Shares in FirstGroup, the bus and train operator, were up more than 17 per cent on Thursday after results at the Aberdeen-based company came in well ahead of market expectations, despite the company’s loss of a key rail contract.
FirstGroup’s adjusted attributable profit for continued operations, a figure that excludes central costs, cash interest and tax, for the 52 weeks to March 25, more than doubled to £82.1mn, from £36.2mn the year before.
The main discontinued operation was the company’s US bus business, including the Greyhound intercity bus operation, whose sale it announced in October 2021. Revenue from continuing operations was up 3.6 per cent, at £4.76bn.
It lost the UK’s Department for Transport’s contract to operate the TransPennine Express (TPE) operation in northern England, last month after it suffered problems with train cancellations. However, the company said its outlook for the current year was in line with expectations despite the challenging economic and industrial relations environment.
FirstGroup still holds the main share in the Avanti West Coast and South Western Railway rail franchises, as well as wholly owning the operator of the Great Western Railway franchise. The company has two wholly commercial “open access” operations, Lumo, offering London to Edinburgh services, and Hull Trains, running from London to Hull.
Graham Sutherland, chief executive, said he was “obviously disappointed to lose [TPE]“. He added: “In terms of its impact on the business, we’re the largest rail operator in the private sector in the UK. It will have an impact but overall we will deliver a rail business in line with expectations.”
Sutherland said that TPE, like Avanti West Coast, had suffered from a withdrawal of staff willingness to work on rest days, something on which both operators had relied to run trains, particularly on Sundays.
He noted the open access operations had had a “really, really strong year” driven mainly by leisure demand. The open access operations have reached pay deals with their staff, which have meant they have been able to operate normally through much of the industrial action that has hit other UK train operations in the past year.
On its franchised UK operations, like other train operators, FirstGroup is no longer exposed to the risk of fluctuating fare revenues, which is borne by the DfT. It is instead paid management fees depending on performance.
Avanti’s services, which also suffered a period of severe disruption, had recovered well, Sutherland said.
FirstRail reported adjusted net operating profits up 42 per cent to £125mn, on revenues up 2.4 per cent to £3.89bn.
Adjusted operating profit at the company’s FirstBus bus division was up 29 per cent to £58.4mn, on revenue up 14 per cent to £903mn. Sutherland said the division had benefited from a cap on local bus fares of £2 in England and a Scottish government policy of offering free bus travel to everyone under 23.
On a statutory basis, the company recorded pre-tax profit for the 52 weeks to March 25 of £129mn, against £654mn the previous year, on revenue down 15 per cent to £4.76bn.
At noon, the company’s shares were up 20.2p at 138.9p.
Source: Financial Times