Transport operator Go-Ahead, which runs the North East’s largest bus fleet, says it is on track to meet ambitious growth targets, despite a dip in overall profits.
Results for the year ended June 29 show the company, which is headquartered in Newcastle, dropped £8m in profit before tax during the period, reporting a final figure of £86.2m.
Operating profit, meanwhile, decreased £7.7m to £102.5m, while revenue rose £148m to around £2.57bn.
However, the new results show differing fortunes for the group’s rail and bus divisions, the latter of which - the business’s core - is aiming for £100m operating profit by 2015/16.
In year ended June 29, it hit £78.2m, up 11.4% on 2012 and £8m ahead of original expectations. The rise was put down to a mixture of factors, including improvements in marketing, technology and services.
There was also strong take-up of the Go-Ahead smartcard, “the key”, of which more than 400 have now been issued, and advancements in mobile-ticketing (m-ticketing), which generated over £1m of revenue in less than 12 months.
Go-Ahead employs more than 23,500 people in the UK, its services being used by more than a billion travellers a year.
Its North East division, Go North East, has a fleet of nearly 700 buses and employs more than 2,100 people.
Group chief executive David Brown said: “Increasing our profits ensures that we can continue to invest in the business and improve service quality for our passengers.
“Once again, we have invested in our bus fleet, spending £45.3m on 251 new buses in the year. We pride ourselves on having a young and green bus fleet.
“Our buses have an average age of 7.4 years and, in the year, we increased our fleet of alternative fuel vehicles to 160, having bought 86 hybrids and introduced the first gas buses.”
He added that reaching the £100m target would depend on a combination of revenue growth and cost efficiencies.
“Our target assumes that cost efficiencies will be achieved alongside consistent revenue growth, with the biggest contribution to operating profit growth coming from the deregulated business,” he said. “Although we are committed to investing in our networks and growing our business, this target does not rely on a significant uplift in capital expenditure or network expansion.”
In the rail division, profits fell by £15.7m to £24.3m, with the sector presenting new challenges as franchises reached the end of their original terms, meaning the assumptions set out at the bid stage no longer reflected economic conditions.
In line with the franchise bid profile, payments to the Government increased by £85.9m.
The performance, however, was deemed “solid” and in line with the board’s expectations.
There were also a number of notable successes, including delivering key elements of the Olympic Games Transport Plan.
“During the year, we were delighted to be shortlisted for the Crossrail franchise and were pleased that the Thameslink, Southern and Great Northern (Thameslink) franchise process was restarted,” Brown added. “We also welcomed the Department for Transport’s announcement in March, proposing extended end dates for the current Southeastern and London Midland franchises as part of the revised franchising timetable.
“The extensions offer short-term stability for our existing rail operations and we look forward to working with the DfT to agree contract terms.”
Brown said he was pleased with the Group’s overall performance, which was slightly ahead of the board’s expectations.
“The group remains in a good financial position with strong cash generation and a robust balance sheet, underpinning the divided and allowing flexibility to pursue value opportunities,” he said.