- Go-Ahead Repays Stg 25 Million In UK Due To Financial Mistakes
- CFO Elodie Brian steps down immediately
- UK says more fines could be imposed on Go-Ahead
- Equities down 11%
LONDON, Sept.28 (Reuters) – Britain announced it would take control of the Go-Ahead Group (GOG.L) rail contract in the southeast after the transport company admitted financial errors and reimbursed 25 million pounds ($ 34 million) to the government, the latest failure of the UK franchise system.
Go-Ahead postponed its annual results due on Thursday, announced the immediate departure of its CFO, Elodie Brian, and apologized for his conduct on the London & South Eastern Railway (LSER) contract.
The Department of Transport (DfT) said the government operator of last resort would resume management of the service from October 17, criticizing the company for its conduct and threatening further action, including fines.
Shares of Go-Ahead, which also operates bus services and the Govia Thameslink railway service, fell 11% to 947 pence.
The scandal is the latest in a long line of problems with the British franchise model that was used to run the railways after privatization in the mid-1990s. This year it announced a system overhaul after multiple chess. Read more
The DfT said it was conducting further investigations into the LSER contract.
“There is clear, compelling and serious evidence that LSER has violated the trust that is absolutely fundamental to the success of our railways,” Transport Minister Grant Shapps said in a statement on Tuesday.
Go-Ahead said its financial results for the 12 months to July, including the expected provisions related to the franchise but excluding any other financial penalties, remained in line with its expectations. No date has been set for their release.
Liberum analyst Gerald Khoo said Go-Ahead’s bus operations accounted for the bulk of its value.
“However, there is exposure to one-off unquantified financial penalties (probably manageable) and a likely negative impact on the group’s ability to win future rail contracts, both in the UK and overseas,” a- he declared.
LSER connects London to the busy suburban areas of Kent and East Sussex in the South East of England and is managed by Govia, a joint venture majority owned by Go-Ahead alongside its France-based partner, Keolis. The pair continue to execute their other rail contract, Thameslink.
Public transport companies have been hit financially as fewer people traveled during the coronavirus shutdowns, and analysts recently argued for consolidation. Go-Ahead’s UK competitors, FirstGroup and Stagecoach, are in merger talks. Read more
Go-Ahead chairman Clare Hollingsworth said the group was working with the DfT towards a settlement. The company has appointed Gordon Boyd as interim chief financial officer. Current chief executive David Brown is due to retire in November and be replaced by Christian Schreyer.
($ 1 = 0.7311 pounds)
Reporting by Kate Holton; edited by Sarah Young, Robert Birsel
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