German rail contract problems weigh on Go-Ahead’s mind

Public Transport

The Go-Ahead Group is undertaking a “comprehensive” review of its loss-making German rail contracts.

In Baden-Württemberg  the company reports a shortage of drivers and problems with the late delivery of trains. “In light of ongoing challenges, a comprehensive review of our German rail business is underway including an assessment of longer-term financial expectations.”

The problems are reported in a trading update for the year ending 27 June 2020, and which includes the period of the Covid-19 pandemic. Overall group operating profit for the year is expected to be in the range £63m to £75m. 

The DfT has put in place a funding package for regional buses, with Go-Ahead providing between 40 and 50 per cent of normal scheduled mileage and carrying around ten per cent of the usual passenger numbers. 

“In our regional bus business around 30 per cent of revenue is derived from contracts and concessionary income. In the vast majority of cases, local authorities across the country have continued paying for these services at pre-crisis levels.” Bus Services Operators Grant is also being paid at the same levels as before the Covid-19 outbreak.

About 50 per cent of the company’s regional bus staff have been furloughed. 

Go-Ahead expects operating profit for the regional bus division in the full year to be in the range £17m to £21m.

On London contracted bus routes, Go-Ahead said it was running 75 per cent of normal service levels. Revenue remained at pre-Covid-19 levels, with variable cost savings returned to Transport for London. Go-Ahead also has contracted bus operations in Ireland and Singapore.  

For the full year, operating profit for the London & International bus division is expected to be in the range £46m to £50m. 

On UK rail, the GTR franchise (Gatwick, Thameslink and Southern) is operating under the DfT’s emergency measures agreement (EMA) until at least September. The EMA has a maximum management fee of 2 per cent of the pre-pandemic cost base, comprising a management fee of around 1.5 per cent and a 0.5 per cent performance-related payment. 

Southeastern commenced a new direct award on 1 April on terms mirroring the EMA.

Because of Covid, the originally planned full year capital expenditure of £140m has been cut to about £90m. 

The Bank of England has confirmed its eligibility for up to £300m financing through its Covid Corporate Financing Facility.