East Anglia: FirstGroup reports further progress of UK bus business

Tim O'Toole, chief executive of FirstGroup

Tim O'Toole, chief executive of FirstGroup - Credit: Archant

Bus and train operator FirstGroup said today that first half trading had remained in line with expectations.

In a final update ahead of its results for the six months to September 30, First Group said it had continued to make progress on “transformation” plans within its bus business.

But the announcement came as it was revealed that the group had failed in its bid to retain the ScotRail train franchise, with the new contract to be awarded to Abellio.

First said that both like-for-like passenger revenue and passenger volumes within its UK bus business – which includes many services in Essex, Suffolk and Norfolk – were expected to an increase of 2.1% in the first half, with “mixed” local economic conditions across its portfolio.

“Our programme of major network redesigns and selected fare rebasing throughout the business has now been

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completed, and our more locally-based management structure is now fully in place to ensure that our commercial proposition is more agile and responsive to the challenges and opportunities arising from the changing needs of our local communities,” it said.

Our other key initiatives, including “more disciplined” operations, further cost

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efficiencies, mobile ticketing and fleet investments, were also on track, with the group aiming to restore double digit margins in the UK bus business by 2017.

It added: “We continue to expect underlying increases in revenue and improvements in operating margin in both the first and second half of 2014-15 compared with the prior year, with progress weighted to the second half as revenues begin to benefit from improving yields, and restructuring costs associated with the transformation plan in the first half do not recur.”

FirstGroup said that its rail businesses had “delivered further robut passenger volume growth”, with first half like-for-like revenue expected to show an increase of 6.5%.

Despite the end of its First Capital Connect franchise just before the end of the first half, the group said the rail division’s overall financial performance would be towards the top of its range of expectations, with First Great Western back to running on “normal commercial terms”. FirstGroup added that the loss of the ScotRail franchise, from April next year, “does not alter the group’s stated medium term targets”.

It said: “As one of the most experienced rail operators we are actively participating in a range of rail franchise competitions with the objective of achieving earnings on a par with the lastround of franchising, at an acceptable level of risk.”

Of its businesses in the United States, the group said there were “encouraging trends” within its First Student school bus operation, its First Transit bus business had delivered a good financial performance and its Greyhound coaches had continued to achieve revenue growth despite ongoing economic challenges.

FirstGroup chief executive Tim O’Toole said: “Trading during the first half has been in line with our expectations for the group and we continue to make progress with our transformation plans.

“We were encouraged that the early pricing improvements on our First Student contract portfolio were maintained through the whole bid season, with contract retention towards the top of our expectations.

“The slow pace of economic recovery for our core Greyhound customers, and in some of our local UK Bus markets, is balanced by the contract pricing and cost reduction progress made in First Student and

good performances in First Transit and our UK Rail operations.

“As usual, the second half of our financial year will make a larger contribution to full year profits than the first half, principally due to the seasonal nature of First Student’s business.

“Despite the variable trading conditions across our markets, we are confident that our financial performance will continue to improve during the second half and for the full year, and that the multi-year plans we are executing across the Group will return us to a profile of sustainable cash generation and value creation in the medium term.”

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