Go-Ahead and Derwent London offer signals for confidence in a return to offices and commuting

Go-Ahead passengers wearing face coverings

Go-Ahead

3 December 2020

Signals for confidence in a return to offices and commuting emerged today.

Property developer Derwent London announced earlier this month that it was committing to a major £400 million new workspace development at 19-35 Baker Street with some 200,000 square of offices.

And on Thursday the company revealed its tenant, the established tech-focused finance start-up TransferWise, has signed up to a new five-year lease on Shoreditch's Tea Building, and is even expanding its space in the building by 54% - meaning the firm will occupy nearly 50,000 square feet of office space.

Derwent London said the new rent is "in line with the passing rent and ERV". It gave the tech firm a rental incentive equivalent to an 11-month rent-free period.

It came as rail operator Go-Ahead upped its full-year outlook after seeing passenger numbers recover well pre-lockdown.

Derwent London has committed to a major development in Baker Street

Derwent London

The company runs bus services for Transport for London - it has a 24% market share in the sector - and also part-owns Govia, the company behind Southeastern and Govia Thameslink Railway. Outside London it operates in other "high-density commuter markets", including Greater Manchester.

The company said in a trading update that capacity had reached nearly 60% of pre-pandemic levels ahead of the second lockdown in some regions.

Chief executive David Brown said that this performance signalled long-term demand for public transport will recover.

He said: “Prior to the second lockdown, we were pleased to see passenger journeys reaching nearly 60% of pre-crisis levels in some regions, showing people’s desire to travel once restrictions are eased.

"With enhanced vehicle cleaning, the provision of hand sanitiser and mandatory use of face coverings, passengers can travel confidently on our services that are safe and clean."

But the recovering numbers slumped back by around 15 percentage points over the second lockdown in November, and today the company warned that although its regional bus division is "expected to make a positive contribution in the year", the "ongoing uncertainty relating to the recovery of passenger demand prevents us from providing meaningful full-year financial guidance for the division at this stage".

Go-Ahead highlighted that 90% of its revenues are contract and not passenger-demand based, which has offered protection from the type of financial hit seen by TfL after commuter numbers plunged in the pandemic.

Go-Ahead said its operations are still generating cash, and said it expects to have around £200 million available in cash and facilities at the half-year end on January 2.

The company also offered potential cheer for investors, confirming it is working towards paying a dividend at an “appropriate level” in the 2021 calendar year.

Analyst Alexander Paterson at Peel Hunt said "trading for the five months to December 2 was better than expected". He said "London and International bus has traded robustly" and that "regional bus has outperformed our estimates".