Transport giant FirstGroup today said its turnaround strategy remains on track despite facing more challenging trading conditions in some of its markets.
In a trading update ahead of its half-year results the company, which has bus and rail operations across the UK and US, said its financial performance had been in line with expectations.
Its UK bus operations saw growth in commercial passenger revenues of more than 2 per cent in the first half with overall like-for-like revenue growth for the division expected to be 1.3 per cent.
A focus on driving down costs at the bus business was continuing through initiatives such as improved driver productivity, greater fuel efficiency and reductions in maintenance expense.
“Since the start of the financial year, we have also taken a number of actions to optimise our depot portfolio,” a spokesman said.
The firm recently announced plans to close depots in Bracknell and Hereford, merge depots in the Potteries and sell one in south Devon. It has said it faces one-off costs of about £7 million linked to an overhaul of its bus depots although it said the actions “will accelerate the delivery of our medium-term targets”.
FirstGroup’s UK rail business, which was dealt a blow after failing to win new contracts to keep running ScotRail and Capital Connect train services, delivered further strong passenger volume growth in the first half, underpinning expected like-for-like passenger revenue growth of about 7 per cent. It also operates the Greyhound intercity coach business in the US where it said it was continuing to manage costs to mitigate the adverse impact on passenger demand experienced since fuel prices began falling sharply last year.
Chief executive Tim O’Toole said: “Overall trading for the group during the first half was in line with our expectations.
“We continue to progress our transformation plans which will drive sustainable improvements in the financial performance and cash generation of the group, despite a more challenging trading environment in some of our markets in the period.”
Martin Brown, an analyst at Shore Capital, said he believed the update confirmed that FirstGroup’s turnaround “remains firmly on track”
“We believe it is only a matter of time before the market begins to take FirstGroup off the naughty step,” headded. “While the market remains concerned around the balance sheet, we expect the company to return to paying a dividend in the current year.” He placed a buy rating on the shares.