FirstGroup hit by US school bus cutbacks

Published on Saturday 8 May 2010 15:02

CUTBACKS in American school bus services are likely to have hit Aberdeen-based FirstGroup's earnings when it unveils annual results this week.

Roughly half of FirstGroup's business is in the States, with a big component being the famous yellow school buses.

Gert Zonneveld, transport analyst at broker Panmure Gordon, said: "North American school boards have been struggling with their budgets. They are under pressure to make cutbacks, and FirstGroup would have been hit by that."

Zonneveld said that as a result many US schools may have tried to renegotiate contracts with the British buses-to-rail group "to get better deals, and that could have put margins under pressure".

Douglas McNeill, transport specialist at Charles Stanley, said FirstGroup's "core" school bus business in the US may have proved more resilient.

"It is the reduction in extra trips, to the zoo or art galleries and the like, that will have had the most adverse effect. The City will be focused on whether there is any sign of improvement there," he said.

McNeill is forecasting "clean" underlying FirstGroup pre-tax profit, excluding exceptional items, to have fallen to 250 million when the company reports on Wednesday.

That compares with a consensus City forecast of 267m and a 326m profit in the previous year. The consensus forecast for operating profits is 456m, 39.2p for earnings per share and a total dividend lifted to 20.6p, compared with an 18.75p payout last time.

In the UK it is thought FirstGroup's bus operation, the biggest in the country, will have been relatively stable.