Go-Ahead Group swerves to a loss as Covid derails operations

Transport group Go-Ahead fell to a loss in the year ending 27 June as its regional bus services were hit hard by coronavirus and it suffered steep exceptional costs in Germany.

Go-Ahead’s shares rose 1.2 per cent, as it said that regional services were back to 50 to 60 per cent capacity and investors gambled that things would get better. 

However, chief exec David Brown told City A.M. that the government’s working from home u-turn could be a “major setback”.

The figures

The Go-Ahead Group swung to a loss of £200,000 in the year ended 27 June, having made a profit of £97m a year earlier. 

A large chunk of the loss was explained by £30.4m of exceptional costs relating to failings in its German operations.

Despite the problems in Stuttgart, Brown said Go-Ahead was committed to the contracts for the long run.

Total operating profit fell 35.7 per cent to £77.9m compared to £121.1m a year earlier. 

Regional bus profit slumped 53.9 per cent year on year to £20.5m. But London and international bus profit only fell 5.3 per cent to £48.5m.

Go-Ahead’s total revenue grew 6.1 per cent to £3.9bn in the year ended in June. 

London and international bus revenue also rose 6.1 per cent to £1.01bn while rail revenue climbed eight per cent to £2.89bn.

The group’s basic earnings per share, before exceptional items, were down 69.5 per cent to 51.6p. Free cashflow rose to £352.8m from £74.1m a year earlier.

Why it’s interesting

Go-Ahead runs bus services across Britain, including in London, Oxford, the north east and east Anglia, as well as a number of rail franchises.

Although passengers had begun to return in recent weeks, helped by the return of schools in early September, Brown warned that the new guidance left the future uncertain.

“I doubt that I’m alone in seeing it as a setback. Things had just started to feel like they were getting back to normal – the return to schools was very successful. But now we will have to wait and see”, he said.

He pointed out that in areas under local lockdown recently, such as Newcastle, numbers of passengers had not fallen dramatically.

However, Brown said that the new restrictions meant that it was highly likely that emergency support for bus operators would be in place until January at the earliest.

“Ultimately, it’s in the interest of the taxpayer for people to get back onto buses so that the emergency funding can stop, but we also need to avoid the cliff-edge of suddenly cutting it off”, he told City A.M.

In August, the Department for Transport (DfT) unveiled £218.4m in additional cash for embattled bus operators, taking the total funding for the sector to over £700m.

After that money comes out, £27.3m in funding will be available every week for as long as is necessary, DfT has said.

Brown also urged the government to stress that public transport remained safe to use despite the restrictions.

Its train operations have effectively been run by the government since March in response to the Covid crisis.

What Go-Ahead said

“Our financial results for the year have been significantly impacted by the pandemic despite only four months of the crisis period falling within our financial year,” said David Brown, group chief executive.

“While our German rail contracts have not been materially impacted by the crisis, this business continues to face significant operational and commercial challenges associated with the delayed delivery of trains and driver shortages.

“Through management action, we have seen operational performance improve and we have a clear plan to deliver profitability over the medium term.”