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09 June 2009

Go-Ahead welcomes today’s announcement by the Department for Transport ("DfT") to retain Govia, Go-Ahead's 65% subsidiary, as the holder of the South Central rail franchise.

The new franchise, which will retain the name “Southern”, will start on 20 September 2009 and will run for five years ten months until 25 July 2015. The final year is subject to performance and there is a two year extension available at the discretion of the DfT.

Commenting on the DfT's announcement, Keith Ludeman, Group Chief Executive of Go-Ahead and Chairman of Govia said:

“I am delighted that the DfT has retained Govia to operate one of the UK’s most important and operationally complex rail franchises.

“This is a commercially robust rail network which we know well and have operated since 2001. During this period, Govia has overseen a £1 billion investment programme in rolling stock, depots, stations and staff. This has established an excellent platform from which we can now launch the new franchise, further improve service quality and expand and grow the passenger market.

“Chris Burchell will continue to be the Managing Director of Southern, and will lead the team into and during the new franchise. Chris and his team will work closely with the DfT, Transport for London and other stakeholders to oversee a period of significant change on the network whilst implementing our innovative and value-for-money franchise plans designed to grow capacity and improve passenger perceptions of service and security.

“The new franchise will deliver a comprehensive package of train, station and security investment, improved operational performance and innovative retailing for the benefit of a wide range of stakeholders.”

Franchise highlights:

Govia’s bid for the franchise features the following benefits for passengers:

  • Additional capacity: an additional 10% carrying capacity across the network by December 2013, including the extension of eight car trains to ten cars on key Metro routes and a significant increase in capacity on peak time Metro arrivals and departures at London Victoria and London Bridge, and peak time services into Brighton.

  • Further investment in trains and stations: a £76m investment programme including £23m of interior and reliability improvements to trains and £28m to improve facilities at stations, targeting those areas of greatest benefit to passengers. In addition, staffing at almost all Greater London stations to be extended to provide cover from the first to the last service.

  • Focus on punctuality: further focus on maintaining and improving the current record levels of punctuality performance through a period of significant change arising from the Thameslink programme and other major initiatives.

  • Improved passenger access and integration at stations, making it easier to use the Southern network: over 1000 more car parking and 1500 secure cycle parking spaces to be installed; £3m to be invested to provide real-time information at every station, new help points to be installed at 40 stations and information about connecting bus services provided at 38 stations. Thirty station travel plans to be developed and their recommendations implemented.

  • Improved security: 100% of trains and stations to have CCTV and passenger information systems by 2011. A new 38-strong Safer Travel Team to be in place by Spring 2010, to include British Transport Police and Rail Enforcement Officers.

  • Easier ticket buying: a £3m investment in 120 new ticket machines by early 2012 plus the introduction of a new Smartmedia system by early 2012. Similar to Oyster, Smartmedia will make ticket buying easier and enable automatic top-ups for season tickets at 26 stations outside London and 18 stations within London.

  • Enhanced revenue protection: new automatic ticket barriers at 22 stations, supplemented by additional stations funded by the DfT to increase the number of gated stations from 28 to 49. These improvements will be supported by a team of 100 Revenue Protection Officers and the Safer Travel Team (who will also have revenue protection responsibilities).

  • Improved overall passenger experience: introduction of a new Service Quality Management System to monitor, measure and improve every aspect of a passenger’s journey with Southern, supported by comprehensive customer service training for all front line staff.

Financial profile:

The financial profile of our bid combines the impact of the wider economic outlook with the benefits that flow from our franchise plan initiatives.

Economic outlook: We are assuming that economic conditions over the next two years remain difficult. Underlying full year passenger numbers (before pricing and initiatives) are expected to reduce in the year to June 2010 by around 2% (compared to the year to June 2009) and are not expected to return to levels above those for the year to June 2009 until the year to June 2012. Regulated fares are set to rise annually by RPI +1% in line with Government policy and we have assumed that unregulated fares increase, on average, by a similar amount per annum.

