September 7, 2017 / 7:22 AM / a year ago

UPDATE 1-Go-Ahead targets growth abroad after strikes hit UK rail arm

(Adds analyst comments, details, background)

Sept 7 (Reuters) - British transport company Go-Ahead Group aims to make 15-20 percent of its profit abroad within five years, it said on Thursday, as it forecast further challenges at home where its Southern rail business has been hit by strikes.

The company said slowing growth in passenger revenues at its rail business in southeast England was set to continue amid a squeeze on consumer incomes, cutting its profitability expectations for its rail division in its new financial year.

For the year ended July 1, group operating profit fell by 7.4 percent drop to 150.6 million pounds ($196 million), hit by the strikes and one-off costs at its bus business.

Go-Ahead’s London bus business has failed to retain some contracts in the face of increased competition.

In August, the company also failed in a bid to retain its West Midlands rail franchise after running the network in central England for 10 years.

It said on Thursday that international contracts would help to offset some of the impact.

“While it was disappointing to be unsuccessful in our bid to retain London Midland, progress in our international strategy will see some of the lost revenue from the franchise replaced with contracts in the targeted markets of Singapore bus, Dublin bus and German rail,” CEO David Brown said in a statement.

Go-Ahead had previously not disclosed a formal international expansion target.

Jefferies analyst Alex Paterson said the new target was “encouraging”, retaining his “buy” rating on the stock.

But he cut his share target price to 2,050 pence from 2,250 pence, citing a larger than expected slowdown in the company’s southeast rail business.

Go-Ahead shares were down 4.7 percent at 1,678 pence in early trading.

The company said its results were in line with expectations, having already lowered its full-year profit forecast in February to reflect the impact of strikes on Southern railways. ($1 = 0.7670 pounds)

Reporting by Esha Vaish in Bengaluru; Editing by David Clarke and Mark Potter

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