UK: FirstGroup hails improved growth in bus revenues

FirstGroup today reported improved growth in bus revenues while rail revenue growth has slowed

FirstGroup today reported improved growth in bus revenues while rail revenue growth has slowed - Credit: PA

TRANSPORT giant FirstGroup said today that the turnaround of its UK bus arm was going to plan, but that passenger revenues growth was slowing in its UK rail business.

The UK’s biggest bus operator said bus revenues increased 2.4% in its final quarter to the end of March, an improvement on third-quarter growth of 2.1%.

It also revealed the sale of eight bus depots in London for £80million, part of plans to offset tough conditions and build “sustainable” passenger and revenue growth.

But the company said fourth quarter UK rail revenues were up 5.9%, a slowdown on the 8.1% underlying growth in its third quarter, which covers the three months to the end of December.

The group operates about 8,000 buses around the UK, including many rural services in East Anglia, and carries 2.5 million passengers every day. The prolonged economic downturn has weighed heavily on many of the urban areas it operates in, particularly in the North of England and Scotland, while higher fuel costs and lower Government subsidies have also impacted.

The company said: “ We are working through our comprehensive plan to recover performance and equip our UK bus business to achieve sustainable revenue and patronage growth, and are seeing early positive signs in some of our markets.”

UK bus revenues were up 2.4% for the full-year on an underlying basis while UK rail revenues increased by 7.4% on a like-for-like basis during the year, with roughly half of this coming from increasing number of passengers and half from higher fares.

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Rail companies increased average fares in January by 3.9%, according to the Association of Train Operating Companies.

The company operates around a quarter of Britain’s rail lines through franchises such as First Great Western and First ScotRail, while it operates 70,000 school and transit buses in North America. It carries more than 300 million passengers a year on its trains in the UK, but did not quantify the passenger growth during the year.

The Government recently handed FirstGroup a 33-month extension to the Great Western franchise, meaning the new franchise winner will run the line from July 2016.

Its Capital Connect franchise was extended by six months and its TransPennine Express contract by 10 months.

The Government’s overhaul of the rail franchise system follows a flawed bidding process for the West Coast Main Line.

A new 13-year franchise for the West Coast had been awarded to FirstGroup which won a bidding war with the incumbent firm, Virgin Trains.

But the bidding had to be scrapped last year after serious mistakes by Department for Transport civil servants in the bidding process. This led to two independent reviews - one on the West Coast fiasco and the other on the whole franchise process.

FirstGroup chief executive Tim O’Toole said: “Public transport is a key enabler of economic growth and the private sector is best placed to deliver high quality and attractive services that represent value for passengers and taxpayers and provide an economic return for shareholders.”

He said he is “satisfied” with the company’s turnaround so far and it is trading in line with expectations, but there remains “significant work” to be done.

Under the London bus asset sale, five depots in at Alperton, Greenford, Hayes, Uxbridge and Willesden Junction, along with 494 vehicles and 1,700 staff, will transfer to Metroline for £57.5 million.

Another three London bus depots Atlas Road, Lea Interchange and Westbourne Park, along with 400 vehicles and 1,500 staff, will transfer to Australian operator Transit Systems Group for £21.3 million.

FirstGroup’s UK bus managing director Giles Fearnley said: “Our strategy is to focus on those areas of the country which offer the greatest potential and while we have been a key operator in London for many years, our focus going forward is on the deregulated market outside of the capital.”