An improved operational performance at Southern and the sale of the London Midland franchise provides a boost for Go-Ahead (GOG), which hikes full year expectations for the rail division alongside its first half numbers.

It is a welcome turnaround for the transport operator from last year after passenger journeys declined on Southern services and dragged on operating profit. Southern is run by Govia Thames Railway (GTR) and partner Keolis.

Shares in Go-Ahead are up 12.9% at £15.11.

Broker Shore Capital analyst Martin Brown says the half year results beat expectations, even without the sale of London Midland.

The analyst had a cautious view on GTR’s performance and assumed the ‘most negative outcome’ but is pleased operating profit is £13.9m higher from GTR compared to the same period last year.

WHY DID THE RAIL DIVISION OUTPERFORM?

In the six months to 30 December 2017, Go-Ahead’s rail division beat expectations with an operating profit of £40.3m, partially supported by the sale of the London Midland franchise for £6.4m.

An end to long-running industrial action back in January 2017 also helped, leading to 36% fewer cancellations and a 7% rise in punctuality in the month to 6 January 2018.

SOUTHEASTERN SLOWDOWN CONTINUES

Troubles remain elsewhere as the Southeastern franchise is dragging on group profit margins thanks to fewer passengers.

Trading in Go-Ahead’s bus division is in line with expectations with operating profit of £46.6m compared to £46.4m in the first half of the 2017 financial year, held back by flat sales growth in regional buses.

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Issue Date: 22 Feb 2018