FirstGroup on track despite tough bus and rail trading

FirstGroup's revenues have been boosted by the pound's slump against the dollar. Picture: Michael Gillen
FirstGroup's revenues have been boosted by the pound's slump against the dollar. Picture: Michael Gillen
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FirstGroup, the Aberdeen-based transport giant with a big presence across the Atlantic, said a Brexit boost from the weak pound was helping to keep it on course for full-year targets.

The group, which runs a major school bus operation in the US as well as the Greyhound long-distance coach business, yesterday posted a 12.8 per cent hike in revenues for the final three months of 2016 thanks to sterling’s slump against the dollar. With those currency changes stripped out, revenues were flat.

We continue to experience tough trading in the uncertain UK macroeconomic environment

Tim O’Toole

The firm said its under-pressure bus business was hit amid “mixed Christmas trading” on the high street, as well as ongoing woes with traffic congestion in some areas. It saw like-for-like bus passenger revenues dip 0.6 per cent, although this marked an improvement on the 1.3 per cent fall seen in its first half.

READ MORE: FirstGroup profits fall amid tough rail and bus market

Like-for-like passenger revenues rose by 1.1 per cent at its rail business, which includes the Great Western and TransPennine Express UK rail franchises and Hull Trains, but growth was held back by a slowdown across the industry.

Chief executive Tim O’Toole told investors that the group was set to make “good progress” for its full year.

He said: “Our substantial North American operations are delivering encouraging performances and are benefiting from currency tailwinds, but we continue to experience tough trading conditions for our First Bus and First Rail operations in what remains an uncertain UK macroeconomic environment.”

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Analysts at brokerage Shore Capital, which has a “buy” recommendation on the shares, noted: “There is no specific reference to profitability beyond the opening comment that overall trading and expectations for the full year are unchanged, however, we believe this is a strong statement given the market’s continued pessimism around the company.

“For a company that makes the vast majority of its profits in North America and could well be a beneficiary of any infrastructure led job creation (increased passengers at Greyhound) in the US, the stock has steadfastly refused [to move] much beyond 100p.”

Shares last night closed up 6.9 per cent at 111.2p.

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FirstGroup also said it was continuing to support investigations into the tragic crash on its Croydon Tramlink line last November, which killed seven people and injured more than 50. It is working closely with Transport for London and others to assist those affected by the incident.

The group is due to report its full-year results on 1 June.

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