LONDON (Alliance News) - Bus and rail operator Go-Ahead Group PLC Thursday reported lower profits as its rail operations were hit by higher costs and lower government subsidies, but the company said the results were slightly better than it had expected and it was on track with improving its bus operations.
It reported a pretax profit of GBP75.9 million for the year to June 29, from GBP84.5 million a year earlier, even though revenues increased to GBP2.6 billion, from GBP2.4 billion.
Its bus division posted an operating profit of GBP78.2 million, up 11.4%, and the company said it is on track to generate GBP100 million in bus operating profits by 2015-16, excluding any exceptional items, through growing revenues and cutting costs.
It spent GBP45.3 million on renewing its bus fleet during the year
The company runs the London Midland, Southeastern and Southern rail franchises through its Govia unit. It owns 65% of the unit, while France's Keolis, majority owned by SNCF, owns the rest. Govia's franchises are nearing the end of their term, but it is bidding for the new Crossrail contract as well as the two Thameslink franchises and is hoping that the London Midland and Southern franchises will be extended.
However, rail margins were hit as payments to the government increased by GBP85.9 million even though its rail profits fell by GBP15.7 million. Government subsidies for London Midland and Southeastern also fell.
"We expect like for like rail profitability to be lower in 2013/14 due to Southeastern's unprofitable extension period, the challenging trading conditions in the Southern franchise and higher bid costs," it said in a statement.
Despite this, "the new financial year has started well, with trading in line with the board's expectations," it said.
It kept its final dividend unchanged at 55.5 pence, and total dividend for the year at 81 pence.
Shares were up 4.6% at 1,542.12 pence early Thursday, with analysts saying that the company's results were also ahead of market expectations as the bus unit improves quicker than hoped.
By Steve McGrath; stevemcgrath@alliancenews.com; @SteveMcGrath1
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