Government spending cuts leave Go-Ahead cautious

Rail and bus company Go-Ahead is cautious on the economic outlook and the prospect of government spending cuts after reporting a fall in profits in the year to July 3 amid tough conditions.The operator of the Southern, Southeastern and Gatwick Express rail franchises and bus operations in cities such as Plymouth and Oxford, saw revenues edge up to £2.20bn from £2.19bn the previous year, but pre-tax profits were down to £88.7m from £117.3m.'We are pleased with the progress we have made this year in challenging economic conditions,' chairman Sir Patrick Brown said.'All of our bus and rail operations have increased passenger revenue, highlighting the quality and value for money of our services.'He said the company remains cautious, despite the resilient performance.'The outlook for the next financial year remains difficult to predict, including any impact from the government's Comprehensive Spending Review expected to be announced in October 2010,' he said.Profits at bus operations were squeezed by lower margins from contract renewals in London, the company said. A sharp reduction in operating profit at rail operations was due to more difficult economic conditions compared to the assumptions at the time of Go-Ahead's bid for the Southeastern franchise and additional costs in London Midland.Operating profit margins in the rail division are likely to be lower next year, said Go-Ahead, which has not changed its outlook for the year since a June trading update. In the bus division, the company expects lower fuel costs and a small additional contribution from acquisitions to be partly offset by the full year effect of lower operating profit margins in London.