It's been a busy year so far for Go-Ahead (GOG) and this was amply reflected in the group's upbeat trading update. It characterises a first quarter as robust while steering the market to expect no changes to full year estimates on both the bus and rail sides.

That's welcome news and it's not surprising that shares in the £1 billion cap are riding 2.9% higher today at £25.16. Underlying first quarter growth in deregulated regional bus operations was around 5% in terms of revenue and this was largely driven by contract revenue. Weakness in the North East meant that overall, the regional business was flat in terms of passenger journeys.


In London meanwhile, revenue growth of around 5% has been driven by the reallocation of bus service operators grant (BSOG) of 4.9%. Mileage operated fell in line with expectations, following the previous year's good growth on the back of contract wins. Rail replacement work has been delivered at similar levels year on year. Due to known contract wins that will begin later this year, Go-Ahead expects mileage to increase and be broadly flat year on year.

It was – by and large – good news as well from the group's rail operations. Even on the London Midland franchise where operations were significantly affected by engineering works, underlying passenger revenue growth added 1%. The group's Southeastern franchise however managed to notch up revenue growth of 6.5%. Operations commenced on the massive Thameslink franchise on 14 September but data on performance is unavailable at the moment.

Analysts clearly approved of the update and Investec's John Lawson raised the broker's pre-tax forecast for full year 2015 from £94.0 million to £96.1 million. Gert Zonneveld at Panmure maintains a 'Buy' recommendation and a target price of £29.00.

Issue Date: 21 Oct 2014