Update: FirstGroup warns of £14m hit after weather woe in North America

Tim O'Toole, chief executive of FirstGroup Tim O'Toole, chief executive of FirstGroup

Wednesday, April 2, 2014
10:38 AM

Bus and train operator FirstGroup said today that underlying operating profit for its financial year to March 31 would be in line with expectations, but warned of a £14million hit from the impact of snow and ice on its North American businesses during the final quarter.

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In a final trading update ahead of its annual results, due to be announced on May 21, First also cautioned that, following a review of its treatment of exceptional items, a number of one-off costs, particular those associated with rail franchise bids and some property disposals, would be included in the results for the year.

However, it said that its UK Bus business a major operator in East Anglia was expected to deliver like-for-like passenger growth of 1.8% for the year, with “good” growth in volume overall.

“This encouraging performance is despite the continued challenges posed by economic conditions in some of our local markets,” the group said.

“We continue with our step-by-step plan to reposition the business through network design and fares structure improvements, further cost optimisation, and investment in fleets and technology. Over the medium term, this repositioning will allow us to raise margins to double digit levels.”

First said that its UK Rail operations were expected to show a 5.9% increase in like-for-like passenger revenue, underpinned by continued strong volume growth across all of our train operating companies, which include Capital Connect, Great Western, Transpennine Express, Hull Trains and Scotrail.

In North Amercia, however, the group’s First Student school bus business was hit by widespread snow and ice from December onwards, with increased operating costs and lost school days expected to result in the operating margin for the year coming in about 1% below previous expectations.

First’s Greyhound coach operation also suffered “significant disruption” as a result of the severe weather, with revenue in US dollar terms now expected to be 2.9% lower for the year, although, excluding the impact of bad weather, like-for-lke revenues for the final quarter were expected to be about 2.1% higher as the underlying improvement in the business continued.

And the group added that its First Transit public sector division had delivered another strong peformance, with US dollar like-for-like revenue expected to be more than 7% higher, with margins in line with expectations.

FirstGroup chief executive Tim O’Toole said: “We have made satisfactory progress on our key priorities in the year, with good performances in four of our divisions partially offset by slower progress in First Student, where we have a detailed programme underway to reposition the contract portfolio, increase returns and drive further cost efficiencies.

“We will deliver earnings growth this year, albeit suppressed by the historically severe weather, particularly in North America. We are broadly on track to achieve our medium term targets and while we are encouraged by the progress made so far, there remains a significant amount of work ahead.

“Our priorities are clear and plans are underway to build on our market-leading positions and ensure the group delivers sustainable cash generation and value creation over the plan period and beyond.”

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