Compensation payments due to track closures were a key reason for a rail profits boost at First Group, prompting chief executive Tim O’Toole to warn against over optimistic expectations for the division in the near term, writes Bradley Gerrard.
Network Rail makes the payments to train companies if its work prevents services running. Parts of the Great Western Railway line have been closed intermittently because of an electrification scheme. The payments meant rail margins rose 0.9 percentage points to 4.6pc for the six months to Sept 30. But Mr O’Toole warned he was “cautious on the rate of passenger growth” for the rest of its trading year, predicting full-year margins would be below the 4.2pc level in 2016-17.
UK rail, First Group’s largest area by operating profits, should benefit from the London Waterloo-based South Western rail franchise it took control of in August.
Its Puerto Rican contracts were hit by severe hurricanes, knocking $6m (£4.5m) off First Transit’s operating profits (£20.9m). Greyhound suffered from higher maintenance costs and growing competition from low-cost airlines.
First Group’s Greyhound arm was hit by higher maintenance costs
Tim O’Toole Chief executive