North East transport giant the Go-Ahead Group has admitted to “serious errors” and failures in the way it ran the Southeastern rail franchise before it was taken over by the Government.
The Department for Transport (DfT) stripped the company of the route in October, after it failed to declare more than £25m of taxpayer funding.
Newcastle based Go-Ahead said it expects to pay a fine, although as there is no specific precedent or relevant guidance, the full amount is unclear.
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In a stock market announcement, the group said: “Go-Ahead has been focused on open collaborative and constructive engagement with the DfT in order to reach a full and satisfactory settlement with the DfT. An independent committee comprising the Chairs of LSER’s shareholders (Go-Ahead and Keolis 海角视频) commissioned an independent review, led by external legal and accounting advisers, into LSER’s performance of its contractual obligations under the Southeastern franchise agreements. The findings of this review have now been shared with the DfT.
“Notwithstanding the complexity of the franchise agreements relating to LSER, the review has found that serious errors were made by LSER with respect to its engagement with the DfT over several years.
"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 behaviours identified by the independent committee which contributed to the management of LSER’s contract with the DfT do not reflect the values and standards of conduct that the Group expects of its colleagues.”
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Go-Ahead said it believes it has a good corporate governance structure in place but that it will look at ways to improve it.
The company added that, as a result of the investigation, it will be delaying publication of its results until January 3 at the earliest.
It said it is considering with Deloitte the inclusion of a provision in the FY21 financial statements.
Within the update the group said that, whilst the audit is ongoing, the board’s current expectations are that adjusted operating profit for the rail division will now be ahead of previous expectations, in part reflecting the treatment of certain non-recurring items in rail.
Expectations for the regional bus and London and International bus divisions are unchanged. Government funding arrangements in relation to its Norway rail business for the remainder of the current financial year have also not yet been agreed.
It added: “Whilst discussions are ongoing regarding the continuation of government support of rail services, unless a satisfactory agreement can be reached, the Board expects that a material provision would be required in the FY21 results for potential losses in our rail contract in Norway.”
The Southeastern franchise had been owned by Govia - a joint venture between Go-Ahead Group (65%) and Keolis (35%) - since 2006.
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Southeastern’s network is one of the busiest in Britain, stretching across south-east England, including London, Kent, East Sussex and the High Speed 1 line.
Go-Ahead Group’s chief financial officer, Elodie Brian, resigned after the decision to take over the franchise was announced.
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