The Go-Ahead Group plc has announced its pre-close trading update for the year ending 1 July 2017, ahead of its full year results announcement on 7 September 2017. 

 
Overall expectations for the full year are unchanged. The Group remains in a strong financial position, with good cash generation and a robust balance sheet.

Bus

RegionalExpected full year like for like growth rates

Revenue	Passenger journeys
c.1.0%	c.0.0%

Regional bus continues to deliver revenue growth broadly in line with our expectations and slightly ahead of wider industry trends. Strong growth in passenger journeys in some regions has been offset by softer performance in other operating areas. Growth in revenue and passenger numbers is also slightly subdued as a consequence of the restructuring of selected route networks to match passenger demand and reduce costs. 

Through regular engagement with our customers we understand that people are looking for greater convenience when travelling by bus and in response we are continually developing our payment channels to give people more choice and flexibility. We continue our programme of implementing contactless payment options across the regional bus business with systems now operational in Oxford and parts of the north east. The first phase of roll out of the contactless system focused on these areas to respond to competitive pressures impacting performance. The initial customer response has been very positive, with strong take-up of this new payment channel which will be rolled out across our regional operations over the coming months; with contactless ticketing available on 2,000 Go-Ahead buses by the end of the calendar year. 

London

Expected full year like for like growth rates

Revenue	Mileage
c.1.0%	c.(1.5)%

Reflecting the timing of known contract renewals, revenue growth slowed and mileage operated fell slightly, in line with our expectations for the full year. 

Our bus operation in Singapore continues to perform well, delivering high levels of punctuality on behalf of the Land Transport Authority. 

Rail

The rail division operates the Southeastern, London Midland and GTR franchises through our 65% owned subsidiary Govia.

Expected full year like for like growth rates

	Passenger revenue	Passenger journeys
Southeastern	c.3.0%	c.(0.5)%
London Midland	c.4.5%	c.4.0%
GTR	c.(4.0)%	c.(4.0)%

In Southeastern, passenger growth has continued to slow, putting pressure on passenger revenue. As previously reported, this pressure has been offset by a cost efficiency programme.  The franchise continues to contribute to the Department for Transport (DfT) through its profit share mechanism. The DfT has started the tender process for the South Eastern franchise and Govia has expressed an interest.  

London Midland’s financial performance remains strong; revenue and passenger numbers are growing ahead of the wider industry. This strong performance has enabled the franchise to continue making profit share payments to the DfT; which are expected to continue for the remainder of the contract, to October 2017. We await the DfT’s announcement regarding the outcome of the West Midlands franchise competition, for which we are shortlisted along with one other bidder.

There has been no significant industrial action on Southern services in the last five months and, consequently, service and performance levels have stabilised, allowing the company to deliver more reliable rail services to customers. Disappointingly, the ASLEF union has called for an overtime ban for Southern train drivers which, if it goes ahead, will result in unnecessary disruption for customers. GTR remains fully committed to resolving these issues to provide improved services for customers and reduce uncertainty for our stakeholders.

Progress is being made in the ongoing discussions with the DfT regarding a number of contractual variations; management’s judgement around these discussions and the potential impact on rail profitability remains consistent with previous guidance.  

Bidding and mobilisation

Earlier this month, we were pleased to be awarded a 13-year rail contract by the Transport Ministry of Baden Württemberg in Germany. Operation of the commuter route, which will generate around €20m of annual revenue, will commence in December 2019, providing important links between Stuttgart and Nuremberg.  This contract is a valuable addition to our growing portfolio of German rail businesses. The mobilisation of the two German rail contracts previously won and due to commence in 2019, is progressing well.

Bid activities in targeted international markets continue as planned; we are working on a bid for the latest bus contract to be announced for tender by the Land Transport Authority in Singapore, due to be awarded in late Autumn; and are considering a number of other opportunities in existing and new markets. 

Financing

The process of refinancing our sterling bond is well underway and is scheduled to be complete later this month, ahead of its maturity in September 2017. As a result of lower interest rates, we anticipate finance costs to reduce in 17/18.