FirstGroup swings to loss but eyeing return to dividend
Transport giant FirstGroup has swung to a first-half loss, weighed down by the impact of 'severe' hurricanes in the US, but said it remains set to hit its full-year targets.
The Aberdeen-based firm reported a statutory pre-tax loss of £1.9 million for the six months to 30 September, compared to a pre-tax profit of £11.1m 12 months previously. Revenues jumped 8.1 per cent to £2.8 billion.
The group also said it was not proposing to pay a dividend for the half, “but will continue to review the appropriate timing for restarting dividend payments”.
Chief executive Tim O’Toole told The Scotsman: “Overall trading for the group was consistent with what we set forth at the end of [the last] fiscal year for the first half.” He also highlighted cashflow progressing by £86.2m, with net cash inflow totalling £97m.
First Rail saw like-for-like passenger revenue growth of 3.2 per cent, boosted by the South Western Railway franchise that started in August, and which O’Toole expects to substantially grow capacity.
First Bus experienced like-for-like passenger revenue growth of 0.6 per cent, although the group said industry conditions “remain uncertain, with high street retail footfall trends and congestion affecting passenger demand in many of our markets, particularly in the North and Scotland”.
O’Toole also flagged the introduction of contactless and mobile ticketing in locations north of the Border. “We’ve been working with the Scottish authorities about dealing with congestion,” he added, noting encouraging developments in this area.
“Business is actually holding up alright in Scotland… the UK First Bus business has done a bit better than we had originally forecast for this period.”
He added that overall, the US has recently “really held up the UK, and in this case the UK rail and bus did a bit better than expected, allowing us to offset the impact of the hurricanes in North America, which were so extraordinary this year”.
Adjusted operating profit for its First Transit unit was down by about $6m (£4.6m), which the group mainly attributed to the consequences of hurricane Maria, which devastated Puerto Rico, where it runs three contracts. Total adjusted pre-tax profit was up by about 40 per cent to £30.5m.
The first half also saw the group’s First Student arm acquire 94-bus operation Falcon Transportation in Illinois, with O’Toole expecting more deals of this kind to follow suit.
All told, he said the group expects to hit its full-year goals. And he also stressed its cash delivery. “It’s going to allow us to deleverage and ultimately return to a dividend-paying company, so I really think we’re well-positioned.”
Shore Capital analyst Martin Brown said the results largely aligned with expectations. “With the start of the debt refinancing less than 12 months away, investors should increasingly be focused on the forecast strong cash generation at FirstGroup.”