Go-Ahead issues profit warning as half-year results falter

Full-year profits at Go-Ahead Group, main owner of the troubled Southern Rail operation around London, could be reduced by as much as £15m by continued uncertainty over industrial relations and other problems at the operation, the company said on Tuesday.

Go-Ahead gave the warning over profits for the year to June alongside half-year results for the year to December 31 that showed operating profits at its rail operations fell 35 per cent to £26.9m.

Although Go-Ahead does not break out results from its different franchises, it said the figures were reduced by losses at Govia Thameslink (GTR), the larger franchise that includes Southern.

The profits were all earned in the Southeastern and London Midland franchises operated by Govia, a joint venture with France’s Keolis in which Go-Ahead holds 65 per cent.

GTR’s management has been grappling with a series of problems, the most serious of which has been a long-running dispute with its unions over a shift in responsibility for closing train doors from conductors to drivers. Conductors have held 29 days of strikes over the issue over the past year, while drivers have separately walked out on six days.

David Brown, chief executive, said the GTR franchise had been “challenging from the outset”.

“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,” he said. “Discussions with trade unions are ongoing as we strive to reach a full resolution of these issues.”

Because of the service’s extreme unreliability, Govia is in discussions with the Department for Transport, which awarded the franchise, about its performance against its contract. Go-Ahead said that, depending on the outcome of the discussions, the effect could be to change the rail profits for the half-year to December 31 by plus or minus £10m. For the full-year to June 2017, operating profits in the division could vary by plus or minus £15m.

“We are doing everything we can to reduce these uncertainties through discussions with the DfT,” Mr Brown said.

Go-Ahead said it was also lowering expectations for regional bus profitability because of the slowdown in bus passenger numbers that a number of public transport operators have reported.

The fall in rail operating profits drove down overall group operating profits before amortisation for the six months by 13 per cent to £74.1m. Pre-tax profits fell 12 per cent to £67m.