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Go-Ahead shares steam higher as strong first-half rail performance offsets flat buses

The FTSE 250-listed firm saw its half-year pretax increase by19% to £79.7mln, up from £67.0mln a year earlier as revenue rose to £1.8bn from £1.7 bn

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Go-Ahead said its rail division results were ahead of expectations, with operating profit nearly doubling to £40.3mln

Go-Ahead Group PLC (LON:GOG) shares steamed nearly 13% higher in morning trading on Thursday as the transport operator reported a solid first half performance, helped by a strong performance from rail where the firm operates the Thameslink and Southern services.

The FTSE 250-listed firm saw its half-year pretax increase by19% to £79.7mln, up from £67.0mln a year earlier as revenue rose to £1.8bn from £1.7 bn.

READ: Go-Ahead delivers rise in train revenue despite fall in passenger journeys

The group said its bus division results were stable and in line with expectations, with the unit's operating profit at £46.6mln, a tick up from £46.4mln a year earlier.

It added that rail division results were ahead of expectations, however, as its operating profit nearly doubled to £40.3mln, up from £26.6mln in the same period a year earlier, albeit flattered by one-offs related to the now ended London Midlands franchise.

The company said the Thameslink route achieved the highest 83% satisfaction in the network's history and cancellations on the Southern services were reduced by 36% in the four-week period to January 6, compared with the same period a year earlier.

Go-Ahead maintained its interim dividend at 30.17p.

In early morning trading, Go-Ahead shares were up 14.2% at 1,528p.

In a note to clients, analysts at investment bank Liberum said: "Adverse sentiment towards the rail industry is understandable, but appears overdone.The cross over between the June 2018E (7.4x) and dividend yield (7.6%) before reflecting the improved guidance would seem to point to valuation support at these levels."

Liberum repeated a 'buy' rating and 1,810p target price on Go-Ahead shares.

Quick facts: Go Ahead Group

Price: 1973 GBX

LSE:GOG
Market: LSE
Market Cap: £851.89 m
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