Go-Ahead Group PLC - Trading Statement
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22 May 2020
("GO-AHEAD" OR "THE GROUP")
TRADING UPDATE FOR THE YEAR ENDING
· During the COVID-19 crisis, we have three priorities: to safeguard the health and wellbeing of our colleagues and customers; to play our role in society in challenging times; and to protect our business.
· Go-Ahead has a resilient business model, with limited exposure to changes in passenger demand, and government support in all divisions.
· We are providing vital regional bus services in
· Resilient financial performance in
· The Group has strong fundamentals. It is cash generative and is expected to have around
· With the impact of COVID-19 and support measures, overall Group operating profit for the year ending
* Underlying liquidity has improved since the half year ended
"The last nine weeks have been unlike any other, and I am extremely proud of how my colleagues across the business have responded, keeping vital services running for other key workers and increasing service levels to provide safe travel as people return to work. I thank them all for the part they are playing.
"Go-Ahead is an extended family of 30,000 people and our priority is safeguarding their health and wellbeing. Our thoughts are with our colleagues who are currently unwell as a result of COVID-19, and the families and friends of our people who have tragically lost their lives.
"Our businesses are key parts of the communities they serve and they have been fundamental in supporting these communities through this crisis. This support has come in many forms; we have amended timetables to align with hospital workers' shift patterns, run shuttle services to hospitals and supported victims of domestic abuse to reach safe places. We have also supported efforts in tackling the crisis by bottling and distributing hand sanitiser for key workers, delivering food packages to those in need, and transporting medical equipment.
"We are pleased that governments have recognised the importance of essential public transport networks. By providing financial support they are enabling the delivery of vital transport links for key workers and supporting the recovery of our communities.
"While none of us know what the coming months will bring, I have no doubt that public transport will continue to play a critical role in society, supporting our economies and tackling climate change long into the future. Go-Ahead has a strong track record of delivery, and with a high proportion of secured revenues we are well positioned to protect our business for the long term."
In recent weeks we have been operating between 40% and 50% of normal scheduled mileage, carrying around 10% of usual passenger numbers, creating a misalignment between revenue and our cost base. While we have taken measures to reduce costs wherever possible, financial support is crucial to cover the costs of providing essential services.
Approximately 65% of the regional bus cost base relates to employee costs. We have utilised the Government's Coronavirus Job Retention Scheme to furlough around 50% of colleagues in this part of the business. We welcome the announcement of the extension of this scheme until
In our regional bus business around 30% of revenue is derived from contracts and concessionary income. In the vast majority of cases, local authorities across the country have continued paying for these services at pre-crisis levels. The Bus Services Operators Grant, relating to fuel duty, is also being paid at the same levels as before the COVID-19 outbreak in the
For the full year ending
As COVID-19 restrictions affected passenger volumes, transport authorities in
We continue to work closely with our transport authority clients to prepare for service levels being increased in line with government guidance.
For the full year ending
Both GTR and Southeastern franchises are currently operating around 75% of typical service levels, as specified by the DfT.
Following the DfT's announcement on
As previously reported, Southeastern began operating an 18-month (plus six-month extension option) direct award contract (DAC) on
We are currently operating around 70% of contracted services in our German rail business, having operated around 55% throughout April. We expect to resume a full-service during June.
As reported in our half year results, the early stages of our rail contracts in
While the reduced service levels in response to COVID-19 have enabled us to deliver strong operational performance during this time, the underlying challenges in this business remain, particularly driver numbers which remain below the levels required to operate a full service, and the pandemic has inevitably delayed our driver training programmes.
While we are now operating with expected levels of rolling stock, progress in recovering losses associated with the late delivery of trains from the rolling stock provider has been slower than anticipated. As a result, we now expect a more material loss from the German business for the full year.
In light of ongoing challenges, a comprehensive review of our German rail business is underway including an assessment of longer-term financial expectations.
As specified by our transport authority client, we are currently operating around 80% of contracted services in our Norwegian rail business. This has increased from around 50% in April, as restrictions begin to be lifted in
Rail division financial expectations for 2019/20
For the full year ending
Wherever possible we have sought to minimise costs and cash outflows. Actions taken include suspension of the interim dividend, a 20% reduction in Board members' salaries and fees, utilisation of government job retention schemes, a freeze on all discretionary expenditure and restrictions on capital spend (see below).
While it has been necessary to reduce supplier services in line with our own service reductions, we have adopted a structured and fair process, in line with our Sustainable Supply
Where possible, we have frozen capital expenditure and, we have chosen to lease rather than buy necessary vehicles to reduce cash outflows where appropriate. We had previously guided to full year capital expenditure of
In line with our policy, we were fully hedged for FY20 before the COVID-19 outbreak. Based on expected volumes, which are regularly reviewed in light of changing demand and mileage, no further hedging is expected to be required for FY21. We will continue to review our monthly hedging programme in light of current low oil prices and expected requirements.
Liquidity and bank covenant
The Group has no debt maturities ahead of 2024. We have a strong balance sheet and good liquidity with adjusted net debt expected to be in the region of
We maintain a positive dialogue with our finance providers and keep our current facilities under review. The
Through a combination of available headroom on our committed facilities, management action, and revenue protection through contractual arrangements and government support, the Group is well placed to withstand the challenges this crisis presents.
Following recent reviews, Moody's and S&P have reaffirmed their credit ratings at Baa3 and BBB-, respectively. Both consider the outlook to be stable.
Our bank covenant, in respect of our revolving credit facility, is 3.5 times adjusted net debt to EBITDA (on a pre-IFRS 16 basis). While this ratio is expected to increase from the 1.53 times we reported for the half year ended
The half year results reported on
Our priority is safeguarding the health and wellbeing of our colleagues around the world. We are following guidelines from local and national governments, the
Colleagues have been provided with additional protective equipment in line with government guidelines and measures have been taken to minimise or remove cash handling. We have implemented enhanced cleaning of vehicles and other workplaces, and have introduced social distancing measures, including the provision of information to help our colleagues and customers adhere to government guidelines.
In all of our geographies material uncertainties remain around the easing of restrictions and the implications this will have on public transport usage. The quantum and duration of government support measures, particularly in our regional bus business, also remains uncertain. Accordingly, we are not in a position to provide guidance in relation to the 2020/21 financial year or beyond at this stage.
A conference call for analysts and investors will be held at
For further information, please contact:
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07766 305 594
07896 968 971
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Go-Ahead is one of the leading
Go-Ahead is one of the
The rail division operates two franchises in the
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Quick facts: Go Ahead Group
Market Cap: £285.19 m
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