FirstGroup drives profits higher amid tough trading

Profits at FirstGroup's UK bus arm missed analysts' forecasts. Picture: Ian Georgeson

Transport giant FirstGroup today said it had overcome a 'challenging' trading environment to post a 7.3 per cent rise in annual profits.

The Aberdeen-based group, which last month got the green light to compete with Virgin Trains on the east coast main line, reported a statutory pre-tax profit of £113.5 million for the 12 months to the end of March, up from £105.8m a year earlier.

The rise in earnings came despite a 13.8 per cent slide in revenues to £5.2 billion, reflecting the loss of its ScotRail franchise and the First Capital Connect service in south-east England.

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However, FirstGroup – which also runs the Greyhound coach business and First Student school bus operation in North America – said its “medium-term future” in the UK rail sector had been secured through contract awards for the Great Western Railway and TransPennine Express routes.

Chief executive Tim O’Toole said: “Overall we have made encouraging progress this year toward a profile of more consistent financial returns for the group.

“The group expects to make strong progress in the year ahead despite a challenging trading environment in several of our markets. This will come from our continued focus on disciplined contract bidding and rigorous cost efficiency programmes, as well as lower fuel costs and more First Student operating days compared with the year just ended.”

Shore Capital analyst Martin Brown said the results had come in ahead of the broker’s forecasts, driven by better-than-expected finance and tax costs.

He added: “We would highlight First Student as being of particular importance, where the lower number of operating days in the period saw a $17m (£12m) hit to profit, something that will reverse next year.

“We would also highlight UK bus, where an industry-wide drop in passenger volumes is proving a challenge for all operators. A operating profit of £52m was below our expectations of £55.3m for the year. Looking into next year, management expect market conditions to remain challenging.”