The transport group Go-Ahead has postponed its financial results and is preparing to suspend trading in its shares as negotiations continue over a £25m breach of Southeastern’s railway franchise agreement.
Shares plunged by 25% on Thursday after the news. The bus and rail operator was stripped of the contract to operate the commuter network in September after the government uncovered discrepancies running over several years since 2014.
The transport secretary, Grant Shapps, said at the time that an investigation had found that since 2014 Southeastern had not declared more than £25m of historical taxpayer funding that should have been returned, and described this as a serious breach of the franchise agreement’s “good faith” obligation. He said the money had been recovered and further investigations were being conducted into historical contract issues related to the franchise.
Go-Ahead’s results, which have already been postponed once, were due to be released on 16 December. They will not be ready until the end of January as its auditor, Deloitte, works through the accounts.
The delay means that the group will miss the six-month deadline to file annual results and has to apply to suspend share trading under regulatory rules.
Investors have dumped the stock despite an update that suggested the financial results could be slightly ahead of previous guidance, because of smaller than expected costs relating to its remaining UK rail operations at Govia Thameslink Railway (GTR), which runs the Thameslink, Southern, Great Northern and Gatwick Express services.
Nevertheless, Go-Ahead will also be making provision for a large fine for the Southeastern breach of contract, as well as the repaid £25m of taxpayers’ money.
Go-Ahead said its review of the events led by the chairs of the group and of Keolis, its joint venture partner in rail, had been shared with the Department for Transport. The group said: “Notwithstanding the complexity of the franchise agreements relating to LSER [Southeastern], the review has found that serious errors were made by LSER with respect to its engagement with the DfT over several years.”
It added: “In particular, the group accepts that, by failing to notify the DfT of certain overpayments or monies due to the DfT, LSER breached contractual obligations of good faith contained in the franchise agreements. Accordingly, the group has apologised to the DfT.”
The chief financial officer of Go-ahead, who was CFO at Southeastern during the affected franchise period, resigned when the scandal broke. Go-Ahead said it could not comment on whether the matter had been referred to the Serious Fraud Office.
The issue was understood to relate to overpaid track access grants to pay for using the HS1 high-speed railway, which Southeastern did not declare and return until government accounting teams uncovered the “breach of good faith”.
Go-Ahead also told investors that it could face further £10m costs relating to its German rail operations.