Go-Ahead vows to increase profits and resume dividends in strategy overhaul

Transport group Go-Ahead has pledged to resume payouts to shareholders and increase earnings as part of a business overhaul, as it recovers from the pandemic and a recent scandal over the Southeastern rail franchise.

The firm said it would return to its pre-pandemic shareholder dividend policy from 2021/22, turn around under-performing businesses and expand into growth areas following a group-wide business review.

It wants to look at possible acquisitions in international bus markets as well as explore new urban so-called mass transit modes, such as metro, light rail and bus rapid transit.

The plan, led by chief executive Christian Schreyer, aims to increase annual revenues by about 30% to £4 billion and operating profits to at least £150 million.

It comes just weeks after its joint venture Govia, a tie-up between Go-Ahead and French firm Keolis, was fined £23.5 million over the Southeastern franchise scandal.

The Government stripped Govia of the franchise last October for a serious breach of contract after it deliberately concealed more than £25 million of historic taxpayer funding relating to High Speed 1 which should have been returned.

The penalty came on top of £64 million the Department for Transport is recovering from Govia in relation to the breach of its franchise and other costs.

The saga led to the firm’s shares being suspended from the London Stock Exchange as accountants needed more time to work out what impact the problems would have on the company, causing a lengthy delay to its 2020/21 results.

In Tuesday’s business strategy announcement, Go-Ahead sought to appease investors with aims to restart paying out between 50% and 75% of underlying earnings per share from this financial year, with plans for a dividend of at least 50p for the year to July 2.

As well as new expansion plans, it wants to grow in current markets, in particular the UK regional bus market.

Shares jumped 8% in early trading on Tuesday.

Mr Schreyer said: “Transport is at a tipping point as we recover from the Covid-19 pandemic.

“The importance of mass transport is growing, reflecting trends in climate change, digitalisation, urbanisation and demographics around the world; and there are increasing opportunities for private operators to bring their expertise to public transport markets.

“Go-Ahead’s core strength is in commuter transport and we see opportunities to grow by encouraging people to leave their cars at home, by winning new contracts and through carefully selected acquisitions.”

He added that the recent surge in costs at petrol pumps was providing a boost to the group by persuading motorists to switch to public transport, with a rise in passengers on buses and trains in recent weeks.

Its bus passengers numbers were now at over 82% of pre-Covid levels, while they were at around 67% in its Govia Thameslink Railway (GTR) business, up from 65% during January’s Omicron disruption.

Mr Schreyer said rising fuel prices would start to affect the group’s regional bus business in future years, having fixed all of its fuel costs for 2022 and half of next year’s costs.

“It’s too early to say how it will impact us, but I’m optimistic the higher passenger numbers will offset the higher costs,” he said.