Go-Ahead sees a difficult year ahead for rail

 
Marion Dakers
SHARES in transport group Go-Ahead slipped 1.9 per cent yesterday as a disappointing outlook for its rail business overshadowed a good overall performance last year.

Go-Ahead said its bus network was growing well, and the firm expects a four per cent like-for-like revenue rise in the year to the end of June, thanks in part to fare increases.

In London, where it operates around one in six buses, like-for-like revenues rose by around six per cent, and contract wins look set to boost mileage growth next year.

But the firm said its rail business has disappointed, and its Southern franchise in particular is on course to fall short of its expectations as the economic slump slows growth.

In 2009, when Go-Ahead retained the Southern franchise, it forecast six per cent revenue growth per year during its tenure. Shore Capital said yesterday rail profits are likely to fall around £4m in 2013 due to the sluggish economy.

“Looking ahead to the next financial year, we expect the performance of our bus business to remain strong,” the firm said in its pre-close update.

“In rail, we expect slower than assumed economic growth rates to impact performance and, as stated in April, £6m of rail bid costs are forecast next year.”

Panmure Gordon analyst Gert Zonneveld said the results confirm the cautious outlook for the firm, adding in a note: “Winning additional rail franchises remains crucial, especially if the company wants to sustain its current level of dividends over the medium to longer term, but we see few catalysts in the short term.”