Go-Ahead bus firm to launch second Irish contract

UK-based bus and rail provider Go-Ahead has said it will start a second bus contract in Ireland for commuter towns outside Dublin next week.

The international firm already operates routes for Dublin Bus and had previously cited its Irish and Singapore operations for helping to boost revenues.

However, the shares of the London-listed company fell 3% after it lowered its expectations for its UK regional bus division’s annual financial performance, as it takes longer to bring a new Manchester bus company up to speed and battles costs.

The shares have soared 50% this year from a year earlier to value the firm at £952m (€1.1bn).

The company said in a trading update it had seen driver and engineering costs rise in its regional bus unit and was working to lower expenses and address underperforming areas of the business. Go-Ahead said this would result in one-off restructuring costs in the first half of the year. Analysts at Jefferies said Go-Ahead was still settling wage deals broadly in-line with inflation, but seeing more overtime and staff turnover.

Engineering costs had stemmed from the delayed delivery of new buses and parts, the analysts said, adding they expect the financial year 2020 operating profit estimates to move down by 1% to 3%. Jefferies reiterated its hold rating of the stock.

Go-Ahead has a fleet of nearly 6,000 buses and about 23% share of London’s bus market. It said it had withdrawn its X90 Oxford to London coach service due to the competitive environmentprevented it from making enough money. Like-for-like revenue from the start of the financial year rose about 2.5% in the regional bus unit, while London and international buses clocked growth of about 8%.

The company said its overall expectations for its rail business in the current financial year remain unchanged, with good performance in its British operations offsetting the impact of a painful start to its first two contracts in Germany. Its rail business has suffered setbacks like the loss of the London Midland franchise, while victory for the Labour Party in Britain’s December 12 election could see the rail network returned to public ownership.

Additional reporting: Reuters