BUS and train operator FirstGroup said yesterday that winter snow chaos had dealt a �16million blow to its operating profits.

The group, whose bus business includes most rural services across Suffolk, Norfolk and north Essex, said the freeze during December and January had affected its rail and bus networks in the UK.

Its operations in the United States, where it runs school buses and the iconic Greyhound coaches, were also hit by wintry conditions.

However, First said its underlying performance remained in line with management hopes for the year to March 31 despite the disruption from the weather and a “challenging” economic environment.

First said the biggest impact from the snow was felt by its US school bus business, where many operating days were cancelled as schools closed because of the weather.

Its UK rail arm, including the First Great Western and First Capital Connect franchises, was least affected as the firm receives compensation payments from Network Rail when it cannot gain access to the network.

Higher volumes in a gradually recovering economy gave the division a stronger than expected final quarter with passenger revenue growth of 3.2%, well ahead of the 1.7% seen in the three months to December.

Government revenue support for the FGW and FCC franchises is also providing “significant insulation” from the recession.

The Department for Transport makes up 80% of any shortfall when revenues are more than 6% below the levels forecast when First originally bid for the deals.

The firm’s bus division saw “steady” trading in the final quarter, with annual revenue growth of 1.8%, at the upper end of its forecasts.First is the UK’s biggest bus operator, carrying around three million passengers a day, with its operations also covering major cities including Aberdeen, Glasgow, Manchester and Bristol.

In the US, where First runs the famed yellow school buses, profits will be below expectations due to the days lost to snow and pressure on school board budgets.

First expects the squeeze to continue into the next financial year.

“The global economic outlook remains uncertain and in particular we expect to see continued pressure on public spending budgets in North America,” it said yesterday.

The group has pushed through a �200million cost-cutting drive to offset the impact of recession as well as a �100m increase in its fuel costs.

The City is expecting operating profits of around �450m from First this year.