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Shares in Go-Ahead plunge more than 16%

Published 14/06/2016

Go-Ahead was hit after it pencilled in margins of 1.5% on its Govia Thameslink Railway franchise
Go-Ahead was hit after it pencilled in margins of 1.5% on its Govia Thameslink Railway franchise

Shares in Go-Ahead have plunged more than 16% after the transport group warned that strikes and upgrade works had had an impact on its rail business.

The bus and train operator was hit by the sharp sell-off from investors after it pencilled in margins of 1.5% on its Govia Thameslink Railway (GTR) franchise, down 50% on the 3% analysts were expecting.

The FTSE 250-listed firm was also on course to enrage passengers after forecasting " another year of strong profit growth" despite its Southeastern and Thameslink and Great Northern services finishing bottom of a passenger satisfaction survey in February.

David Brown, group chief executive of Go-Ahead, said the company was in a "strong financial position" and full-year expectations for the group were unchanged.

He added: "As previously reported, the additional resources being invested in GTR to support service delivery are depressing margins on that contract in the current year and will also impact on next year's margins.

"While we do expect margins to improve in the longer term; given the very challenging performance and industrial relations environments, we no longer expect to recover the profit shortfalls, and as a result margins, on an adjusted basis, over the life of the contract, are now more likely to be nearer to 1.5% than the 3% previously expected."

Go-Ahead reported in February that pre-tax profits had risen 17% to £52.1 million for the six months to December 26 2015.

The group - which runs about 4,600 buses for nearly two million passengers - also saw bus adjusted operating profits rise 1.5% to £47.8 million over the period.

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