Go-Ahead shares fall 11% as it warns on profit

Shares of Newcastle-headquartered international bus and rail giant Go-Ahead Group fell about 11% on Friday after the firm published a trading update for the year ending June 27, 2020, ahead of its full year results on September 10.

Go-Ahead said the effects of the coronavirus crisis would almost halve its annual profit, even after UK government support for bus and rail companies.

The company also said it expects “a more material loss” from its German rail business for the full year.

The company said it expects group operating profit for the year to be in the range of £63 million to £75 million — compared to the £121 million it made in the 12 months to June 29, 2019.

Go-Ahead said its regional bus business in recent weeks has been operating at between 40% and 50% of normal scheduled mileage, carrying around 10% of usual passenger numbers.

“In London, where we are currently operating around 75% of normal service levels, revenue remains at pre-COVID-19 levels with variable cost savings being returned to Transport for London (TfL),” said Go-Ahead.

On its rail business, Go-Ahead said: “Both GTR (Govia Thameslink Railway) and Southeastern franchises are currently operating around 75% of typical service levels, as specified by the DfT.”

On its Germany business, Go-Ahead said: “We are currently operating around 70% of contracted services in our German rail business, having operated around 55% throughout April.

“We expect to resume a full-service during June.

“As reported in our half year results, the early stages of our rail contracts in Baden-Württemberg have been challenging.

“Issues around availability and reliability of rolling stock, and driver shortages have impacted operational performance and service reliability, resulting in penalties and unplanned costs being incurred.

“While the reduced service levels in response to COVID-19 have enabled us to deliver strong operational performance during this time, the underlying challenges in this business remain, particularly driver numbers which remain below the levels required to operate a full service, and the pandemic has inevitably delayed our driver training programmes.

“While we are now operating with expected levels of rolling stock, progress in recovering losses associated with the late delivery of trains from the rolling stock provider has been slower than anticipated.

“As a result, we now expect a more material loss from the German business for the full year.

“In light of ongoing challenges, a comprehensive review of our German rail business is underway including an assessment of longer-term financial expectations.”

In its outlook, Go-Ahead said: “In all of our geographies material uncertainties remain around the easing of restrictions and the implications this will have on public transport usage.

“The quantum and duration of government support measures, particularly in our regional bus business, also remains uncertain.

“Accordingly, we are not in a position to provide guidance in relation to the 2020/21 financial year or beyond at this stage.”

Go-Ahead Group CEO David Brown said: “The last nine weeks have been unlike any other, and I am extremely proud of how my colleagues across the business have responded, keeping vital services running for other key workers and increasing service levels to provide safe travel as people return to work. I thank them all for the part they are playing …

“Our thoughts are with our colleagues who are currently unwell as a result of COVID-19, and the families and friends of our people who have tragically lost their lives.

“Our businesses are key parts of the communities they serve and they have been fundamental in supporting these communities through this crisis.

“This support has come in many forms; we have amended timetables to align with hospital workers’ shift patterns, run shuttle services to hospitals and supported victims of domestic abuse to reach safe places.

“We have also supported efforts in tackling the crisis by bottling and distributing hand sanitiser for key workers, delivering food packages to those in need, and transporting medical equipment.

“We are pleased that governments have recognised the importance of essential public transport networks.

“By providing financial support they are enabling the delivery of vital transport links for key workers and supporting the recovery of our communities. 

“While none of us know what the coming months will bring, I have no doubt that public transport will continue to play a critical role in society, supporting our economies and tackling climate change long into the future.

“Go-Ahead has a strong track record of delivery, and with a high proportion of secured revenues we are well positioned to protect our business for the long term.”

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.