London’s Southern Rail Turmoil Weighs on Go-Ahead Earnings

  • Franchise operator says strike will clip six-month profit
  • 48-hour walkout this week affected 300,000 people per day

A Southern Rail sign alerting strike action at Victoria station in London on Dec. 13.

Photographer: Ben Stansall/AFP via Getty Images

Train-driver strikes that caused travel chaos for hundreds of thousands of Londoners this week will weigh on profit at Go-Ahead Group Plc, the operator of the stricken Southern rail network said.

The cost of walkouts that left the normally packed Victoria and London Bridge terminals largely deserted while snarling roads and forcing other stations to close amid dangerous levels of overcrowding means rail earnings for the year through June will fall below anticipated levels, Go-Ahead said Thursday.

Commuter towns and parts of England’s south coast were effectively cut off from the rail network for 48 hours during the strike called by the Associated Society of Locomotive Engineers and Firemen, which ended Wednesday. The action -- branded “appalling” by Prime Minister Theresa May -- was just the latest to afflict Southern, with the Rail, Maritime and Transport union, which represents guards, staging walkouts since April in a dispute over plans to adopt driver-only operation and replace ticket-office staff with “station hosts.”

Go-Ahead, which runs the Govia Thameslink Railway or GTR rail franchise of which Southern is a part, said the industrial dispute has left it facing “higher than expected costs.” Talks with the U.K. government’s transport department on contractual claims relating to the RMT action are continuing and further submissions will be made regarding the Aslef walkout, it said in a statement.

“The GTR team continues to work towards a resolution to these issues and provide the best possible service to customers under the circumstances,” Go-Ahead said. “In doing so, we expect to incur additional costs in this financial year. Risks to the performance of GTR, as previously disclosed, remain.” Passenger revenue at the franchise will probably decline 4 percent in the first half ending Dec. 31, the company added.

Market Reaction

Shares of Newcastle upon Tyne-based Go-Ahead, which controls GTR via its 65 percent stake in the Govia alliance with France’s state-owned Keolis, fell as much as 1.9 percent before recovering to trade up 0.6 percent as of 10:51 a.m. in London. They’ve declined 16 percent this year.

Go-Ahead suffered its sharpest drop in almost 15 years on June 14, falling 19 percent after slashing its timetable to cope with the strikes and mass absenteeism and saying the cost of measures to ease overcrowding at London Bridge would halve earnings over the seven-year span of the GTR franchise. Police had to hold people back from packed platforms at the station last year as a radical remodeling linked to construction of the Shard skyscraper prevented the operation of the planned 24 trains an hour.

Jefferies analyst Joe Spooner said in a note Thursday that the hit from Southern so far will probably wipe 3 million pounds ($3.8 million) from profit in the current fiscal year, reflecting efforts to “shore up the operation as much as possible,” while adding that the talks on Go-Ahead’s contractual obligations in light of the strike provide some assurance. Franchise-bid expenses will have a similar earnings impact but could lead to future contract successes, he said.

Aslef has begun talks with the conciliation service Acas in an attempt to resolve the dispute, though it currently plans to stage a further walkout on Friday with more due in January.

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