Go-Ahead Group PLC (LON:GOG) has been granted yet another extension to its Southeastern franchise by the Department for Transport (DfT).
The FTSE 250 transport group will now run the franchise until 1 April 2020 rather than 10 November 2019. The company has operated the Southeastern franchise since 2006 and the most recent contract was due to expire on 22 June 2019.
READ: Go-Ahead confirms extension to Southeastern franchise until November 10
Southeastern covers stations from East London across the south east towards Dover and Margate and is run as a joint venture (JV) between Go-Ahead, which holds a 65% stake, and Franco-Québécois transport operator Keolis, which owns the remaining 35%.
David Brown, Go-Ahead’s chief executive, said that the company would be engaging the DfT on “next steps”, although added that the firm was “disappointed” that the government had decided not to take forward its original bid to run the franchise.
David Statham, managing director at Southeastern, said that over the extension period the group would focus “squarely” on passengers, adding that since beginning its current contract in 2014 the group had improved punctuality by “nearly 10% in two years” while also adding 5,000 extra seats.
Broker highlights renationalisation risk
In a note, analysts at Liberum said that the DfT’s plans beyond the newly extended franchise end date were as yet “unclear” but they see only two options -- the franchise being awarded to the existing JV or a “renationalising” of the service by transferring it to government control. However, they added that the latter was “politically unlikely” under the current Conservative government.
The broker said the current situation was a “net negative” for the company due to the “loss of option value” from a longer-year franchise, although this could be mitigated by the possibility of a multi-year extension in the future.
In early trading on Wednesday, Go-Ahead’s shares were 0.5% lower at 2,044p.