Shares in FTSE 250 public transport operators FirstGroup (FGP) and Go-Ahead (GOG) gained ground after the government extended a bailout for local bus services.

The new funding round of £218.4 million for the industry under the COVID-19 Bus Service Support Grant Restart (CBSSG Restart) programme extends a deal previously announced at the end of May for the next eight weeks.

After that, weekly funding of up to £27.3 million will be available from the Department for Transport until such a time when funding is no longer required.

FirstGroup shares rose around 6% to 41.1p on the news, while Go-Ahead shares increased 2.6% to 607.5p. Shares in fellow operator Stagecoach (SGC) also jumped, rising 6.4% to 49.1p.

It comes as the Government also announced plan to publish a National Bus Strategy, setting out how it plans to support a ‘sustainable future’ for bus services across the country, and working on ways for the bus sector to operate independently and be commercially viable.

BAILOUT WELCOMED WITH PASSENGER NUMBERS STILL LOW

Go-Ahead CEO David Brown welcomed the funding extension as he warned passenger numbers across the firm’s network are still 50% below pre-coronavirus levels.

FirstGroup’s bus operations across England have increased operated mileage from 40% to almost 90% of pre-pandemic levels, with passenger volumes increasing from around 10% to 40% since the low point.

In a note on FirstGroup a few weeks ago, Canaccord Genuity analyst Gert Zonneveld warned that while government support will help cushion the blow, he expects revenue and margins in its UK bus division – which makes up around 11% of the group’s total revenue – to take a hit in its 2021 financial year before staging a ‘good recovery’ in subsequent years, depending on social distancing guidelines.

Though it may take ‘several years’ for the firm’s passenger numbers to return to pre-pandemic volumes, he added.

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Issue Date: 10 Aug 2020