Go-Ahead Group slams into reverse

Go-Ahead Group, the rapidly expanding bus operator, slammed into reverse yesterday after warning that cut-throat competition in Oxford would hit profits this year. The shares slid 35p to 309p on news that efforts to win back market share would wipe out profits at the Oxford Bus Company, which contributed pounds 2.5m last year.

Analysts cut profit forecasts for the current year to June from over pounds 13m to around pounds 11m, only a little more than the pounds 10.3m notched up in the previous 12 months. The setback came as National Express - which owns West Midlands Travel, one of the biggest bus operators in the country - announced the first increase in passenger numbers for 10 years.

But Martin Ballinger, Go-Ahead's managing director, dismissed the Oxford problem as "not even a hiccup" yesterday, saying it was something they had been planning when they bought the municipally owned Oxford Bus Company in 1994.

Oxford was "very fertile ground for bus companies", he said, after 20 years in which the city authorities had favoured public transport over private. A rival operator, Thames Transit, set up in 1987 by Harry Blundred, had scooped up 40 per cent of the market. In September, Oxford Bus decided to fight back by cutting fares and increasing frequencies, he said.

As a result, passenger numbers had already risen by a fifth and they believed they had increased their share of a larger market to 65 per cent. Although costs had risen, turnover was only slightly down and the group as a whole remained on course to deliver margin increases of 1-1.5 percentage points a year.

"The only question is how long it is going to go on for," Mr Ballinger said. They would continue until they got "the right sort of market share". He denied suggestions of a personal battle between Mr Blundred and the Oxford Bus Company and denied any link with last month's announcement that finance director Trevor Shears was to retire early.

National Express said it was unlikely to suffer from similar levels of competition. West Midlands Travel was less exposed because of its low fares, high frequencies and extensive loyalty-card customer base.