Revenue growth initiatives: Our initiatives aim to more than offset weak underlying economic conditions, resulting in overall revenue growth of around 4% pa (before inflation) over the next two years. A number of these initiatives have not been cost effective to implement in the current franchise given its short remaining life and 60% profit share mechanism. Around half of the growth is expected to be delivered by an expanded timetable and increased revenue protection measures. The balance is targeted through further improvements in punctuality, marketing, retailing and a significant number of other enhancements to customer service outlined above.

Investment: The initiatives will be supported by capital investment of £76m, of which approximately £50m will be funded by Govia. Most of the investment will be made in the early part of the new franchise, with Govia providing around £20m pa in each of the first two years.

Medium term growth: We have assumed a return to more normal economic conditions after the next two years, resulting in an average revenue growth over the 5 year 10 month period of around 6% (before inflation).

Revenue share and support arrangements: These are consistent with other recently awarded franchises. Revenue share applies from the start of the franchise, sharing 50% of incremental revenue above 102% of the bid with the DfT, and 80% above 106% of bid revenue. Revenue support applies from 21 September 2013, whereby the DfT provides 50% of any incremental shortfall in revenue below 98% of bid and 80% support for any shortfall below 94% of bid revenue.

Cost base: Our cost base in the new franchise is significantly reduced by a change in the network access regime across the industry from 1 April 2009. This reduces our access charges by almost £80m per annum at the outset of the franchise, with a corresponding reduction in franchise subsidy / premium and hence no net impact on profit. With the exception of this change, the balance of our costs remain reasonably consistent over the life of the franchise, with the additional costs of new services and initiatives broadly offset by efficiency improvements.

Operating profit: At this stage, we would expect the first nine months of the new franchise (from 20 September 2009 to 30 June 2010) to contribute approximately £10m of operating profit to Govia. Target operating profit margins are initially relatively low, increasing to average 5% over the life of the franchise.

Franchise premium: To date, the current franchise has received a subsidy from the DfT. This will change to a premium payment to the DfT in the first year of the new franchise because of changes to the network access regime. These changes have a net present value of around £375m over five years, ten months. After the first year, increases in the nominal value of annual premium payments to 30 June average £40m pa, resulting in a total net present value of premium over five years, ten months of £534m to the DfT.

Other financial items: Bonding provided by Govia will consist of around £30m for performance bonds and £30m for season ticket bonds at the start of the franchise. At the end of the current franchise, the DfT is due to reimburse Southern for the purchase of around £50m of rolling stock from restricted cash. Otherwise, the net cashflow impact between the end of the current franchise and the start of the new franchise is not expected to be material.


For further information, please contact:

The Go-Ahead Group
Keith Ludeman, Group Chief Executive 020 7821 3920
Nick Swift, Group Finance Director 020 7821 3922
Jim Boyd, Group Corporate Affairs Director 020 7821 3927
Citigate Dewe Rogerson Limited 020 7638 9571
Michael Berkeley
Chris Barrie
Angharad Couch

Keith Ludeman, Group Chief Executive and Nick Swift, Group Finance Director will be hosting a presentation for analysts at 9.00am today (9 June 2009) at Citigate Dewe Rogerson, 3 London Wall Buildings, London Wall, London EC2M 5SY, Tel: 44 (0)-207-638-9571

A dial in facility for analysts to listen to the live presentation is available:

Dial-in details:
UK Free - 0808 109 0700
International Access Number - +44 203 0032 666
Password: 2210211

The presentation slides will be added to Go-Ahead’s website ( at around 8:00am today.

Notes to Editors

1. Go-Ahead is one of the UK's leading providers of passenger transport services operating in the bus, rail and aviation services sectors. Employing over 27,500 people across the country, around 920 million passenger journeys are undertaken on our services each year. In addition to the travelling public, customers include the DfT, Transport for London, local authorities, British Airports Authority and major airlines.

