Go-Ahead Group plc (LON: GOG) (LSE: GOG.L) has released full year results for the year to 2 July 2016. The results are slightly ahead of management expectations. Go-Ahead reached its £100 million bus target, while its adjusted operating profit increased by 8% to £100.4 million. This was boosted by a 9.4% increase in regional bus adjusted operating profit which benefitted from passenger growth in H2. Further, London bus adjusted operating profit was 6.3% higher despite a significant reduction in QICs income.
Go-Ahead’s rail division saw operating profit at £57 million with a margin of 2.3%. This contributed to total operating profit for the group of £91.2 million which was up from the previous year’s £80.7 million. Go-Ahead states that it continues to have a robust balance sheet and strong cash flow which enabled it to increase the full year dividend by 6.5% to 5.85p per share. This means that Go-Ahead now yields 4.7%.
However, it was a difficult year in GTR (Govia Thameslink Railway). Go-Ahead is working closely with the Department for Transport and Network Rail to improve services to customers following a period of major disruption. On a more positive note, Go-Ahead achieved a sector-leading customer satisfaction score of 89% in its regional bus operations as well as record passenger numbers in its rail division.
Go-Ahead is forecast to record a decline in EPS of 14% next year. On this basis it lacks appeal versus other travel and consumer goods companies such as easyJet plc (LON: EZJ), Unilever plc (LON: ULVR) and Diageo plc (LON: DGE). Unilever’s EPS is forecast to increase by 8% next year and Diageo’s is forecast to increase by 15% in the 2017 financial year. Similarly, easyJet’s EPS is due to increase by 7% in the 2017 financial year following the challenges it currently faces in air traffic control strikes and reduced demand.
As a growth stock, Go-Ahead therefore lacks appeal versus Unilever, Diageo and easyJet. But its yield and P/E of 4.7% and 11.5 respectively mean that it has appeal from a value and income perspective in my opinion.
The author owns shares in Unilever but not in Diageo, easyJet or Go-Ahead at the time of writing.