PUBLIC transport operator FirstGroup said yesterday that it remained on course to hit its earnings target for the year to March 31.

First, whose UK bus operation includes many services in East Anglia, warned that its US-based school bus arm, First Student, was facing further pressure on margins.

But the group said this was being offset by a stronger than expected performance from its UK rail division and a “steady” showing from the UK bus business.

First said the yellow school bus services run by First Student in the US and Canada had turned in a “disappointing” performance during the final quarter of the year, with budget cuts compounded by severe weather, and it expected its margins to remain under pressure.

However, it said its rail division, which runs the Capital Connect, Great Western, ScotRail and TransPennine Express franchises, was on track to grow passenger revenues by a better-than-expected 5.1% over the full year.

“We remain encouraged by the strong demand for services that has continued to develop throughout the course of the year,” it said.

“We are also encouraged by the Government’s commitment to continued investment in transport infrastructure including the Thameslink programme, the Intercity Express programme and the electrification of part of the Great Western Main Line.”

At the group’s UK bus division, which runs around one in five of all local bus services, passenger revenues increased by 1.4% on a like-for-like basis, with “good” operating margins being maintained through increased efficiencies, reduced costs and “proactive” management of services in response to local demand.

The group’s Greyhound coach business was showing an improved trend, First added, with a return to revenue growth during the final quarter leaving it on course for a 0.6% increase over the year as a whole.

Yesterday’s statement was a final update ahead of First’s annual results, due on May 11.