A new business strategy has been launched by the Go-Ahead Group that hints at further expansion for the company in the UK bus market
The Go-Ahead Group has unveiled a new strategy which it says is aimed at delivering profitable growth and a sustainable future for the business in a dynamic market for public transport. Named ‘The Next Billion Journeys,’ the strategy follows a business review led by Group Chief Executive Christian Schreyer.
The company said it will reinstate its pre-covid dividend policy of paying a dividend to shareholders equivalent to between 50% and 75% of underlying earnings per share from the 2022 financial year. In line with this, the Board said it intends to recommend a dividend of not less than 50p for the year ending 2 July 2022.
’The Next Billion Journeys’
Three strategic priorities have been identified by the group, aimed at delivering profitable and sustainable growth in existing and new markets:
- Performance improvement. The group intends to enhance the basics by focusing on operational excellence, particularly through performance management, standardisation of processes and digitalisation. It is also looking to turn around underperforming operating companies and reduce the zero-emission break-even point to accelerate fleet decarbonisation.
- Organic and external growth. The Group will seek ways to accelerate passenger recovery and increase modal shift, whilst looking to grow in existing geographies, notably the UK regional bus market, maintain its London market share and promote an attractive model for Passenger Service Contracts in the UK rail market. It will seek to replicate the business model used by its London & International Bus division in selected international markets, exploring partnership and acquisition opportunities where appropriate.
- Progress new opportunities by leveraging existing capabilities and resources to explore new urban mass transit modes such as metro, light rail and bus rapid transit, accelerate its presence in the business-to-business segment, such as airport transport and rail replacement services, and explore new services within the mobility value chain with existing capabilities and resources, such as zero-emission services, Mobility as a Service (Maas) operation and property utilisation.
The group has set the financial targets that include an increase of around 30% in annual revenue to around £4 billion in the medium-term and an increase in annual operating profit to at least £150 million in the same time frame. It has also reaffirmed its commitment to reduce carbon emissions by 75% by 2035.
Christian Schreyer, Group Chief Executive, said: “This is an exciting moment for Go-Ahead. My review of the business has found fundamental strengths in the business, and has identified areas where we can deliver improvements and sustainable growth. We plan to strengthen, digitalise and decarbonise our operations, delivering greater profitability and stronger returns to investors alongside improvements for our customers and communities.
“Transport is at a tipping point as we recover from the Covid-19 pandemic. The importance of mass transport is growing, reflecting trends in climate change, digitalisation, urbanisation and demographics around the world and there are increasing opportunities for private operators to bring their expertise to public transport markets. Go-Ahead’s core strength is in commuter transport and we see opportunities to grow by encouraging people to leave their cars at home, by winning new contracts and through carefully selected acquisitions.
“We’ve set ambitious, but deliverable, targets. It has been a challenging two years for public transport but there is an exciting future ahead for Go-Ahead.”
To achieve its three objectives, Go-Ahead focus on strengthening governance and transparency; improving its digital and data capabilities; consolidating its zero-emission capabilities; rebuilding post-covid confidence amongst passengers and clients, and; enhancing people engagement and collaboration.
A new operating model will be introduced for all Go-Ahead’s operating companies which it says will deliver more transparency and increase the focus on financial performance. The group intends to ‘drill down’ on common cost drivers across bus and rail companies, including maintenance, energy, and overheads, to identify and address inefficiencies.
Another key priority for the business as it moves forward will be to reduce the break-even point for zero-emission vehicles to allow it to accelerate the decarbonisation of its fleets. As part of this, a new Centre for Excellence will be established at Go-Ahead London to leverage group capabilities, improve the zero-emission business case and support fleet decarbonisation across the Group.
Going further, Go-Ahead says it will implement initiatives to accelerate passenger recovery including leveraging data to analyse new travel patterns and to tailor routes, schedules and ticketing to match needs, plus marketing initiatives to rebuild confidence in public transport, whilst working closely with clients and local authorities on efforts to stimulate further modal shift to public transport. The Group said it has also identified opportunities where it believes it can grow its UK regional bus business, particularly in the north of England.
Internationally, Go-Ahead will seek to replicate existing successes in franchised and contracted bus services such as in Dublin and Singapore. It has identified France, Australia and Sweden as priority development countries, and will also consider moving to selected attractive emerging countries. In both cases, the Group plans to work with local partners on the ground when entering new markets.
The Group’s Executive Committee will be reshaped, with Christian Schreyer as Group Chief Executive; Sarah Mussenden as Chief Financial Officer; Louis Rambaud in the role of Strategy and Transformation Director; Scott Maynard as HR Director; John Trayner as Managing Director for London and International Bus; and Martin Dean as Managing Director of UK Regional Bus.
