British rail and bus operator Go-Ahead said new passengers looking to avoid the high cost of running cars had helped boost first-quarter trading, although it remained cautious about the medium-term wider economic outlook.
The company, which operates the Southern, Southeastern and London Midland rail franchises, said Thursday all three operations saw a rise in passenger revenue in the period to October 26.
We are encouraging people to make that shift from cars to public transport and people are doing that -- they are finding the cost of motoring quite expensive and we benefit from that, Chief Executive David Brown told reporters on a conference call.
He said a 20 percent increase in the cost of car insurance and a surge in fuel prices was driving growth at a time when Britons are reining in their spending as their incomes are squeezed by rising prices, muted wage growth and government austerity measures.
We want a vibrant economy because a vibrant economy means people will travel more but there is a tightening of belts amongst people and the common theme would be if you've got a second car, you get rid of the second car, Brown said.
Go-Ahead's subsidiaries have launched schemes on the Isle of Wight and in Newcastle offering consumers the chance to swap their old cars for a year's worth of free public transport.
From our perspective that's getting someone on the public transport who would not otherwise have used it and we think it's a good price to pay because we know that once we get people on public transport ... we can keep them, Brown said.
Go-Ahead said its bus unit delivered revenues 4 percent higher outside of London but passenger numbers remained flat compared with the same period last year. Bus revenues in London were marginally up and Brown said the company's North American yellow school bus joint venture was making profits.
The group is demonstrating good resilience in the present tougher economic environment and cashflows remain strong, Investec Securities analyst John Lawson said in a note.
The company, which also operates commuter rail franchises through its majority-owned joint venture Govia, added that its high speed rail services in Kent and the Gatwick Express were showing good growth as passengers want to use fast rail links.
There's no sign that the rail division is being adversely affected by weaker conditions in the employment market, Charles Stanley Securities analyst Douglas McNeill said.
The company left its full-year guidance unchanged but Brown said the turbulent economic environment combined with the euro zone sovereign debt crisis meant the company remained cautious about its medium-term prospects.
Britain's economy has barely grown since September last year and a recent Reuters poll showed that economists saw a one-in-three chance that Britain would slip back into recession.
Shares in the company, which have lost around 11 percent of their value over the last three months, were up 2.10 percent at 1,408 pence at 9:05 a.m.
Go-Ahead lost out on a potentially lucrative contract to run the Greater Anglia rail franchise last week, having been beaten by Holland's Nederlandse Spoorwegen.
We're obviously disappointed, but not particularly surprised, Brown said, adding that the company fully intended to bid for a 15-year Greater Anglia rail franchise when it came up in 2014.
Go-Ahead plans to bid for a range of other franchises in the meantime, he said, adding that the company would not restrict itself to commuter rail franchises.
The company is, on average, expected to report a pretax profit of 92.70 million pounds, for the year to June 2012, according to a Thomson Reuters poll of 17 analysts.
(Reporting by Michelle Martin; Editing by Neil Maidment and Jon Loades-Carter)