P2P issues earnings warning after Gold Coast Cabs cuts services to its taxis on Gold Coast

THE CEO and chairman of listed fleet operator P2P have resigned following a worsening outlook for the company in the wake of Gold Coast Cabs cutting back on services it offers the Melbourne-based company.

Gold Coast Cabs has cut back on services it offers listed company P2P.

THE CEO and chairman of listed fleet operator P2P have resigned following a worsening outlook for the company in the wake of Gold Coast Cabs cutting back on services it offers the Melbourne-based company.

P2P Transport Ltd, which operates 157 taxis on the Gold Coast under the Gold Coast Cabs banner, said today in a third quarter trading update that Gold Coast Cabs has been restricting dispatch services to its taxis.

It comes as Gold Coast Cabs shareholders consider a proposal next month from A2B, formerly called Cabcharge, to acquire its booking and dispatch service for $2.5 million.

P2P said in a statement to the ASX that it is revising its FY19 forecast downwards because of “competitive issues” in the Gold Coast and Melbourne markets, as well as lower forecasts for its digital signboards and fuel tax credits.

Gold Coast Cabs drivers Larriece Evans and Mandeep Arora at the company’s Helensvale depot.

“In addition to traditional seasonal factors influencing the taxi industry during this quarter, the company’s revenues were significantly impacted by short-term competitive issues expected by P2P’s Melbourne and Gold Coast operations,” P2P said.

It said its new FY19 guidance was for pretax earnings of between $7.8 million and $8.2 million, down from $16.1 million to $16.8 million issued in December last year.

Net operating cashflow was a loss of $1.1 million for the quarter.

It also said CEO Tom Vargas and chairman Matthew Reynolds have resigned in the wake of the poor result.

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Interim CEO Greg Webb said he is “disappointed” by the trading update and revised guidance.

“Since its IPO (initial public listing in December, 2017), the company has established a significant fleet management platform with considerable potential — however, this potential is yet to be realised,” he said.

“As interim CEO, I will be focused on improving operational execution, fully integrating the existing business units and delivering related synergies, and achieving other cost savings in the near term to ensure the company is delivering an appropriate commercial return on investment from the substantial revenue base that now exists.”

Former Gold Coast Cabs CEO Martin O'Riordan pictured at the company’s base in Helensvale.

P2P said the utilisation for its taxis fell from 80.7 per cent in the second quarter to 73.9 per cent, in what is traditionally a quiet time of year in January and February.

However, despite the hit to earnings in the Gold Coast and Melbourne markets, revenue for the three months to March 31 rose 65.9 per cent to $16.1 million. The company said it is on track to deliver revenue between $77 million to $80 million for FY19.

The company said it has been able to mitigate losses in the Gold Coast market by transferring taxis to its Black & White Cabs business and taking bookings through a secondary dispatch network.

P2P has a fleet of 1087 vehicles across Australia, with Sydney its biggest market. The number of vehicles it provides network services to has increased to 2040.

Its brands, as well as Black & White Cabs, include Zevra, Adflow and Australia Wide Chauffeur Cars.

Shares in intraday trading were steady at 37¢.