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Go-Ahead slowed down by regional buses and Germany

New business in Manchester took longer than estimated to reach targets while there are plans to cut costs

Go-Ahead slows down with regional buses

Go-Ahead Group PLC's (LON:GOG) regional buses and new German operations put the brakes on growth in the first four months of its financial year.

Like-for-like (LFL) regional bus revenue rose 2.5% and LFL passenger journeys were up 0.5% in the period, the FTSE 250-listed transport company said in an update, putting the blame mostly on new business in Manchester taking longer than predicted to reach targets.

Go-Ahead Southeastern franchise extended yet again

With upward pressure on driver and engineering costs, Go-Ahead said it was "investing" in restructuring costs as part of its new strategy to focus on improving yield rather than growing volumes as it had in 2018.

The London and international bus division generated 8% growth in LFL revenue, with mileage and peak vehicle requirement (the number of vehicles needed to operate at peak demand) up 4% and 4.5% respectively, thanks to new contracts in London.

Management did not provide numbers for the rail division, however they said expectations remain unchanged as positive UK performance has been offsetting a “challenging” operational start to the first two contracts in Germany.

Go-Ahead said it is taking measures to stabilise performance and improve service availability, ahead of the third rail contract set to be introduced next month.

Southeastern’s franchise term, operating in south-east England, is set to end on 31 March and the company said it is in talks with the Department for Transport for a new contact beginning 1 April.

“I firmly believe in the fundamental strength of our bus business,” said chief executive David Brown in a release.

“Buses have a significant role to play in transforming the way people travel and in slowing the rate of climate change, improving air quality and easing congestion in our towns and cities.”

Shares dipped 5% to 2,160p on Thursday at open.

Quick facts: Go Ahead Group

Price: 2160 GBX

Market: LSE
Market Cap: £932.63 m

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