* Regional bus ops face higher driver and engineering cost
* Co withdraws X90 Oxford to London coach service
* Rail could be taken into public ownership by Labour party
* Shares fall more than 6%
(Adds details on performance, shares, analyst comment)
By Noor Zainab Hussain
Nov 28 (Reuters) - Rail and bus operator Go-Ahead
slightly lowered its expectations for its UK regional bus
division's annual financial performance, as it takes longer to
bring a new Manchester bus company up to speed and battles
costs.
The company said on Thursday it had seen driver and
engineering costs rise in its regional bus unit and was working
to lower expenses and address underperforming areas of the
business.
Go-Ahead, which operates bus services in the UK, Ireland and
Singapore, said this would result in one-off restructuring costs
in the first half of the year, sending its shares more than 6%
lower to 2,136 pence and pushing rival Stagecoach's
share price into the red too.
Analysts at Jefferies said Go-Ahead was still settling wage
deals broadly in-line with inflation, but seeing more overtime
and staff turnover.
Engineering costs had stemmed from the delayed delivery of
new buses and parts, the analysts said, adding they expect
financial year 2020 operating profit estimates to move down by
1-3%. Jefferies reiterated its "hold" rating of the stock.
Go-Ahead, with a fleet of nearly 6,000 buses and about 23%
share of London's busy bus market, said it had withdrawn its X90
Oxford to London coach service as the competitive environment
prevented it from making enough money.
Like-for-like revenue from the start of the financial year
rose about 2.5% in the regional bus unit, while London and
international buses clocked growth of about 8%.
Go-Ahead said it will take longer than previously expected
to "sustainably" bring the Manchester bus business "up to the
Go-Ahead standard", adding this would have a slight short-term
impact on the division's financial performance in the current
year.
The company said its overall expectations for its rail
business in the current financial year remain unchanged, with
good performance in its British operations offsetting the impact
of a painful start to its first two contracts in Germany.
Its rail business has suffered setbacks like the loss of the
London Midland franchise, while victory for the opposition
Labour Party in Britain's Dec. 12 election could see the rail
network returned to public ownership.
Infrastructure operator Network Rail, which controls
stations as well as tracks, tunnels and level crossings, is
already in the public sector.
However, companies like Go-Ahead operate services under
limited-term contracts and under Labour's plans, the government
would wait for these contracts to expire and then take
operations back into public hands.
(Reporting by Noor Zainab Hussain and Yadarisa Shabong in
Bengaluru; editing by Uttaresh.V and Toby Chopra)
