O’Toole steps down as First reveals £326 million loss
FIRSTGROUP Chief Executive Tim O’Toole stepped down from his role on May 31, as the company posted full-year statutory pre-tax losses of £326.9 million for the year to March 31 2018. Wolfhart Hauser has been appointed as executive chairman until a permanent successor is appointed.
Although group revenue increased from 2017’s figure of £5.65 billion to £6.39bn, operating profit fell from £339m to £317m, with pre-tax profits down £10m to £197m. First also warned that its TransPennine Express (TPE) franchise is now forecast to make losses of up to £106.3m over its remaining life.
For the company’s rail division - which includes Great Western Railway, South Western Railway, TPE and open access operator Hull Trains - full-year revenue increased from £1.27bn to £1.67bn, with adjusted operating profits increasing by £4m to £57.8m. However, the adjusted operating margin fell from 4.2% to 2.9%.
First says the increase in revenue was primarily driven by the inclusion of the South Western Railway franchise from August 2017. Like-for-like passenger revenue growth was 4.1%, and passenger numbers rose by 1.4%.
However, TPE made an operating loss off £6.5m during the financial year, and the rail division reported a statutory loss (which includes all other costs and income beyond operations) of £50.6m for the year. It says that slowing growth could be blamed on wider macroeconomic uncertainty, modal shift due to lower fuel prices, and changes to working practices which could affect season ticket sales.
GWR reported like-for-like passenger revenue growth of 2.7% compared with 0.3% in the previous year, and TPE 10% (up from 5.9%). Hull Trains’ revenue growth slipped to 3.3%, from 5.8% in the full year to March 31 2017.
FirstGroup says its rail portfolio as a whole “has and will continue to generate good returns for the group. Our decision to provide for forecast losses of up to £106.3m over the remaining life of the TPE contract does not affect our plans for the remainder of the franchise to increase capacity on the TPE network by more than 80% and create a true inter-city railway for the North, in conjunction with our industry partners.”
It adds that the rest of its rail portfolio “is expected to generate satisfactory returns”, but that payments for rail network unavailability due to infrastructure improvements and repairs “will continue to cause swings in period to period profits”.
Its bus division reported a £13.2m increase in operating profits to £50.2m, but First Student operating profits fell from £171.1m to £156.5m, First Transit from £73.3m to 58.2m, and Greyhound from £42.6m to £25.5m.