FirstGroup chief confident of ‘strong progress’

FirstGroup chief executive Tim O'Toole. Picture: Contributed
FirstGroup chief executive Tim O'Toole. Picture: Contributed
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Tim O’Toole, the chief executive of FirstGroup, today said he was confident of “strong progress” this year in the face of tough trading conditions.

Updating investors on recent trading at the Aberdeen-based transport giant, O’Toole said the group was poised to benefit from lower fuel costs and more operating days for its school bus business in North America.

“Overall, we expect to deliver a significant improvement in our profile of sustainable returns and cash generation going forward,” he added.

His comments came as FirstGroup, which last month said it had overcome a “challenging” trading environment to post a 7.3 per cent rise in annual profits revealed a 1.4 per cent dip in overall revenues during the first quarter of its new financial year.

At its rail operation, which runs the Great Western Railway and TransPennine Express routes, like-for-like passenger revenues rose 2.3 per cent.

Revenues at First Student – its division that operates 49,000 school buses across North America – were up 1.1 per cent, but fell 5 per cent at its Greyhound coach arm.

Back on home turf, like-for-like passenger revenues at First Bus reversed 1.4 per cent. The group blamed the performance on a decrease in the number of shoppers venturing onto Britain’s high streets and “congestion impairing services in several of our markets”.

It added: “We continue to take action to offset the challenging market backdrop by merging or closing a number of depots and other cost efficiencies, and expect to deliver margin progression during the current year from the benefits of past cost-saving actions, additional cost and operational efficiency initiatives and reduced fuel costs.”

While FirstGroup said it was too early to judge the overall impact on its business from last month’s Brexit vote, it noted that the fall in the value of sterling would provide some benefits, as more than two-thirds of last year’s adjusted operating profit was generated in North America.

“Like other business sectors, our UK-based First Bus and First Rail operations are affected by trends in the wider economy, including factors such as weakening economic growth and lower consumer confidence,” the group said.

“The degree to which the net currency benefit from our US-based operations will be offset by more challenging UK economic conditions for our UK-based businesses is uncertain at this stage.”

• Shareholder lobby group Pirc has recommended investors vote against FirstGroup’s remuneration report at its annual general meeting in Aberdeen next week over O’Toole’s long-term pay, writes Perry Gourley.

O’Toole received a package of £1.24 million in the last financial year, down from the £1.65m he received the previous year. The package included a £162,000 annual bonus paid in cash and deferred shares on top of his £846,000 salary, which was unchanged from the previous year.

Although Pirc said that the variable element of O’Toole’s salary was not considered excessive, as it represented only 19 per cent of the total package, it argued that the balance of his pay with financial performance “is not considered acceptable”.

Pirc said the change in his pay over five years was not in line with total shareholder returns over the same period.