Go-Ahead faces fall in subsidies

Go-Ahead is confident it can offset the impact of lower rail subsidies over the coming year after reporting a strong performance across its rail and bus operations over the past year.

Go-Ahead, which operates the Southeastern rail franchise running into London, yesterday reported a 56 per cent rise in profits at its rail division in the year to the end of June. Lower government subsidies for its rail business will slow the unit's growth over the coming year, yet the company is confident new routes, including the West Midlands which it will take over in November and the Gatwick Express next year, will help offset the impact of the lower funding.

Over the past year, the number of people travelling on Go-Ahead's trains increased as much as 9 per cent while revenue at its Southern and Southeastern franchises rose more than 14 per cent and 12 per cent respectively. Analysts expect rail profits to decline due tolower government subsidies and higher costs.

Go-Ahead recorded sales growth of 25 per cent over the past year despite a poor performance in the aviation market. The company said security problems at Gatwick and Heathrow as well as the bad weather and the loss of some of contracts resulted in its aviation services reporting a loss of £3.8m compared to £8.6m profit in the year earlier. But despite the issues in its aviation unit, the company recorded a 20 per cent increase in profits, due to the strength of its bus and rail operations. Go-Ahead said it expects new contracts with British Airways to provide services across a number of airports to put its aviation unit back on track.