Snow hits First Group profits

THE transport giant that runs ScotRail and hundreds of bus services around the country will take a £7 million profit hit from the big freeze - but confirmed it remains on track to hike this year's dividend.

• Winter weather hit First Group profits, with the firm's ScotRail operations particularly badly hit. Picture: Greg Macvean

Aberdeen-based FirstGroup - which posted pre-tax profits of 178m last year - said the earnings drop was split equally between its bus and rail arms.

But its ScotRail franchise, which operates train services north of the Border, "bore the brunt" of the wintry conditions that saw services cancelled in the run up to Christmas.

The FTSE-100 group's third-quarter trading update came a day after airport operator BAA revealed it lost 24m during the disruption, including about 4m from its three Scottish airports.

Other transport providers are expected to follow suit and outline the impact the Arctic weather had on their sales and profits.

FirstGroup yesterday said: "The trading environment has remained challenging since our interim results in November.

"However, the group remains on course to achieve its earnings and cash targets for the year."

Even though the snow took a chunk out of the group's profit, turnover continues to rise at both its bus and train divisions.

Like-for-like bus passenger revenues increased by 2.1 per cent during the third quarter, while the figure for rail operations jumped by 5.2 per cent.

The rises will help the group to meet its target of hiking its full-year dividend by 7 per cent, reflecting efforts to control costs and generate more cash.

As well as its UK bus and rail operations, FirstGroup runs bus, coach and school transport services in North America.

The company said that school board budgets remained under pressure in the US, with a knock-on effect for its school buses.

But its transit division recently won a contract to provide shuttle bus services at Rutgers University in New Jersey.

The group said it "continued to make progress in transforming" its Greyhound coach service operations, with its Canadian operations "delivering encouraging results" and an express service being rolled out in Chicago.

Analysts welcomed the update, with a mixture of "hold" and "buy" recommendations. Annual profits in the current year are set to hit 288m.

Gert Zonneveld, co-head of research at Panmure Gordon, said: "Even though we have some concerns about the short to medium-term profitability of the North American student transportation business, FirstGroup is attractively valued."

Paul Hickman, an analyst at Peel Hunt, said the update was "confidence firming".

He added: "Trading remains on course for the year despite a 2 per cent hit from snow disruption, particularly affecting ScotRail. The shortfall is covered mainly by improved performance from US bus and rail through the rest of the quarter."In December, FirstGroup signed a five-year, $1.4 billion (900m) debt facility, which replaces the $1.5bn loan it took out in 2007 to buy US firm Laidlaw and a 505m revolving facility, both of which were due to expire in February 2012.