If any investor wants to know why the shares of this awful company keeps going down, all they need to do is to listen to today's news or read tomorrow's newspapers.
The line was closed between Gatwick Airport and Three Bridges, so anyone travelling from London to Brighton would have to get on a bus replacement service running between these two stations. Now, management at the Go-Ahead Group failed to comprehend that trains carry more passengers than buses, so not enough buses were booked. Worse, there was no queueing system in place, so there was absolute chaos. Most passengers were stuck at Gatwick for more than two hours in the heat. At least it wasn't raining!
Someone told Southern (the Go-Ahead subsidiary) that trains carry more passengers than buses, so they came up with a cunning plan, Baldrick style; they cancelled trains.
It is not as if Southern had not been told of the engineering works weeks in advance; the problem is that they have neither the staff nor the inclination to plan anything. If passengers are inconvenienced then so be it. What a way to run a company! Investors should get out while they can.
Labour did not do too well in the Council elections, so this share should have recovered some of yesterday's losses. It didn't and even went further down slightly to 1,728p. This is not good news for investors. A crisis is round the corner.
" (Sharecast News) - Go-Ahead was under the cosh on Thursday as Deutsche Bank downgraded the transport operator to 'hold' from 'buy', slashing the price target to 1,840p from 2,340p in the absence of future rail franchise wins.
The bank pointed out that the shares have performed "very well" since mid-February, first on the back of good first-half results and then on read-across from Apollo's bid for FirstGroup.
"We continue to believe Go-Ahead is robust with a net cash balance sheet. However in the absence of future rail franchise wins, and with Go-Ahead's bus businesses seeing the same muted trends as the rest of the industry (London - Transport for London budget issues; Regional - anaemic volumes), it is less clear that the shares are significantly undervalued," DB said.
It added that while Go-Ahead is regularly characterised as an income stock, on DB's forecasts free cash flow, pre-working capital, in FY18E, FY19E and FY20E will not quite cover the dividend payments to ParentCo shareholders of around £44m per annum.
"It's clear that Go-Ahead has the balance sheet capacity to do this. A potential future rail franchise win would also likely lead to upwards earnings revisions and working capital inflow (albeit cash forecasts could actually move down for the initial few years on higher capex and no upstreaming of dividends from the train operating company).
"When Go-Ahead shares were substantially cheaper this was more acceptable - now it is less so."
At 1020 BST, the shares were down 7.5% to 1,808p. "
From the HL website (ii not showing the full analysis, only the note of it)
I would have thought it was obvious why the big drop for this awful company this morning. A recent (all-party) parliamentary report said that rail privatisation was a shambles. The franchises run by this company were declared the worst, by offering an appalling service made worse by management's unwillingness to discuss anything with the Unions; employees are treated in utter contempt. The report said that rail customers were being ripped off, paying the highest prices in Europe while suffering the worst service in Europe.
In fairness to the company, management's irrational behaviour has been egged on by our Minister of Transport, one Chris Grayling, who hates unions. It was reported months ago that Theresa May wanted to sack him, but she is powerless as she has to do what Brexiteers tell her to do. They would not allow one of their own to be sacked.
However, the report on rail privatisation has shocked even the Tory government into understanding that something has to be done. What exactly will be done is dependent upon today's local elections. If Labour do well, then drastic action will be taken leading to a massive drop in revenue and profitability for rail franchises. If they don't then the action taken by government will be minimum. But it is a one way bet for this company, in the long term; their share price will either go down a little or collapse. The market is obviously nervous and that is the reason for today's big fall. If Labour is hammered at today's elections you can expect the price to recover today's losses; otherwise a further fall is inevitable.
If you want evidence of appalling management, just review the shambles at Redhill Station (Surrey) where relacement buses were used because of track maintenance. There was no queuing system and no organisation. Hundreds of people, including women with children found themselves in what resembled a football crowd before we had all-seater stadia. No doubt down to staff shortages; I am sure the Transport Minister will (as usual) blame the unions but nobody was on strike and nobody was working to rule. Much more of this ineptitude and surely Southern will lose its franchise.
"If you don't like the terms and conditions you have signed up to, then leave."
It is a fact that under the condition you describe, there would NEVER be any strikes. What happens, as in this case, the employee signs his contract. Then management say they are changing the contract without any discussion.
