Thameslink woes hit Go-Ahead shares

Thameslink train Image copyright PA

Shares in transport group Go-Ahead have plunged after it warned of lower-than-expected profit margins for its Govia Thameslink rail franchise.

It said its GTR franchise - the UK's biggest rail franchise - was operating in "a very challenging operational and industrial relations environment".

The GTR franchise operates Thameslink, Great Northern, Southern and Gatwick Express services.

Go-Ahead shares closed 18%, or 438p, lower at £19.95.

Govia - a joint venture between Go-Ahead and France's Keolis - was awarded a seven-year franchise to run the services in 2014.

Thameslink services have suffered problems because work to rebuild London Bridge station has caused significant delays.

Passengers have rated its services as the worst in the country.

On its other routes, employees on Southern services are in dispute over plans for new trains with driver-operated doors.

Go-Ahead said "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."

However, Go-Ahead - which is also one of the UK's largest bus operators - said its full year expectations for the group "remain unchanged".

It is due to report results in September and it said 2016-16 would be a "another year of strong profit growth".

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