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Go-Ahead expects profit boost from rail operations

Transport group Go-Ahead has signalled a boost to profits after energy costs fell at its Southern, London Midland and Southeastern rail division.

The Newcastle-based company, which runs services through its Govia joint venture, also credited a better operational performance after the three rail franchises achieved growth in passenger journeys of between 4% and 5%.

With its bus division performing in line with hopes, Go-Ahead expects operating profits for the year to June 28 to be ahead of previous guidance, driven by the better performance in rail.

Go-Ahead's bus division carries nearly two million passengers every day, focusing on busy commuter markets in the South and South East as well as Oxford, East Anglia and North East England.

It is on track to achieve £100 million in profits by 2015/16, having seen growth of 14.7% to £40.6 million in the six months to December 28.

Rail profits were £10.5 million in the first half and Go-Ahead said today it still expects a slightly smaller figure in the second half, despite the better trading.

Its three rail franchises are drawing to a close, which has put pressure on results in light of original bid assumptions.

The Southern franchise will continue on existing terms for the whole of the next financial year before merging into the new Thameslink, Southern and Greater Northern (TSGN) franchise next July.

Go-Ahead will run the TSGN franchise and continues discussions over a planned extension of the Southeastern franchise to June 2018.

It added that the rate of passenger revenue growth in the London Midland franchise was beginning to slow as a result of increased competition

The London Midland franchise has just been extended to March 2016 and the company hopes to secure a longer planned extension to June 2017.

Shares rose 4% today as Investec Securities kept its buy rating on the stock and increased its forecast for full-year pre-tax profits by 9.2% to £83 million.

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