Thameslink woes hit Go-Ahead shares

Shares in transport group Go-Ahead have fallen sharply after it warned of lower-than-expected profit margins at its Govia Thameslink Railway franchise.

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

Go-Ahead's shares fell 16% on the news.

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

Govia - which is a joint venture between Go-Ahead and France's Keolis, of which the UK firm owns 65% - 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 huge passenger delays.

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

On its other routes, employees on Southern services are in an industrial 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 in addition to its rail services 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".