London Midland parent confirms talks continue with DfT on contract extension
THE parent company of rail franchise London Midland has confirmed it is continuing talks with the Department for Transport with a view to extending the service’s operating contract.
The Go-Ahead group said the current contract was due to end next March but it was keen to agree an extension until October 2017.
The move comes as the group revealed a 5.4% increase in passenger revenue for the year to June 27, 2015. The increase is not as strong as the previous year, when the service saw growth of 7.4%.
“London Midland’s performance continued to improve throughout the year, with the franchise making a modest contribution to profit,” said Go-Ahead in its results statement.
“Passenger revenue grew by 5.4% (2014: 7.4%) in the year and passenger numbers increased by 2.1% (2014: 4.9%) on a like for like basis. London Midland’s trading performance improved in the second half of the year.
“The franchise will continue to operate within its original contract terms including a seven month extension period to March 2016. Discussions with the DfT are underway regarding a potential direct award contract for London Midland from March 2016 to October 2017.”
The group’s rail division as a whole saw stronger than expected profitability of £25.7m (2014: £19.7m) up 30.5% on the previous year, despite the operational challenges faced during the year. This was ahead of the board’s expectations and helped by contract management benefits in the second half. However, margins remained at historically low levels.
Overall passenger revenue growth was 7.6% (2014: 6.1%) on a like for like basis, with like for like passenger journey growth of 3.9% (2014: 4.8%).
The group’s net increase in contributions to the DfT was £191.9m (2014: £51.6m increase) with an overall contribution of £255.9m (2014: £64.0m).
Total revenue – which includes the group’s bus operation – increased by 26.1%, or £495.5m, to £2,397.4m (2014: £1,901.9m).
Operating profit of £114.7m (2014: £103.2m) exceeded initial expectations and rose 11.1% from the previous year.
Profit before tax excluding amortisation, goodwill impairment and exceptional items for the year increased by £11.7m, or 13.8%, to £96.6m (2014: £84.9m) and adjusted earnings per share rose 1.5% to 150.8p (2014: 148.6p).
