Go Ahead shares plunge as firm warns on full year profit
Bus operator Go Ahead Group saw its shares shed over a third of their value today after the firm reduced its full year profit expectations on the back of extended periods of adverse weather.
The firm added that it was also expecting the coronavirus impact to have an impact on its results, but could not estimate what that would look like at this stage.
The figures
Profit for the half year was £60m, down £4.5m on last year’s £64.5m, with a further hit expected to the full year profit due to the change in travel patterns expected.
Go Ahead’s bus division saw profits slip 3.4 per cent to £45.3m, with a strong performance in London offsetting a weaker regional bus effort due to extensive bad weather.
Rail also slipped from £17.6m last year to £14.7m this year, a drop which the firm said was in line with expectations due to difficult conditions in Germany.
The group maintained its first half dividend of 30.17p, although earnings per share slipped to 64.6p from 69.0p.
Chief executive David Brown added that although he could not yet estimate the damage the coronavirus could do to the business, 75 per cent of the company’s revenue was contractually based, which would limit its exposure.
He said that Go Ahead was working out how it could “minimise” damage to the remaining 25 per cent and that the company was working with the government.
What Go Ahead said:
Speaking to Morning Wire, Brown said that weaker regional performance was not so much down to flooding as to the fact that the UK saw an especially wet autumn:
Sign up to Morning Wire’s Midday Update newsletter, delivered to your inbox every lunchtime
“It’s just constant rain. People just don’t go to the shops. We get this every year but this year the difference was that it was for such a sustained period across all aspects of our operation, from Plymouth to Newcastle”.
He added that while the £5.2bn pledged for flood defences in yesterday’s Budget would have little impact, he said that the reinforcement of £5bn for the UK’s buses was a “really positive step”:
“It will see government put money into granular, practical things like easing traffic and that is the right thing to do in order to get people out of their cars and into buses”.
However, he said that Go Ahead was less pleased about the potential roadworks that the £27.4bn in funding for roads would bring about, as it could cause major congestion for buses.
He also bemoaned the freeze in fuel duty, saying: “If you really want to get to a zero carbon society, you really have to start doing these things to move people onto public transport”.
The transport operator is also in the process of renewing its Southeastern rail franchise, which runs out on 31 March. Brown said whilst Go Ahead was currently in negotiations, he could see “no reason” why it should not be reawarded.
On the upcoming Williams review, which could totally shake-up the UK’s rail network, Brown said his main concern was establishing clarity as to who owns the customer and fares reform:
“I’m perfectly happy with the concession type model, but I really want to understand what the rules of the game are. And what it means in practice. There’s a lot to find out”, he added.