Go-Ahead Group Plc shares fell the most in eight years after the U.K. train company said the cost of measures to ease overcrowding at London Bridge station will halve earnings from Britain’s biggest rail franchise.
Profit margins over the seven-year span of the Thameslink, Southern and Great Northern franchise awarded to Go-Ahead and French state railway company SNCF in 2014 will be closer to 1.5 percent than the 3 percent previously expected, the Newcastle upon Tyne-based company in a statement Tuesday.
Go-Ahead stock tumbled 17 percent to 2,014 pence, the biggest drop since Feb. 15, 2008, and was trading at that price as of 11:57 a.m. in London, reducing the company’s market value to 866 million pounds ($1.23 billion).
London Bridge, the city’s fourth-busiest station, is enduring a capacity squeeze that last year saw police hold back commuters from packed platforms as a radical remodeling linked to construction of the Shard skyscraper prevents the operation of the 24 trains an hour stipulated in the franchise terms.
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Go-Ahead has experimented with at least four timetables at the station while adding trains and staff, resulting in a jump in costs that will depress margins this year and next, Chief Executive Officer David Brown said in the release.
Brown said targets for the fiscal year that ends on July 2 remain unchanged for the company and its bus and rail units, forecasting “strong profit growth” and “robust” cash flow.
FirstGroup Plc shares rose as much as 13 percent, the most in seven years, after the company posted earnings for the 12 months ended March 31 that beat estimates and said cash generation is set to gain for the first time since 2013.
CEO Tim O’Toole said non-European units that include the U.S. Greyhound brand and the largest fleet of school buses in North America will help protect it from any financial hit should Britons vote to quit the European Union on June 23.
(Updates with U.K. rail franchise awards starting in 11th paragraph.)
--With assistance from Benjamin Katz To contact the reporter on this story: Christopher Jasper in London at cjasper@bloomberg.net. To contact the editors responsible for this story: Chris Reiter at creiter2@bloomberg.net, Andrew Noël
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