Another trick played by companies who run bus services is to harass employees who expect their contract to be honoured. What happens is that the company takes over a franchise, where the employees of the taken over company earns more than their own employees. Under TUPE the employee on the higher pay retains his pay scale. This means that bus drivers working for the same company and doing the same job are getting different pay; often the difference is 20% plus. A decent company would raise the rates to the higher rate, but they don't. Instead they harass the high paid employees in the hope that they will leave.
We know that Southern have not been negotiating with the Unions because they have been spurred on the Chris Grayling, the Minister of Transport, not to do so. The company doesn't mind because the Taxpayers have been picking up the penalties for poor performance. Unfortunately, management of this company do not understand that poor industrial relations is not cost effective.
So I am afraid you have got it a about f. The problem is always management changing the contract of employment, with a take it or leave it attitude. This is what makes employees angry; all Unions do is try to resolve issues.
As I said yesterday the strikes and guard issue are not just affecting this company - it is a nationwide issue.
I prefer to look at hard facts and the fundamentals here.
A 20% fall in 2 days on the back of RISING revenues and a 5% fall in profits - really?
These results apparently beat expectations. Strange reaction then!
It is total madness. This should have fallen no more than 2-3%
There is a great final dividend of 72p in only a few weeks.
This alone is now yielding close to 5% after this ridiculous MM/shorter orientated fall.
The P/E is 7.5
No one can deny this is very low.
Anything around 10 is considered a bargain.
Being ultra extreme if I discount the whole rail business/all the rail profits and concentrate solely on the bus side of the business the forward P/E is still only 12!
An overall dividend yield of 7% is also very high vs the 0.5-1% you get in a savings account. Furthermore this dividend is covered 2x by earnings so ample cover.
RSI only 28 so remains highly oversold.
A run back up to 1750-1800p in the short run as sense returns.
Have you any evidence that the company has not attempted to negotiate with the unions?
Apart from which it seems very clear to me - there is simply no justification for the strike. The practice that the company wants to introduce has been ruled safe by the rail safety regulator. As far as I am aware safety is the only reason for the strike is over safety concerns.
What do you think management should agree to?
I commute on Southeastern railways, also owned by Go-Ahead. This franchise has no issues with staff relations and the service for the past few years has been excellent (it was appalling under Connex).
Personally I don't believe in the right to strike. If you don't like the terms and conditions of the employment you have signed up to, then leave.
I sold out of my investment here some time ago at a small loss - sadly the unions are making life impossible and Go-Ahead are better off without this franchise.
Top, I assume from your response that you regard any negotiating to be 'caving in'. I have been in management for over 30 years and I can tell you that you get the highest productivity and best financial result when you treat employees like human beings and listen to them.
I have spent a great deal of my working life negotiating with a number of Unions; you will find that talking to them will actually help them to resolve issues for you. In the majority of cases, it is the Union members who are unhappy, not the Union itself. The Union doesn't want the aggravation anymore than you do, so will often ask for something little, so they can get their members off their backs. This obviously means you have to compromise a little, but, in financial terms, it is always worth it.
Companies like the Go-Ahead Group who believe, like you, that negotiating amounts to 'caving in' end up with a miserable, depressed and uncooperative workforce and low productivity. So when the company digs a hole for itself, the workforce refuse to bail it out. Then we get Tory politicians who complain that workers are merely honouring their contract; they are 'working to rule' they moan.
Frankly, I don't care what Tory politicians think (or Labour and LibDem politicians for that matter), but what I care about is trying to select profitable investments, After a great deal of research, I found the most profitable companies were the ones who looked after their employees and achieved excellent employee relationships. An example of good employee relations is 'Google.
' (parent is Alphabet).
If this company's directors would take a course in industrial relations and enacted what they learnt then the share price would increase by over 50%. Until they do, this company will never meet its full potential; the current share price tells you this,
Lintons - there is actually some support at 1532p also and then yes it is around 1485p.
These levels have not been reached since August 2013 so 4 YEAR LOWS.
It's a highly volatile share that drops rapidly but usually rises just as quickly.
Having read the entire annual report the only negative was with aspects of the rail franchise. Southern rail is old news now. All train services are having problems with strikes over the guard issue - it is not just isolated to this company. Being ultra negative and taking into account the loss of London Midland in H2 lets say rail profits halve next year. Yes I'm taking a very bearish shorters view but this still gives full year profit of £120M and EPS of 166p.
