Go-Ahead Swipe-Card Campaign Propels Bus Profit Beyond Forecasts

Go-Ahead Group Plc (GOG) said a push to win acceptance of “smart ticketing” among U.K. bus customers outside London has been more effective than expected, lifting earnings at the business more than 10 percent above its target.

Operating profit from the bus unit reached 78.2 million pounds ($122 million) in the year to June 29, 8 million pounds higher than anticipated, as Go-Ahead targets divisional earnings of 100 million pounds by fiscal 2016, the company said today.

Go-Ahead has issued more than 400,000 of its swipe-to-enter smartcards and built a database of 600,000 users as it seeks to widen the appeal of a technology already engrained in London in a push to lure people who commute by the car. The Newcastle upon Tyne-based company also generated more than 1 million pounds in 12 months from 65,000 “m-ticketing” downloads via mobile phone.

“Oyster cards transformed travel in London when they were introduced 10 years ago and we’re now seeing a similar shift in other British cities,” Chief Executive Officer David Brown said in an interview. Price differentials between smartcards and traditional tickets have been kept smaller than in the capital in order to avoid alienating the existing client base, he said.

Shares of Go-Ahead, which spent 45.3 million pounds buying 251 new buses in the fiscal year, rose as much as 5.2 percent, the biggest gain since Oct. 18, 2012, and were trading 3.1 percent higher at 1,521 pence as of 10:07 a.m. in London.

U.S. Bus Concern

Brown said expansion plans for the company’s U.S. school bus business, established in 2010 to compete with bigger operations run by U.K. rivals FirstGroup Plc (FGP) and National Express Group Plc (NEX), has been frustrated by a lack of value in available contracts and acquisitions.

The venture, run in conjunction with U.S. partner Cook-Illinois, operates about 120 yellow buses in St. Louis, Missouri, and Go-Ahead had said the fleet might grow to 300 vehicles. The continuation of the relationship will now be reviewed when it comes up for renewal, Brown said.

“It’s moving slowly,” he said. “Unless you’re actually putting buses into St. Louis or have a huge fleet, the synergies are not really there.”

Go-Ahead, Britain’s No. 1 train operator by passenger numbers, posted an operating profit of 102.5 pounds for the 12 months, which while 7 percent lower than a year earlier was “slightly ahead” of company expectations, Brown said.

Rail earnings have fallen off as franchises near the end of their terms, limiting returns, and the company said it’s focused on winning the expanded Thameslink contract and another to run the new Crossrail line spanning London from east to west.

To contact the reporter on this story: Chris Jasper in London at cjasper@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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