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East Anglia: FirstGroup reports increased revenues for UK bus and rail operations

16:38 17 January 2014

FirstGroup has reported improved revenues within its UK bus business during the final three months of 2013.

FirstGroup has reported improved revenues within its UK bus business during the final three months of 2013.

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Transport operator FirstGroup said today that overall trading had been in line with management expectations during the three months to December 31.

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But it admitted that progress in the turnaround of First Student, its school bus operation in the United States, had been disappointing.

However, there was also some better news for the company, with the Department for Transport announcing that FirstGroup is one of three bidders to have made the final shortlist for the new East Coast Main Line rail franchise.

FirstGroup said that its UK Bus division, which is a major operator in East Anglia, had achieved a 2.0% like-for-like increase in passenger revenues over the past quarter, continuing the “encouraging trends” seen during the first half of its current financial year.

“We are on track with our plans to return the division to double-digit margins in the medium term through further cost optimisation from more disciplined operations; market-by-market improvements to our network designs and fares structures to drive improved volume growth; and further investment in our bus fleets and technology to improve customer experience,” it added.

“We recently confirmed a £70million investment in 425 new buses, helping to improve reliability, reduce fuel and maintenance costs as well as significantly enhance the quality of our service offering to customers.”

FirstGroup said like-for-like passenger revenue within its UK Rail division, which includes the Great Western, Capital Connect, ScotRail, TransPennine Express and Hull Trains franchises, increased by 6.3% during the period, with “further strong volume growth” across its operations.

FirstGroup’s bid for the East Coast Main Line franchise faces competition from a joint bid by French company Keolis and high-speed Channel Tunnel services firm Eurostar and another joint venture between UK companies Stagecoach and Virgin.

In the US, FirstGroup said its recovery plan for First Student was helping to mitigate tough market conditions, with limited growth opportunities and pricing power.

A slowing in progress on margins during the period was “disappointing” but the group said it remained confident in achieving its medium term objectives for the division.

First Transit, the group’s North American bus business, delivered further strong trading, with revenue growth of 7% expected for the full year, while its Greyhound business business saw like-for-like revenue grow 0.3% during most recent quarter, with “robust” Thanksgiving and Christmas sales partially offset by poor weather and the subdued US economic environment.

Group chief executive Tim O’Toole said: ““I am pleased to report that overall trading in the period is in line with our expectations, with a good performance in four of our divisions offset by slower progress in First Student.

“While there remain a number of short term challenges to overcome, the programmes are in place that will enable the group to benefit from its market leading positions.”

He added: “In UK Bus, we are pleased with the tangible results we are seeing from our comprehensive transformation plans, and although challenging economic conditions continue in some of our local markets, our confidence continues to grow.”

FirstGroup is under pressure from investment company Sandell Asset Management, which holds a 3.1% stake in the group, to sell the Greyhound unit and demerge the rest of its US business, using the proceeds to repay debt and invest in its UK rail and bus operations.

New York-based Sandell saw its initial demand dismissed by FirstGroup last month but earlier this week it called on FirstGroup’s new chairman, John McFarlane, to review the proposal, branding its rejection as premature.

However, Mr O’Toole said today: “I am confident we are on the right track to increasing the resilience of the group and improving returns and growth prospects for the benefit of all our stakeholders.”

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