Go-Ahead lowers FY expectations on GTR challenges

Transport operator Go-Ahead, which owns 65% of the Southern franchise through Govia Thameslink Railway (GTR), reported a drop in first-half pre-tax profit as operating profit from the rail division slumped due to strike action, and the company lowered its full-year expectations for the bus and rail divisions.

For the six months to the end of December, pre-tax profit dropped to £67m from £75.9m the year before, as revenue edged up to £1.72bn from £1.67bn.

Operating profit fell to £74.1m from £85.4m, with regional bus operating profit up 6.2% to £25.7m but rail operating profit down 35% to £26.9m, owing to losses at GTR and known bid costs.

Chief executive David Brown said: "We have delivered financial results in line with expectations. Beneath these overall results there is a mixed picture. Both of our bus divisions and two of our three rail businesses performed well, but there are clearly ongoing issues at GTR which we are working hard to resolve.

"In regional bus, while variations exist between different geographical areas, revenue has continued to grow. Passenger volumes, while subdued, have outperformed national trends. The London bus business performed in line with our expectations."

Go-Ahead said that in the rail division, the long-running industrial relations issues in GTR have introduced additional costs and delays to expected efficiencies which will result in lower than anticipated profits in the full year.

Meanwhile, its expectations for full-year regional bus division profitability have lowered as a result of the slowdown in passenger volumes across the business, most notably in the north east and Oxford.

Go-Ahead threw in an apology with its interim results on Tuesday.

"We apologise to our passengers who have faced months of severe disruption and inconvenience. Our primary aim is to improve the service for passengers and we remain in discussions with trade unions with the aim of reaching a full resolution of these ongoing issues so that we can deliver services our customers can rely on.

"We continue to work closely in partnership with Network Rail, the DfT, rolling stock providers and other key industry partners to deliver the longer term benefits of the Thameslink Programme."

Canaccord Genuity said: "The uncertainties surrounding the GTR franchise are likely to have a negative impact on investor sentiment in the short term until the industrial dispute is settled and there is more visibility on the financial consequences of the outcome of the contract negotiations with the DfT."

At 1000 GMT, the shares were down 14% to 1,969p.