New chief executive Christian Schreyer reveals ambitious new strategy but brands existing German rail contract ‘a mistake’. Andrew Garnett reports

Schreyer: Focus on improving the next billion journeys

Recently installed Go-Ahead chief executive Christian Schreyer aims to move on from the debacle of the Southeastern rail franchise and problematic overseas contracts with an ambitious new strategy. He is seeking to increase annual group revenues to £4bn and profits of at least £150m in the medium term.

The new strategy – The Next Billion Journeys – will focus on three strategic objectives: improving performance of the underlying business; organic and external growth; and the progressing of new opportunities.

Schreyer has tasked Go-Ahead managers with achieving these objectives via five ‘enablers’:

  • Strengthening governance and transparency;.
  • Improving digital and data capabilities;
  • Consolidating zero emission capabilities;
  • Rebuilding post-Covid confidence with passengers and clients; and
  • Enhancing people engagement and collaboration.

The group will enhance the basics of its business by focusing on operational excellence. A new operating model will be introduced for all Go-Ahead’s operating companies to deliver more transparency and to increase the focus on financial performance. This will include “drilling down on common cost drivers” across the group.

Centres of excellence will be created to allow knowledge to be shared across the group. Schreyer pointed to Go-Ahead London’s leading role in introducing zero emission buses in the capital. He said the subsidiary would now take a lead in sharing its knowledge and experience group-wide in order to speed up the transition to zero emission.

Go-Ahead also plans to target further acquisitions within the regional UK bus market and in a call to investors and city analysts, Schreyer said opportunities had been identified in the East Midlands and North of England.

Go-Ahead will seek to replicate proven business models also – for example, in franchised and contracted bus services, as it has demonstrated successfully in Ireland and Singapore. Schreyer said the group would target further opportunities for bus expansion in France, Australia and Sweden. He claimed that these business-to-government contracts were worth around £80bn each year and they would be a key expansion target.

Meanwhile, Schreyer also sees potential for expansion in the provision of business-to-business transport, for example, air transport ground services and rail replacement buses. He claimed the group could leverage its existing depot infrastructure to target these markets.

But Schreyer, who worked for Deutsche Bahn for 15 years, admitted the group’s push into the German rail market had been “a mistake”. “It’s a market we didn’t know and a business model that’s very different,” he said, adding that the group would not repeat that mistake in the future. He added that the group had had a “very bad time” from its rail contract in Norway while closer to home there were performance issues at some of Go-Ahead’s smaller bus businesses that needed to be resolved.

While keen to bid for rail contracts in the UK, Schreyer was adament the group would not seek to enter the open access long-distance rail market. He also said rising inflation would provide an opportunity to grow modal share, revealing the group was fully hedged for its fuel requirements for this year and 50% next year. “Private car prices are not hedged on fuel like we are,” Schreyer added.

UK bus franchising a key Go-Ahead target

Go-Ahead chief executive Christian Schreyer said this week that the group is keen to target emerging opportunities offered by bus franchising. He said that while margins are tighter in a contracted environment, this was largely influenced by the risk profile.

Schreyer pointed to Singapore’s bus franchising model. He described it as a “capex-free model” as the Land Transport Authority there owns both the buses and depot infrastructure. Operators are paid a fee to manage and operate services and in such a market Schreyer claimed “you can do very well on low margins”.

Wales is a clear opportunity

Meanwhile, the Go-Ahead chief executive told Passenger Transport that the group would be keeping an eye on opportunities in the UK with Greater Manchester, Liverpool and “maybe a bit later in Leeds” key targets. “Wales is a clear opportunity,” he added.

Schreyer said he saw more opportunity than threat from the move to a franchised operating model. “It could be a small threat, but with the size of the markets that are opening it is a balance of risk and opportunity,” he said. “The opportunities are clearly stronger and bigger than the risks.”

This article appears in the latest issue of Passenger Transport.

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