Go-Ahead flags profit concerns due to Southern rail dispute

In light of the ongoing industrial disputes over its Govia Thameslink rail franchises, Go-Ahead Group has warned that full year revenues will be slightly lower and costs higher.

In a pre-close trading update for its first-half to end-December, the FTSE 250 group said its bus division continued to trade in line with expectations but rail earnings are likely to be slightly below expectations due to additional costs at 65%-owned Govia and higher overseas rail bid costs.

With Govia services continuing to be heavily impacted by strike action and another strike announced by the Aslef union recently, Go-Ahead said its discussions were ongoing with the Department for Transport regarding its contractual claims relating.

Work to resolve the issues is predicted result expect to incur additional costs in this financial year, the company said.

There was better news elsewhere in rail, with around 2% volume growth at the Southeastern and 4% at London Midland rail franchises.

Meanwhile, although the UK regional bus markets remain challenging, the company managed to deliver around 0.5% volume growth in passengers during the half, with revenue growth expected to be roughly 1.0%.

Excluding the north east, revenue and volume growth was circa 2% and 1% respectively, while London revenues are largely driven by contracted mileage, which rose by close to 0.5%.

Broker Canaccord Genuity said: "Investor sentiment continues to be impacted by the GTR issues, overshadowing good performances elsewhere. We expect the performance issues to gradually improve going forward as new trains are introduced, driver shortages are addressed, the London Bridge redevelopment progresses and industrial relations improve."