Shares in Go-Ahead Group PLC (LON:GOG) ran out of steam after the bus and train operator warned that profits in its Govia Thameslink Rail (GTR) franchise would be half those previously expected.
The stock dropped 359p, or 14.8%, to 2074p as Go-Ahead said extra cash being spent on resolving a train driver shortage and infrastructure-related issues was depressing the franchise’s margins and would hit next year’s margins as well.
GTR runs the Thameslink, Great Northern and Southern routes through central London, which are being modernised for longer, more frequent trains.
The company said in a trading update: “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.
"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’s rail joint venture Govia has faced criticism for regularly cancelling GTR trains due to a driver shortage.
The issue has arisen despite the company having faced action by the government for similar problems on its London Midland franchise some years ago.
Meanwhile, Go-Ahead said its London Midland and Southeastern franchises were still trading well and bus revenues in London and the UK regions were continuing to increase.
It said full-year expectations for the group as a whole and for its bus and rail divisions remained unchanged.
Chief executive David Brown said: “GTR continues to work closely with industry partners and to invest in additional resources to provide the best possible service to its customers in a very challenging operational and industrial relations environment.”