3,500 job cuts and 'resilient' revenues lift First's shares

Published on Thursday 19 March 2009 20:20

TRANSPORT giant FirstGroup unveiled a £200 million company-wide cost-saving programme yesterday involving 3,500 job cuts, as it also flagged up resilient revenues in the downturn.

The Aberdeen-based group's cost-cutting programme follows similar measures recently announced by Perth-based rival Stagecoach, and its shares jumped more than 20 per cent to close last night at 252.5p.

A FirstGroup spokesman said 1,300 of the planned headcount reduction had happened in the past six months.

A further 2,200 reduction – an unspecified mixture of redundancies and natural staff turnover – is targeted over the bus, rail and back-up operations by March 2010.

That will take the group payroll down to 134,800, which includes 150 at FirstGroup's Aberdeen HQ.

The spokesman said 600 jobs would go in the rail division, which includes First Great Western out of London Paddington, the First Capital Connect commuter service into London and the Trans-Pennine Express.

By the end of the cost-cutting programme, a total of 1,100 jobs will have gone in the UK bus division, and 1,800 at FirstGroup's US operations, the majority in its Greyhound bus business.

FirstGroup said in a trading update yesterday that the cost-cutting was necessary to "remain robust in this more challenging economic environment".

The group, Britain's biggest bus operator, said it expected its bus division to achieve like-for-like revenue growth of 7.3 per cent in the trading year to end-March 2009. Like-for-like passenger revenue growth in the rail business was set to rise 7.6 per cent. That compared with 9.8 per cent in the first trading half.

Panmure Gordon analyst James Cooke said the latest figure pointed to a probable rise of 3.2 per cent in FirstGroup's rail revenues in the three months to end-March.

FirstGroup, operator of the ScotRail franchise, said: "Despite the high fixed-cost nature of the rail industry, we have already implemented cost reductions which, together with government] revenue support and share mechanisms, will substantially mitigate the impact of a weakening economy on our rail businesses."

Last November, the group said strong commuter traffic between Glasgow and Edinburgh and a 138m government subsidy had helped First ScotRail's revenues jump 8.6 per cent to 259m in the six months to end-September 2008.

The company said yesterday that three-quarters of its North American revenues, which include yellow school buses, "are derived from a contracted base with no exposure to changes in passenger revenue". The school bus, transit and services businesses in the US have a contracted order book worth $11.5bn, it added.

Greyhound is expected to deliver profits growth despite weakening volumes in the second half of the year. FirstGroup said it had reduced mileage by 7 per cent in the US on lower demand.

FirstGroup forecast full-year results "in line with management expectations".