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Go-Ahead sees recovery in 2011

Source: Reuters - Thu 3rd Sep 2009

Transport group Go-Ahead does not expect the economy to recover until 2011, but its business is healthy enough to keep it on track until then and provide leeway for small acquisitions.

The firm, which operates bus companies and runs three London rail franchises, saw full year profit fall 14.5 percent from last year, just beating market expectations, held its dividend payment and said its new financial year had begun as expected despite the tough economic climate.

Finance director Nick Swift told Reuters the group was cautious about the economy but the business remained robust.

"It's easy to get over-optimistic, so we are staying cautious ... 2010 will be fairly stable, while in 2011 things will be ready to pick up" he said, adding that the group's bus network was proving resilient.

Go-Ahead shares were up 2.7 percent at 1338 pence a share by 9:55 a.m., valuing the business at around 575 million pounds.

The company, which operates its commuter rail franchises through majority-owned joint venture Govia, said on Thursday adjusted pretax profit fell to 112 million pounds for the year to June 27, on sales up 6.7 percent at 2.35 billion.

Analysts were expecting pretax profit of 110 million pounds on sales of 2.43 billion, according to Reuters estimates.

Go-Ahead held its dividend flat at 81 pence a share, while debt was cut to 91 million pounds from just under 200 million. 

"We view these results as a very solid outcome following a difficult year for the sector" Royal Bank of Scotland analyst Joe Spooner said in a note.


Go-Ahead's profit fall was largely due to a worse performance in its UK rail business, which has been hit by a slowdown in passenger growth due to the recession.

Swift said he expected rail to remain profitable in the current year but at a lower level. The firm's new high-speed service on the southeastern franchise would be rolled out in December.

Go-Ahead also runs bus companies and has an aviation services arm. It has bought two small regional bus companies since July for a combined 10 million pounds, and Swift said he hoped to secure more deals.

British bus operators are set to be investigated by competition regulators due to concerns a single player dominates a particular area, which Swift said was "puzzling."

"We don't quite know what the problem is, but if it leads to broader divestment we may benefit as we are one of the smaller players" he said.

He declined to comment on whether Go-Ahead would consider entering the bidding for rival National Express, which is being stalked by a consortium including CVC Capital Partners.

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