FirstGroup ‘encouraged’ as profits jump by a third

FirstGroup's revenues drove higher despite a decline at its bus division. Picture: Michael Gillen
FirstGroup's revenues drove higher despite a decline at its bus division. Picture: Michael Gillen
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Transport giant FirstGroup has said it is making progress in Scotland as it reported that profits grew by more than a third in its latest financial year.

The Aberdeen-headquartered company posted statutory pre-tax profit of £152.6 million for the 12 months to 31 March, up from £113.5m the previous year. Revenues grew 8.3 per cent to £5.65 billion.

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Chief executive Tim O’Toole told The Scotsman: “We’re very pleased with these results in that we hit our financial goals through the year [and] delivered significant improvement in operating results and cash-generation.”

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Adjusted operating profit reached £339m, up from £300.7m, and boosted by margin improvement at its First Student school bus operation in North America, now its largest division.

First Student and other US divisions came in ahead of analyst expectations, but O’Toole said the picture was less bullish in the UK.

Like-for-like passenger revenues at First Bus edged down 0.6 per cent, but at the group’s rail arm saw rose 1.3 per cent amid an industry-wide slowdown and infrastructure upgrades on the Great Western network.

O’Toole said rail volumes are depressed, while challenges in the bus sector include congestion and falls in high-street footfall.

“But when you put it all together, it’s a very positive result and one that we think puts us in a very good position moving forward,” he added.

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He said that Scotland tends to have a slightly lower growth rate than in the south of England. As a result, “we’ve done so much in terms of discount fares that we’ve put in place in our Scottish markets”.

“Glasgow remains a good market for us, Aberdeen’s under a lot of pressure because of the economy, but all in all we think we’re making progress,” he said. “[Overall] we get more stable with each passing day, which gives us greater capability to take advantage of opportunities.”

The group recently won the South West Trains franchise from Perth rival Stagecoach, and said it kept its “consistent and disciplined approach to bidding for future business throughout the group” with potential for bolt-on merger and acquisition activity in its First Student division.

Regarding the latter, he said: “As we recovered the business and when it was earning margins that didn’t deliver returns that would justify our expanding the business, we weren’t looking so much at growth opportunities.

“Now that we’ve created this very healthy business delivering very healthy returns, the topline becomes more of an issue… we would take advantage of small opportunities as they come along.”

Analyst Martin Brown of Shore Capital said all divisions apart from the group’s UK bus arm exceeded its expectations, “although we are disappointed that the board has not reinstated the dividend, something which we believe is now overdue”.

The results came after the tragic crash on FirstGroup’s Croydon Tramlink line in November, in which seven people were killed and more than 50 others injured.

O’Toole said the group remained “focused on understanding the exact cause of this incident and will continue to provide our full support to the ongoing investigations”.

He added that the results of investigations may still not be known “for many months”.

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