Shares in FirstGroup tumble as hurricanes whip up profit storm

SCOTT WRIGHT

FirstGroup chief executive Tim O’Toole said the company’s UK bus and rail operations had helped offset the challenges

Mr O’Toole acknowledged FirstGroup’s UK bus business was continuing to feel the weight of economic uncertainty, the rise of online shopping and road congestion. But he said the period had seen the company manage to push through some fare rises. This followed years of reductions designed to make its prices more competitive.

Asked about the possible effect on demand from the recent 0.25 per cent rise in interest rates, Mr O’Toole said he was aware it could influence “consumer views and expectations”. But he said the company would have to “just wait and see” adding that, if there is an impact, it would “adjust our operations accordingly”.

In UK rail, the company said first-half trading had been better than anticipated, with like for like passenger revenue rising 3.2 per cent, and cost efficiencies helping to boost margins.

The period saw FirstGroup commence

operations in August on the South Western Railway (SWR) franchise, which it took over from Stagecoach following a successful bid with Hong Kong’s MTR Corporation in March.

Group revenue leapt 8.1 per cent to £2.77bn when the new franchise and favourable foreign exchange rates were taken into account. Excluding SWR, whose arrival marked a major coup for FirstGroup following the loss of the ScotRail franchise to Abellio, and the currency factor, group revenue was up 0.9 per cent.

Mr O’Toole pledged “massive increases in capacity” across all of its rail franchises – SWR, Great Western Railway and TransPennine Express - which he said would again illustrate the benefits that privately-run railways can bring to passengers.

FirstGroup has previously declared its

it faced across the Atlantic.

intention to bid for the forthcoming West Coast and East Midlands rail franchises but Mr O’Toole signalled that the company would not over-extend itself.

“We’re preparing ourselves to put in a competitive bid [for West Coast] but one thing the recent past has taught us is we have got to stick to our very disciplined bidding, and not get carried away,” he said. “We have to make sure we only win franchises that we can deliver.”

Meanwhile, looking to the second half, Mr O’Toole said he expects FirstGroup to benefit from its “normal seasonal bias”, as well as its ongoing drive for cost efficiencies and the the impact of the SWR franchise. He added: “All in all I think we are really set up for the full year and the way cash came in makes us even more comfortable and confident in our full-year results.”

Shares were down 7.3p at 102.6p.