Shares in transport operator Go-Ahead (GOG) plunged 10% to £11.06 on Friday as the impact on earnings from the coronavirus lockdown starts to become clear.
The firm issued a profit warning, with the impact from coronavirus on travel demand meaning operating profit for the year ending 27 June 2020 is now expected to be between £63m-75m, a sharp drop from the £121m profit it made last year.
In the UK, Go-Ahead’s main market, the government is providing financial support to companies who operate public transport so they can keep services running despite lower use during lockdown.
But even with that help, profits are set to drop compared to last year, while a ‘challenging’ rail contract in Germany is also set to drag on profit, hit by reliability problems and driver shortages.
Despite the profit hit, Go-Ahead insists it has ‘strong fundamentals’ being cash generative, and expects to have around £200m in cash and unused facilities at its financial year end.
The Bank of England has also confirmed its eligibility for up to £300m in additional financing through its COVID Corporate Financing Facility, while the firm’s adjusted net debt to EBITDA ratio is expected to remain within target range at the year end.
Go-Ahead declined to give guidance for its 2021 financial year, citing ‘material uncertainties’ around the easing of lockdowns which currently remain in all the countries it operates in, while it added that the amount and duration of continuing government support is also unclear.
Chief executive David Brown said, ‘While none of us know what the coming months will bring, I have no doubt that public transport will continue to play a critical role in society, supporting our economies and tackling climate change long in to the future.
‘Go-Ahead has a strong track record of delivery, and with a high proportion of secured revenues we are well positioned to protect our business for the long term.’