2. Govia is the Group's rail division, a joint venture between Go-Ahead (65%) and Keolis SA (35%). Govia is the UK’s busiest rail operator responsible for nearly 30% of all UK passenger rail journeys through its three rail franchises, Southern, Southeastern and London Midland.

3 Keolis is the leading operator of public transport in France. Each year more than 1.8 billion passengers are carried by the company’s 40,000 employees, generating revenue of Euros 3.2 billion. Keolis is also present in six other European countries and in Canada.

4.The Southern franchise covers south London and parts of Kent, East and West Sussex, Surrey and Hampshire including key business hubs such as Croydon, Crawley, Gatwick and Brighton. It also includes fast services between London Victoria and Gatwick Airport, the majority of services on the Brighton Main Line, services along the South Coast and a significant number of high frequency services in South London.

5. Franchise Highlights

On-board passenger offer

  • Real time passenger information systems on all the fleet by 2010
  • CCTV coverage on all carriages by June 2011
  • Retention of the Gatwick Express non-stop services between London Victoria and Gatwick Airport
  • Enhanced Brighton Express operated by additional refurbished Class 442 units delivering an inter-city travelling experience
  • Offers focused on meeting the needs of specific markets

Fleet improvement

  • Reliability modifications to all fleet types by 2010
  • Interior refreshment of the 455 fleet by 2012 and of the 377 Metro fleet by 2011, enabling maximum capacity benefit from the move to ten car metro operations during the franchise

Station enhancements including:

  • CCTV at all stations with 24 hour live monitoring by April 2011
  • New ticket gates at 22 stations
  • Additional car and cycle parking spaces
  • 100 extra car park ticket machines and real time train departure information at ten car parks
  • Deep clean and minor fault repairs at all stations by 2011
  • Improvements to lighting
  • Additional improvements to 34 stations including Brighton, Haywards Heath, Hove, Lewes, Redhill, Three Bridges and Worthing. Work will include refurbishment of waiting rooms and toilets and repainting
  • Station access improvements linked to Station Travel Plans

Fares and ticketing

  • Introduction of an ITSO-certified Smartcard ticketing system across the network by January 2012
  • 120 new ticket vending machines
  • A customer-orientated website making it easy to buy tickets on-line
  • Introduction of Oyster Pay As You Go
  • Multi-modal Pay As You Go ITSO Smartcard for Crawley/Gatwick and Brighton, working in partnership with Metrobus and Brighton and Hove Buses respectively

Passenger information

  • New information zones at stations to assist passengers during their journey
  • Customer information systems on all stations
  • “Fastest train” boards for all destinations at nine stations
  • Help points at 40 stations where none currently exist
  • Real time multi-modal rail/bus travel information at 35 stations including Crawley, Falmer, Gatwick Airport, Haywards Heath, Shoreham-by-Sea and Worthing
  • Improved rail replacement bus service information including signage at stations and on customer information systems
  • A 1000-member virtual passenger panel providing a channel for feedback and consultation
  • A new “Station Partnership” scheme delivered in partnership with the Sussex Community Rail Partnership
  • A new Passenger Charter and delay/repay scheme
  • Train departure information in 10 station car parks


  • Further improvements to performance through fleet enhancements
  • A new customer focused service recovery team dealing with passenger information during disruption


  • A new Safer Travel Team comprising 38 staff including 32 Rail Enforcement Officers
  • Retention of Park Mark accreditation at 24 car parks and new accreditation at a further 17 car parks
  • Secure Station Status at stations which together account for 95% of total passenger numbers


  • Regenerative braking on all 377s by 2010
  • 25 per cent reduction in electricity usage at stations and depots by September 2013
  • A 50 per cent increase in paper waste recycling
  • New environmental targets to reduce Southern’s impact on the environment
  • Energy efficiency driver training using upgraded driving simulators

Passenger-focused staff

  • Achievement of Investors in People by 2011
  • Personal Digital Assistants or Blackberrys for passenger facing staff enabling them to provide information to passengers quickly and accurately
  • A new Service Excellence customer service training programme to re-train all 2800 frontline staff

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