Go-Ahead aiming to make £100m profits from its bus division

The group currently generates an annual return of £70m from a fleet of around 4,600 buses carrying some 1.7 million passengers a day.

It said the new target would be achieved by the 2015/16 financial year through “high quality services, innovation and marketing and cost efficiency”.

In a meeting with City investors, chief executive David Brown said he believed there was “significant potential” to grow the bus part of the business.

It comes as Go-Ahead faces up to uncertainty in its rail operation following the Department for Transport’s decision to postpone current rail franchise competitions in the wake of the West Coast mainline debacle.

The government has started two independent reviews to focus on the botched West Coast competition and the wider DfT rail franchise system.

Flaws in the bidding process were unearthed as the DfT was preparing for a legal challenge by Virgin Trains over the decision not to award its franchise to FirstGroup.

Go-Ahead had been shortlisted to bid for the new Thameslink rail franchise, a London commuter route, which has been put on hold as part of the government review.

Go-Ahead is behind a third of the UK’s rail journeys through its Govia joint venture, which runs the Southern, Southeastern and London Midland franchises.

Whilst the Olympics resulted in much higher levels of rail passenger revenues and journeys, the company said the profit impact was largely neutral.

“We remain committed to operating in the UK rail market,” said Mr Brown.

“Following the Department for Transport’s (DfT) announcement regarding the postponement of current rail franchise competitions and a review of the franchising process, Go-Ahead looks forward to working with the review team to help shape the future of UK rail franchising.”

In the deregulated bus division, underlying revenues were 5 per cent higher in the period between July 1 and October 17 after the number of passenger journeys increased by around 3 per cent.

This was after fares increased by between 4 per cent and 7 per cent in April due to higher fuel costs and a cut in government grants for bus operators.

The majority of its bus operations are based in southern England, particularly commuter growth corridors where demand for public transport is particularly strong.

The company’s margin from bus operations is currently just over 10 per cent.

However, Go-Ahead warned that it was cautious about the medium term wider economic outlook.