Go-Ahead CEO Says U.K. Government Must End Rail-Tender Logjam

Go-Ahead Group Plc (GOG), Britain’s top rail company by passenger numbers, said the government should issue a franchising timetable and resume contract awards to clear a logjam caused by the discredited West Coast tender.

“In the next couple of months they need to set out the program for the franchising timetable, which franchises are coming up and when,” Chief Executive Officer David Brown said in a phone interview after reporting sluggish first-half profit.

Contracts that were close to being handed out before the state-back probe, including Thameslink, a route in southeast England for which Newcastle upon Tyne-based Go-Ahead was a shortlisted bidder, should go out to tender this year, he said.

Britain’s franchising system, under which companies have competed for routes since the rail network was privatized in the 1990s, was suspended after flaws were detected in the award of the West Coast line to FirstGroup Plc (FGP) ahead of the incumbent, Richard Branson’s Virgin Trains. A report into the system from Eurostar Group Ltd. Chairman Richard Brown, published on Jan. 10, recommended that the process resume with some modifications.

Go-Ahead’s net income for the six months ended Dec. 29 was little changed at 26.9 million pounds ($41 million), it said in a statement today, with operating profit flat at 51.2 million pounds and sales 8.1 percent higher at 1.3 billion pounds.

Brown is seeking higher returns from its bus unit as the franchising holdup clouds the outlook for the rail sector.

Operating income from buses should meet the 100 million- pound target set for fiscal year 2016 as the company replaces cash ticketing with pay-in-advance smart cards and keeps costs down, the CEO said. The division’s operating profit gained 5.4 percent in the first half to 37.1 million pounds.

The stock traded 0.9 percent lower as of 9:59 a.m.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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