Shares in Go Ahead Group PLC (LON:GOG) headed lower this morning after the public transport provider’s Govia joint venture lost out in its bid to retain the Western Midlands rail franchise.
Govia – which is 65%-owned by Go-Ahead and 35%-owned by Keolis – has been operating the network as London Midland since 2007, running trains from London to Liverpool and across the West Midlands.
READ: Govia given 8-week West Midlands contract extension to 10 December
It will now hand over the franchise to a joint venture comprised Abellio, East Japan Railway Company and Mitsui when its current contract is up in December this year.
David Brown, chief executive of Go-Ahead, said he was “disappointed” that the company’s bid was unsuccessful.
“London Midland and its people have been part of our Group's rail business for ten years,” he added.
“In that time we have delivered significant improvements across the entire network which have seen London Midland transformed into an award-winning franchise with high levels of employee engagement and customer satisfaction.”
Liberum disappointed but not total disaster
“The failure to win the replacement contract for the West Midlands rail franchise is disappointing,” said Liberum analyst Gerald Khoo.
“This will do little to dispel concerns about the group's long-term future in the industry, even though these are unfounded, in our view.
“However, although operationally and financially successful, the franchise's contribution to group earnings was modest in absolute terms, and we had included no contribution beyond the end of the current franchise anyway.”
Khoo cut his price target 10 £19.10 from £19.75 and repeated his ‘buy’ recommendation.
Go Ahead shares were off 3.26% in afternoon deals to trade at 1,738p.