Shares of Go-Ahead Group plc (LON: GOG) fell 14.6% after the transport company was relieved of its Southeastern franchise by the UK Department of Transport (DfT), citing a severe breach of its “good faith” obligation.
Go-Ahead was operating the Southeastern railway route in conjunction with its partner Kelios before today’s announcement.
The breach of “good faith” referred to by the Department of Transport relates to its move not to declare over £25 million of taxpayer funds that it was supposed to repay.
The transport company decided to delay publishing its annual results, which were due on Thursday, citing the pending issues related to the Southeastern contract.
Go-Ahead reassured investors that its GTR rail division was not affected by the DfT’s decision.
The company also announced the firing of Elodie Brian, its Chief Financial Officer (CFO), with immediate effect. Brian also stepped down from the company’s board.
Go-Ahead has taken measures to resolve the issues, including fully repaying the £25 million of taxpayer funds. Still, it seems the government was keen to make an example of the firm regain the financial help given to private firms by the government.
Grant Shapps, Transport Secretary, said:” There is clear, compelling and serious evidence that LSER have breached the trust that is absolutely fundamental to the success of our railways. When trust is broken, we will act decisively.”
Adding:
“The decision to take control of services makes unequivocally clear that we will not accept anything less from the private sector than a total commitment to their passengers and absolute transparency with taxpayer support.”
Go-Ahead share price.
Go-Ahead shares plunged 14.57% to trade at 874.8p, falling from Monday’s closing price of 1024.0p.