London Midland revenues rise but franchise faces uncertain future

RAIL franchise London Midland faces a challenging year despite delivering an improved full year performance, its parent group has said.

The Go-Ahead Group, announcing its full year results said LM had delivered the most improved punctuality performance in the London and South East network, running 86.2% of services on time.

However, it said the franchise continued to face challenges. During the year, the franchise underwent a management and administrative shake-up in an attempt to reduce jobs. The cutbacks resulted in a one-off charge of £3m, which was against a backdrop of reduced subsidy receipts, higher operational costs and increased competition on the West Coast mainline.

The franchise has been awarded a seven month extension which will run to March 2016 but Go-Ahead said it would be holding talks with the Department for Transport shortly with the aim of extending the service agreement to June 2017.

LM passenger revenue grew by 6.8% to £276.9m last year (2013: £259.2m), with passenger numbers increasing by 4.5% (2013: 2.4%). Passenger revenue and journeys rose 7.4% (2013: 11.5%) and 4.9% (2013: 2.1%) respectively, when adjusting for the impact of the Olympic Games.

However, it said the rate of passenger revenue growth in the franchise had begun to slow during the year as a result of increased competition on the West Coast Main Line.

Go-Ahead said LM was no longer making revenue share payments to the DfT and it was not expected to contribute to group profits in 2014/15.

Overall, the transport group, which operates both bus and rail services, delivered a strong full year performance with revenue up 5.1% to £2,702.4m (2013: £2,571.8m), with growth in both its bus and rail divisions.
 
Operating profit was significantly ahead of the board’s initial expectations and slightly ahead of latest expectations at £103.2m (2013: £86.7m), a rise of 19%.
Pre-tax profit increased by £15.3m, or 22% to £84.9m (2013: £69.6m) and adjusted earnings per share were up 26.4% at 148.6p (2013: 117.6p).
 
David Brown, Group Chief Executive, said: “The group performed very well in the financial year with our bus and rail divisions both delivering strong results, which were significantly ahead of our initial expectations for the year.”