Go-Ahead gains after recovering from fuel cost hit

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Go-Ahead, the bus and rail group that took over Southeastern trains from a government-backed operator earlier this year, said yesterday fare collection on the franchise had improved markedly.

The improvement in revenues was one reason why Go-Ahead ended the financial year strongly with profits in the second half well ahead of the same period in the previous 12 months.

Shares in the group rose almost 3 per cent despite an 11 per cent fall in profits for the year to the end of July, due mainly to a £9m increase in fuel costs in the bus division.

Keith Ludeman, who took over as chief executive of Go-Ahead this summer after Chris Moyes was forced to retire because of ill health, said revenue collection on Southeastern had been "poor" after the franchise was taken over from Connex by the Strategic Rail Authority, with at least 5 per cent of fares not being collected. "The SRA had a difficult job to stabilise the franchise. What they focused on was getting the operational performance up. They weren't so strong on the revenue side," Mr Ludeman said.

Go-Ahead said in the final quarter of the year Southeastern had delivered a better contribution to profits than expected. Allied to a recovery in passenger traffic at its other commuter rail franchise, Southern, after last summer's London bombings and an improvement in performance, this helped drive operating profits 10 per cent higher in the second half.

Southern gained a net £10.7m under the rail industry's performance regime and benefited further by not having to offer discounts to season ticket holders for the first time in five years.

Operating profits in the rail division rose 6 per cent to £42.5m. But profits in the bus division slipped 9 per cent to £47.2m due to the higher fuel costs. Go-Ahead's finance director, Ian Butcher, said he was considering a new hedging arrangement which would protect Go-Ahead from a further escalation in fuel charges this year.