Edinburgh City Council could lose annual £6m dividend from Lothian Buses for several years

The council insist the Tram project is not at risk due to the lack of a dividend from Lothian Buses

Lothian Buses' £6m annual dividend will not be paid to the council this year or next year.
Lothian Buses' £6m annual dividend will not be paid to the council this year or next year.

Cash-strapped Edinburgh City Council have admitted they will not be able to rely on a previously expected annual payment of £6 million from Lothian Buses, their annual accounts have revealed.

Due to the impact of Covid-19 on the council-owned bus company who have experienced plummeting passenger numbers and revenue, the council did not receive the annual dividend in the 2019/20 year and are planning for it to not be paid next year and potentially beyond.

In the unaudited annual accounts for the local authority, council officials state: “Having not received the budgeted £6m dividend from Lothian Buses in 2019/20, the Council expects this position to continue at least for 2020/21 and potentially further years thereafter.”

However, Lothian Buses said their results for 2019/20 were “in line with our forecasted expectations” and that the dividend was not paid to shareholders due to “unprecendented” anticipated financial pressure in the coming year.

Despite this, the company found almost £150,000 to pay in compensation their controversial former managing director Richard Hall who resigned in February, in addition to his salary of more than £170,000.

His payment of £323,091 is equal to five per cent of the cancelled annual dividend.

Liberal Democrat transport spokesman Cllr Kevin Lang said he was worried the city’s entire bus network could be at risk.

He said: “The days of Edinburgh Council using Lothian Buses as a cash cow are over, at least for the foreseeable future.

“The company is now facing one of the biggest challenges in its history. Even if profits are made, that money may need to be used to keep marginal bus routes going. Otherwise, I fear the whole citywide bus network could be at risk.”

The council added that the loss of the dividend would not impact the financial viability of the tram extension project due to it not being linked to the main business case.

The leader of the council, the SNP’s Adam McVey added: “We are making every effort to mitigate the impact of COVID-19 on the tram project.

“The project is largely funded through borrowing repaid by future tram revenues, so any impact to the Council’s budget now is limited. The £6m annual dividend is not part of the tram business case.”

Jim McFarlane, chair of Lothian buses, said it was “too early” for the bus company to accurately gauge the impact of the coronavirus pandemic.

He said: “Across 2019, Lothian continued to contribute significantly to both the local and wider Scottish economy, creating new job opportunities and investing heavily in the latest technology and vehicles for the benefit of our customers.

“Our results for last year are in line with our forecasted expectations and show an overall revenue increase of 5% over the previous year driven by the exploitation of growth opportunities including our West Lothian expansion.

“We anticipate that the financial pressures we face in 2020 like most other commercial businesses will be unprecedented and as such we have not paid out any shareholder dividends relevant to the 2019 financial year.

“It is still too early for Lothian to accurately forecast the long term financial consequences of COVID-19, however we continue to model a number of scenarios with the intent of mitigating impact on the business.”

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