Go-Ahead revenue growth hampered by 'weak' North East economy

The bus and rail operator cited poor economic conditions in its home region and significant roadworks in the south as restraints on revenue

David Brown, group chief executive of Go-Ahead
David Brown, group chief executive of Go-Ahead

Revenue growth slowed across Go-Ahead Group’s bus business in the last four months, hampered by what the firm called “ongoing economic weakness” in the North East.

The transport operator updated the London Stock Exchange with its performance over the third quarter of its 2014/15 year, and said revenue had grown 3% in the year to date.

Passenger journey growth turned negative during the period as the Newcastle-headquartered business cited poor economic conditions in its home region, where it operates Go-North East services, and significant roadworks in Oxford and Brighton as major impacts on its services.

Go-Ahead’s London bus revenues also slowed, caused by known contract losses and roadworks and congestion in the capital. The business saw a year-on-year reduction of around £1m, which is expected to repeat in the fourth quarter.

Bus driver strike action on pay discrepancies across London in the early part of this year was also said to have impacted profitability to the tune of around £1m.

Growth was better across the firm’s Rail division, which includes the Southern, Southeastern, London Midland and Govia Thames Railway (GTR) services.

Passenger revenue grew by 9% across the Southeastern services and around 7% across the Southern network.

Go-Ahead said the GTR business — majority owned through the Govia partnership with Keolis — has faced incremental costs due to changes in the operating network. This is expected to squeeze margins in the short term.

Plans to bring the Southern business into the GTR franchise this year will create redundancies, resulting in a charge of between £7m and £10m.

David Brown, group chief executive of Go-Ahead, said: “The overall trading performance of both our bus and rail businesses has been satisfactory and our expectations for the full year remain unchanged.

“We continue to make progress in our bus division and remain committed to our strategic target. During the period we welcomed the results of the independent statutory watchdog Passenger Focus’ national bus customer satisfaction survey which named Go-Ahead as the best performing large operator, with our regional bus companies achieving an average satisfaction rate of 90%.

“In our rail division overall underlying trading remains in line with our expectations. We are working closely with Network Rail and other industry partners to minimise the impact on passengers of the major infrastructure works associated with the Government’s £6.5bn Thameslink Programme.”

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