(Alliance News) - Go-Ahead Group PLC issued a profit warning on Friday, having carried around 10% of normal regional bus passenger numbers in recent weeks amid the Covid-19 pandemic and troubles with its rail business in Germany.
Shares in public transport operator Go-Ahead were down 11% at 1,100.00 pence in London in morning trading.
Go-Ahead expects to post a group operating profit of between GBP63 million and GBP75 million for its financial year ending June 27, or between GBP54 million and GBP66 million on a pre-IFRS 16 basis. This compares to a GBP121.1 million operating profit before exceptional items - GBP104.3 million after exceptional items - in financial 2019.
The firm has, as reported in its interim results, experienced challenges in the early stages of its German rail contracts in Baden-Wurttemberg. These have included trouble with the reliability and availability of rolling stock, as well as driver shortages which have hurt operating performance, incurring unplanned costs and penalties.
Although reduced service levels in the wake of the pandemic have meant that Go-Ahead was able to achieve a "strong operational performance", driver levels are still too low for the operation of a full service and the virus has held up driver training programmes.
As such, Go-Ahead is conducting a review of its German rail business with "an assessment of longer-term financial expectations".
For its financial year as a whole, Go-Ahead is forecasting a total rail division operating profit between nothing and GBP4 million, or a loss of between GBP8 million and GBP4 million pre-IFRS 16, with losses in Germany offsetting Go-Ahead's UK rail business profit.
A sharp drop also has been seen in Go-Ahead's regional bus business, where it has operated between 40% and 50% of normal scheduled mileage in recent weeks while carrying just 10% of ordinary passenger numbers.
Given this, Go-Ahead is forecasting a regional bus division operating profit of between GBP17 million and GBP21 million, pre- and post-IFRS. In financial 2019, the division posted a GBP44.5 million operating profit before exceptional items.
The firm has made efforts to minimise its costs and cash outflows "wherever possible", including suspending its interim dividend, cutting board member salaries and fees by 20%, using job retention schemes, freezing discretionary spending and restricting capital expenditure.
Go-Ahead was fully hedged in terms of fuel for financial 2020 before the virus outbreak with no further hedging expected to be needed in financial 2021.
None of Go-Ahead's debt matures before 2024 and by June 27 adjusted net debt is forecast to be around GBP980 million with unutilised facilities and cash of approximately GBP200 million.
"We maintain a positive dialogue with our finance providers and keep our current facilities under review. The Bank of England has also confirmed our eligibility for up to GBP300 million additional financing through its Covid corporate financing facility," said Go-Ahead.
Chief Executive David Brown said: "While none of us know what the coming months will bring, I have no doubt that public transport will continue to play a critical role in society, supporting our economies and tackling climate change long into the future. Go-Ahead has a strong track record of delivery, and with a high proportion of secured revenues we are well positioned to protect our business for the long term."
No guidance for financial 2021 was provided due to continued uncertainties surrounding Covid-19 and government response to it.
By Anna Farley; annafarley@alliancenews.com
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