Even in this worst case scenario P/E is still only 9.3 with expansion into Germany, Singapore and Ireland to come.
I can not see any justification for such a large drop today
The balance sheet is also better with shareholder equity rising to £227M
Top, I am talking about getting rid of the guard on all trains, without being willing to negotiate. If Southern (part of the Go-Ahead group) had negotiated with the Unions everything could have been settled a year ago. For example, on the Southern route I take to London, we have had driver only trains for years; previous Union discussions here resolved everything.
The routes where a guard is needed is where long trains pass through stations with a distinct curve, meaning the driver cannot possibly see the whole train. If the company were willing to discuss this with the Unions (who after all are promoting passenger safety) then we would not have a problem. Personally, I would not invest in a company that puts politics in front of creating shareholder value.
Said I had an 'agenda' in advising more than once this share was a 'strong sell'. Well, I am afraid not. I could see what a disaster this company was (any company that would be happy to see commuters go through hell for eighteen months, just to make an irrelevant point, has to be badly managed). When companies are this poorly managed it is inevitable that at some time their share price would collapse. Well, it happened today, DOWN the best part of 10%.
On the 25 August 2016 when the price was 1,966p I suggested this company had woeful management and that investors should stay clear. I repeated this sell recommendation on 22 September 2016 when the price was 2,027p. I wrote then, "How Southern Railway (part of Go-Ahead Group) keep their franchises beggars belief". On 3 October 2016 I repeated the strong sell message, this time at 2,045p. Finally, on 26 January 2017 when the price was 2,192p I tried to warn investors yet again that this company was poorly managed and therefore was a strong sell.
On 15 March 2017 the 'Darkkight' posted that I had a personal vendetta against the company and two days later at 1,736p he recommended a 'strong buy'. Well the thing is that I don't have a vendetta against the company, but I recognise a poor management team when I see one. Their overall performance has been awful and it is just as bad when the unions are not taking strike action. You simply cannot run a company on the basis that the timetable can only operate if drivers agree to give up their rest days. You really cannot expect drivers to work unlimited overtime.
It seems that even the Department of Transport have realised what a poor performer this company really is and have taken away a franchise at the earliest opportunity. Given that Southern's appalling record contributed to the Conservatives losing their overall majority, I cannot see Grayling's support for the company being maintained. So we can expect the company to lose franchises when they expire and the share price to fall further. Of course the price may. Increase in the short term as investors forget how bad the company is and think they are getting a bargain, but long term this can only go down. Even at today's price of 1,715p,
"Is the market jaundiced towards this mid-cap rail and bus share LSE:GOG:Go-Ahead due to chronic strikes taking attention off underlying financial strength?Its chart shows a couple of big steps down in market price during the last year or so, from ..."
Southern Railway said it ran 95% of train services during the latest strike by workers in a long-running dispute over staffing and driver-only trains.
Members of the Rail, Maritime and Transport union walked out on Saturday for the 31st stoppage since the row flared a year ago.
Southern said most of its services were not affected by the action, adding that 55% of conductors and on board supervisors (OBS) reported for work, the highest number on a strike day.
A Southern spokesman said: Whether heading to the seaside on the hottest day of the year or shopping in London, were pleased we could get our passengers where they wanted to be in the main.
Now being able to run a near-normal service and with more and more conductors and OBS coming into work on strike days, the RMT needs to call a halt to their futile industrial action on Southern. They now need to resume talks with us, shake hands on a deal and lets move forward together.
Despite the disappointing results, its encouraging to see that most of the groups bus and rail businesses continue to perform well. With the share price collapsing to three-year lows, Go-Ahead has certainly been punished by the market, but I think this is far more than it deserves. A forward P/E ratio of eight is simply too cheap for this business, and more so given the generous dividend which yields a healthy 5.2%, and is covered more than twice by expected earnings.
You seem to have a personal vendetta against this company.
Post after post slagging it off.
Never bring emotion into investing.
The facts are the P/E is now a ludicrous 7.8, dividend approaching 6%, minimal debt & trading at levels not seen for 4+ years. This was £26.73 not so long ago. Also the rail strikes are not just limited to this company.
As predicted. Now well below the 2,000p mark. Their costs will shoot up when they have recruited enough drivers to run an acceptable service, The days of creaming it in by doing absolutely nothing and blaming the unions for everything seems to be over,
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