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Highlights
- Transport company, Go-Ahead Group’s shares fell nearly 24 per cent after it admitted to serious errors in its running of the South-eastern franchise.
- The group expects its rail division’s adjusted operating profit to be better than earlier expectations, whilst its audit is currently ongoing.
Passenger transport company, The Go-Ahead Group PLC’s (LON:GOG) shares plunged by nearly 24 per cent after the group updated on its discussions with the Department for Transport (DfT) about the running of the London & South Eastern Railway Ltd (LSER).
Later, the group also said that it would delay reporting its FY 2021 results.
Updated discussions with DfT about LSER
An independent examination revealed that critical errors were made by LSER in relation to its arrangement with the Department for Transport, spanning over many years.
Go-Ahead accepted its mistake that LSER had been in breach of the franchise agreements’ contractual obligations of good faith by failing to notify the DfT of some overpayments and other aspects. The group apologised to DfT for the same.
The group anticipates it may have to pay a fine, however, Go Ahead said the total amount to be paid is unclear at the moment.
Go Ahead believes that the group has in place good corporate governance arrangements. However, it intends to look for ways to improve in certain areas going forward. It confirmed to provide further details regarding this in its FY 2021 results.
The operator of last resort had taken over passenger services on the South-eastern franchise as of 28 September, after it had failed to declare over £25 million worth of taxpayer money.
The South-eastern franchise was previously owned by a joint venture (JV), Govia, since 2006. Go Ahead held a 65 per cent stake in the Govia JV, while Keolis held a 35 per cent stake in it.
Delayed FY 2021 results
The group and its audit firm, Deloitte, said that more time is required to consider all of the implications of the independent review on Go Ahead’s FY 2021 results and that an audit is not possible by the FCA’s deadline of 3 January 2022.
Go Ahead expects that its results will be reported before end of January next year and anticipate its adjusted operating profit for the rail division to be better than earlier expectations whilst the audit is ongoing. This improved expectation is partly due to the treatment of certain non-recurring rail items.
The Go-Ahead Group PLC (LON:GOG) share price performance
Go-Ahead Group’s shares were down sharply by 23.62 per cent at GBX 538.50 on 9 December at 09:12 AM BST. The FTSE All-Share index, which it is a part of, stood at 4,174.45, down by 0.08 per cent.
Image source: EODHD/Others
Meanwhile, the travel sectoral index was at 7,408.42, down by 1.62 per cent. The company has a market cap of £304.40 million as of Thursday.
