First on track for first-class return

Published on Tuesday 28 September 2010 22:44

COSTCUTTING, a rise in first-class bookings and improved revenues have placed FirstGroup on track to deliver a "moderate" rise in earnings for the full year.

Analysts said the better first-class sales, particularly notable in cheaper "Advance" purchases, was a further sign of Britain's gradual economic recovery.

In a trading update, the Aberdeen-based transport giant said: "We expect moderate earnings growth in the current financial year, which supports the board's commitment to dividend growth of at least 7 per cent per annum."

The company, which announced last week that its long-serving chief executive Sir Moir Lockhead will step down on 1 November to be replaced by former London Underground managing director Tim O'Toole, said it continued to focus on profit margins through tight cost control.

It noted that cash generation was strong, adding it was confident of hitting its target of a ratio of 2.5 times net debt to underlying earnings.

FirstGroup, whose rail franchises include ScotRail and First Great Western out of London Paddington, said first-half revenues grew 4.4 per cent at its UK trains business, while like-for-like passengers on its UK buses were up 1.3 per cent.

More than half of the group's business is in the United States, where it runs First Student, North America's biggest provider of yellow school bus services, and the Greyhound bus business.

Revenues at Greyhound were up 1.6 per cent in the six months to end-September, the group said, despite "challenging economic conditions and continued high unemployment in North America".