Go-Ahead ups outlook despite lockdown 2.0 hit to demand

Bus and rail firm Go-Ahead Group has upped its full-year outlook after a better performance in its London and international bus division offset falling demand amid the second lockdown.

The group, which runs services such as Govia Thameslink Railway and Southeastern, said the London and international bus arm was boosted by the timing of quality incentive contract income.

It added that all revenues in the division are secured through contracts, which has offered protection from falling demand for public transport during the coronavirus crisis and restrictions to control the pandemic.

This has helped the group weather a hit to the regional bus division, which saw passenger numbers fall sharply during the second national lockdown in England.

It said demand had recovered to around 50% to 60% of pre-crisis levels before the one-month lockdown, but that this had slumped back by around 15 percentage points over the past four weeks.

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The group warned that regional bus profits are expected to plunge by around half in the six months to January 2 compared with a year earlier.

It added: “While regional bus is expected to make a positive contribution in the year, ongoing uncertainty relating to the recovery of passenger demand prevents us from providing meaningful full-year financial guidance for the division at this stage.”

But Go-Ahead chief executive David Brown said the performance ahead of the lockdown signalled that demand would recover.

He said: “Prior to the second lockdown, we were pleased to see passenger journeys reaching nearly 60% of pre-crisis levels in some regions, showing people’s desire to travel once restrictions are eased.

“With enhanced vehicle cleaning, the provision of hand sanitiser and mandatory use of face coverings, passengers can travel confidently on our services that are safe and clean.”

Go-Ahead said there is no change to guidance for its rail arm, reiterating expectations for breakeven in the division.

It also gave assurances that 90% of group-wide revenues are secured through contracts, with no revenue risk from falling passenger demand.

It also offered some cheer to investors, confirming it is working towards paying a dividend at an “appropriate level” in the 2021 calendar year.

Transport experts at Jefferies said: “Improving full-year 2021 expectations and a 2021 dividend as a target should be taken well.”