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Go-Ahead Group sees first half profit beat expectations as the train takes the strain

The transport group saw its pre-tax profits before exceptional items fall by 24% to £61mln, down from £79.7mln a year earlier but well above Liberum Capital's forecast of £45mln

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Liberum's analysts said: “A better than expected H1 performance, but mainly driven by Rail so with limited implications for the long term and valuation”
Go-Ahead Group PLC (LON:GOG) saw its shares rise as a big drop in first-half profits, reflecting the expiry of the London Midland rail franchise, still beat analysts' expectations and the passenger transport group said its full-year expectations have increased, principally due to rail.
 
The FTSE 250-listed firm saw its pre-tax profits before exceptional items fall by 24% to £61mln for the six months ending December 2018, down from £79.7mln a year earlier, but well above Liberum Capital's forecast of £45mln, as revenue rose by 5% to £1.9mln.

READ: Go-Ahead to expand into Manchester with purchase of FirstGroup PLC bus depot

The company said its Bus operating profit pre-exceptional items of £46.9mln was slightly ahead of last year's number, while Rail operating profit at £17.6mln was also ahead of expectations, albeit lower than last year's £40.3mln due to the end of the London Midland franchise in December 2017.

David Brown, Go-Ahead's chief executive said: "Whilst overall rail profits fell due to the end of the London Midland franchise in December 2017 and a lower result at GTR (Govia Thameslink Railway), they were ahead of expectations. Southeastern delivered good financial performance, up on last year.”
 
On the outlook for the group, Brown added: "For the Group overall, our full year expectations have increased, principally due to rail. We expect free cash flow generation to be strong, resulting in a reduction in net debt, excluding restricted rail cash, at year end and supporting the payment of dividends that are in line with our policy.”
 
In a note to clients, Liberum analysts commented: “A better than expected H1 performance, but mainly driven by Rail so with limited implications for the long term and valuation.”
 
Liberum reiterated a ‘hold’ rating and 1,850p sum-of-the-parts based target price on Go-Ahead shares, which in early afternoon trading were up 3.4% at 1,980p.
 
Go-Ahead maintained its interim dividend at 30.17p per share.

Quick facts: Go Ahead Group

Price: 2162 GBX

LSE:GOG
Market: LSE
Market Cap: £933.46 m
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