industry" but warned it takes around 14 months to train new drivers, meaning the immediate effect will be minimal.
"The group remains in a good financial position, with strong cash generation and a robust balance sheet, allowing flexibility to pursue value-adding opportunities. This strong position underpins the board's decision to propose an increased final dividend for the year, supported by increased profits in our bus business," the chief executive added.
Capital expenditure in the year totalled GBP113.9 million, rising from only GBP42.3 million last year. Expenditure within the regional bus unit rose to GBP57.4 million from GBP28.0 million, London was up to GBP38.7 million from GBP8.1 million and the rail division had a budget in the year of GBP17.8 million compared to GBP6.2 million.
Go-Ahead said the current financial year has started with similar trends seen in the second half of the recently-ended financial year, and said revenue show continue to grow moderately from the bus division. Lower fuel costs are expected, it said, and will help to offset headwinds such as contract reductions from lower local authority contracting.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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