Go-Ahead’s rail division profit slumps 35 per cent as it counts the cost of Southern rail strike troubles
Go-Ahead shares have slumped 14 per cent after it warned over full-year profits.
Interim earnings at its rail division plummeted 35 per cent on the back of months of Southern rail disruption.
The transport giant, which owns 65 per cent of the Southern franchise through Govia Thameslink Railway (GTR), said full-year results were lowered due to "the challenges in GTR" as rail operating profit slumped 35 per cent to £26.9m.
Read more: Southern passengers told to check if they're allowed one-off compensation
The figures
Operating profit in bus and rail was £46.4m, with rail operating profit taking a 35 per cent tumble to £26.9m, due to losses at GTR and known bid costs. Go-Ahead said the contribution to the Department for Transport (DfT) was £42.9m.
Full-year results could drop by as much as £15m, the firm said, due to "ongoing uncertainty" over GTR.
Operating profit before amortisation fell 13.2 per cent to £74.1m.
Go-Ahead said its half-year results were in line with management expectations, but full-year forecasts had been lowered due to the GTR troubles, as well as a slowdown in passenger numbers in regional bus.
But here's some news to keep investors happy, if not passengers… Go-Ahead said stable bus profits supported an interim dividend increase of 6.5 per cent.
Why it's interesting
The Southern rail saga has caused misery for passengers as erratic service disrupted by ongoing industrial action has meant months of travel uncertainty. And back in December, Go-Ahead warned its rail division would miss full-year financial forecasts due to the ongoing walkouts.
The strikes, over changes to the role of the guard on the train and the switch in who's responsible for closing train doors, have led to calls for GTR to be stripped of the franchise.
Part of the controversy has revolved around the use of a management contract for the franchise. The DfT receives revenue from ticket sales and takes on the revenue risk, with the company – GTR – operating the service in exchange for a management fee, in the region of £1bn.
The Transport Select Committee has said this arrangement puts the "ultimate financial risk" with the taxpayer. Despite the severe operational failings of GTR, it paid just £2m in penalties for its first year of operation – only 0.2 per cent of its £1bn management fee.
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What the company said
David Brown, group chief executive, 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."
He said the GTR franchise has been "challenging from the outset" as the "largest and most complex franchise ever tendered in the UK".
In addition to the inherent challenges of operating this complex franchise, we have faced lengthy and significant industrial relations issues related to the modernisation of working practices required by the contract.
Our customers have suffered months of disrupted travel, impacting work and family lives and we are sorry that such inconvenience and hardship has been caused.
Discussions with trade unions are ongoing as we strive to reach a full resolution of these issues.