First cashes in on the rising cost of drivers’ fuel and insurance

Motorists abandoning their cars for public transport helped FirstGroup grow profits in the first half of the year despite problems at its US school bus arm.

The Aberdeen-based firm said yesterday that group operating profits rose 25 per cent to £216.3 million in the six months to 30 September.

However it warned that the trading conditions for its bus network will “remain challenging as a result of lower economic activity in the major urban areas where we operate”.

Chief executive Tim O’Toole played down the caution, saying that unlike previous recessions, the recent economic woes had not seen people cut back on public transport.

Instead, he said the rising cost of petrol and insurance meant young people were no longer automatically choosing the car as their main form of transport. He said it was therefore hard to predict how wider economic problems might affect the business.

The firm is investing £160m in about 1,000 new vehicles to create “a step change” to the profile of its fleet over the next two years. Many of the new buses will be built in Scotland by Falkirk-based Alexander Dennis. Profits at First’s rail division, which runs First Great Western, TransPennine Express, First Capital Connect and Scotrail, increased 15 per cent to £55.7m. Passenger revenues rose 9 per cent as the firm benefited from higher prices as well as increased passenger numbers.

O’Toole said: “Our biggest growth area has been high-discount advanced ticket sales. People are being clever about how they use rail and are voting with their feet.”

Analysts have been concerned about First’s student bus service in the US, which saw profits slide to £5.5m from £28m as school budgets came under pressure. But O’Toole said business for the new school year was better after he sent in a management team to overhaul the division.