PUBLIC transport giant FirstGroup put more of its bus services on the block today after admitting that fuel costs, lower demand and reduced subsidies were hurting the division.

The group, a major operator of bus services in Suffolk and Essex, said it would accelerate its programme of disposals, which has already seen it off-load some operations in Norfolk and Devon and withdraw from number of depots, at locations including Bury St Edmunds, in order to protect profitability.

It warned that conditions for urban services in Scotland and the North of England were particularly harsh and that cost efficiencies would not be sufficient to offset the impact of reduced government subsidies and fuel costs, but gave no indication of which businesses might be sold.

Bus operating profits fell 9.7% % to �134.4million in the year to March 31 on revenue 1.7% higher at �1.157billion, with the operating margin of 11.6% expected to fall to 8% this year.

FirstGroup, which is the UK’s biggest bus operator, said other divisions including UK rail and Greyhound coaches in the US were performing well as it recorded pre-tax profits of �271.4 million, down 1% on a year earlier.

Chief executive Tim O’Toole said a new management team was working on a plan to stimulate growth in the bus business, including �160m of investment in 1,000 new vehicles and a �4m refurbishment of mid-life vehicles.

It is also investing �27m in new ticketing technology, including a “touch-in, touch out” contactless payment system using bank cards.

Mr O’Toole said: “We have a very strong platform to grow in UK bus. The vast majority of our bus operations generate good growth and returns with opportunities to grow further.

“However, there is scope to reposition our portfolio to concentrate on those areas with the greatest potential.”

FirstGroup has around 8,000 buses operating in 40 towns and cities across the UK, carrying 2.5 million passengers every day.

The group’s rail business, which includes the First Great Western, First Capital Connect, First TransPennine Express and First ScotRail franchises, recorded a 10.4% increase in revenues to �2.506bn with operating profit 1.7% up at �110.5m.