Rail fare dodge crackdown puts First on track

Published on Sunday 8 May 2005 01:30

A CRACKDOWN by rail staff on fare dodgers appears to be paying off for FirstGroup, which is expected to see a benefit in its year-end figures released this week.

The ScotRail operator has been criticised for poor punctuality and reliability since taking over the franchise last year.

But more regular checks and the installation of ticket barriers at stations in Glasgow and Edinburgh have contributed to a good performance by First’s rail division, making up for problems in its UK bus and American units.

Tim Marshall, an analyst at UBS, FirstGroup’s house broker, said: "They have been able to better protect revenue by adding barriers at stations. We would expect this to continue to have a positive impact on the performance of ScotRail over the next six months."

Chief executive Moir Lockhead will unveil pre-tax profits up from 161m last year to 164m in the year to March, according to analysts. Turnover at the UK’s biggest transport group is thought to have risen marginally to 2.5bn.

First also installed ticket barriers at Paddington station in London, the terminus for its Great Western and Thames Trains operations. UBS predicts these measures will contribute to a 30% rise in rail earnings to 65m.

But First’s bus operations have not been performing so well. Dresdner Kleinwort Benson, the broker, describes First’s overall performance as like "a Chinese takeaway - more sour than sweet". It recently downgraded its target price for First from 340p to 327.5p, compared to a closing price on Friday of 313p, because of an anticipated fall in UK bus profits.

First’s bus operations, including large networks around Glasgow and Aberdeen, have suffered from staff shortages and bus breakdowns. First plans to address the latter problem, but that will involve added capital expenditure which will eat into the company’s profits.

In common with other companies which operate in the US, First is likely to take a hit because of the weaker US dollar. The company, which runs yellow school buses, has also had to pay out more in state unemployment taxes in California, New York and Massachusetts.

UBS has reduced its forecast for First’s US bus profits from 67.9m to 63.7m, compared to 63.5m the year before.

First is now positioning itself as a company equally balanced between bus and rail operations. The company lost out to GNER in the battle to run the east coast main line but has been shortlisted by the Strategic Rail Authority to run the enlarged Greater Western network between London, Bristol and South Wales; and the Thameslink commuter line through London.

The company is competing head-to-head with its Scottish rival Stagecoach for both of these franchises, while National Express, which previously ran ScotRail, is also bidding.

First may provide an update on its battle to build a new head office and bus station on former football pitches on the outskirts of Aberdeen. There have been local objections and the company has been invited to relocate to cities in England.

Industry watchers will also be looking for clues as to who might follow Lockhead as chief executive. He turned 60 earlier this year but there is no obvious successor on the company’s board at the moment.