Go-Ahead increases profits, but not on GTR

News of increased profits by the Go-Ahead Group (majority owner of the troubled GTR Southern rail franchise) has sparked off anger among rail commuters, though analysis of the results shows that the gains were made in the bus and other rail sectors.

GA has three main business divisions: Regional bus; London Bus; and Rail. The Rail division is a 65:35 joint venture with Keolis, responsible for the GTR, London Midland (LM) and Southeastern (SE) franchises.

Results for the (53 week)year ended 2 July 2016 show that  group adjusted operating profit  improved 16.9% to £157.4m (2015: £134.7m) while group revenue increased 4.5% to £3.361bn (2015: £3.215bn).

Rail operating profit was 36.7% up at £57.0m (2015: £41.7m), and rail revenue increased 4.2% to £2.498bn (2015: £2.397bn).

SE and LM both turned in improved performances of £14.9m and £7.6m respectively, and lower costs added another £6.4m, but GTR/Southern results were £13.6m down on the previous year.

Rail is the least profitable division: Rail accounted for 74.3% of group revenue but only made up 36.2% of group profit. (Regional bus and London bus contributed 11.1% and 14.5% of revenue, and 33.9% and 29.9% of profit, respectively).

The rail operating margins have been consistently low and compare unfavourably with the bus operations. For the past five years (from 2016 to 2012) the rail margin has been 2.3%, 1.7%, 1.7%, 1.3% and 2.3%.

For the same period the Regional bus operating margins were 14.2%, 13.5%, 12.4%, 11.2% and 11.3%; those for London bus were 9.7%, 9.7%, 9.6%, 9.5% and 9.3%.

Table 1 gives a more detailed breakdown of the rail revenue:

Source: GA
Source: GA

The GTR payment of £276m was a revenue adjustment for the difference between the passenger revenue and the franchise payment from the DfT, as agreed in the original franchise bid.

The low 2016 passenger revenues for Southern represent the first few weeks of the financial year; Southern was subsumed into GTR wef 26 July 2015 (whereas the financial year started on 28 June 2015).

GA made a net £222.4m contribution to the DfT (2015: £255.9m). Table 2 shows the premiums payable/ subsidises received:

Source: GA
Source: GA

Like-for-like passenger revenue growth showed all round improvements: SE 4.9%; LM 9.3%; and GTR 3.4%. Volumes have also grown: SE 2.3%; LM 5.9% and GTR 2.9%.

As well as recent industrial action, GTR services continue to be affected by ongoing work at London Bridge as part of the ongoing Thameslink upgrade. The estimated low operating margin of 1.5% is expected to remain for the rest of its franchise life (as recently  forecasted).

Commenting on the results, GA Group Chief Executive, David Brown, said:

“A large part of the role of the GTR franchise is to introduce three new train fleets and modernise working practices. During this period of change, Southern services have been disrupted by restricted network capacity, strike action and increased levels of absence. We apologise to the people whose lives have been affected during this time.  .  . Our rail division has delivered a robust financial performance, with strong results in Southeastern and London Midland offsetting weakness in GTR.”


Bus operations accounted for 25.7% of GA group revenue in 2016 but contributed 63.8% of group profits
Bus operations accounted for 25.6% of GA group revenue in 2016 but contributed 63.8% of group operating profit.

GA results FYE 2 July 2016


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