Reaction: FirstGroup posts 'surprisingly decent' FY results and expects to maintain speed in current financial year

Aberdeen-headquartered transport giant FirstGroup has said it expects to keep results on track over the year ahead despite ongoing rail strike action and being stripped of its TransPennine Express franchise last month.

The bus and rail firm said it expects "broadly consistent" earnings from its trains business in the year to next March and for its group results to align with expectations, although it has cautioned that the "economic and industrial relations backdrop remains challenging".

FirstGroup saw its TransPennine Express franchise taken over by the UK Government at the end of May – a decision the firm said was a "huge disappointment". The franchise contributed £8.5 million in the last financial year to the group's rail division income. It said the past few years have been "among the most challenging in the history of the UK's rail industry" as it has grappled with the pandemic and changing passenger habits, as well as industrial action.

FirstGroup's full-year results showed statutory pre-tax profits falling sharply to £128.7m from £654.1m in the year to March 25 due to the sale of its First Student, First Transit and Greyhound businesses. It said with this impact stripped out, underlying earnings more than doubled to £82.1m from £36.2m, which it said was ahead of expectations. The group also launched a plan to buy back £115m of shares after offloading businesses in North America.

The Scottish-headquartered firm has been boosting the eco credentials of its vehicles. Picture: contributed.

The group said its bus business saw revenues speed up to £902.5m from £789.9m as total passenger numbers jumped by a fifth thanks to recovering demand for public transport. Underlying earnings in the bus arm rose to £58.4m from £45.2m, while its First Rail division – which runs around a quarter of the UK rail market – saw underlying earnings leap to £124.8m from £87.8m.

It added: “We have welcomed the recent announcement by the Scottish Government regarding the launch of the second phase of its ScotZEB fund, through which up to £58m of funding to be made available to fund zero emission buses and infrastructure, reinforcing its commitment to drive forward a fully decarbonised future for Scotland’s buses.”

Robust

FirstGroup boss Graham Sutherland said: "Our performance in FY 2023 in the face of the ongoing industry-wide challenges has demonstrated the value and increasing diversity of our revenue streams, which together with our strong balance sheet and breadth of capabilities underpin our robust platform to deliver further growth and value.”

Julie Palmer, partner at Begbies Traynor, said FirstGroup has posted “surprisingly decent results” amid “some intense industrial action and an inflationary environment that’s seriously dampening consumer confidence”.

She said the recent loss of the TransPennine Express franchise “will be a blow for the FTSE250 transport operator”, but added: “First Rail is still expected to trade in line in the year ahead, so it’s possible the blow will be more reputational than financial for the Aberdeen-headquartered transport group.

“Looking ahead, investors will also be pleasantly pleased to see the group’s confidence in its current guidance for the year ahead. While it’s clear that many of the past year’s pressures are set to stay – union relations are hardly improving and inflation is proving hard to curtail – the transport operator displayed yet more confidence in its future with an additional buyback announced on the back of funds being released from its exit of the US.”