First­group swings to loss but eye­ing re­turn to div­i­dend

● Seven-fig­ure hit from US hur­ri­canes al­though net cash in­flow jumps by £86m

The Scotsman - - Perspective / Letters To The Editor - By EMMA NEWLANDS

Trans­port gi­ant First­group has swung to a first-half loss, weighed down by the im­pact of “se­vere” hur­ri­canes in the US, but said it re­mains set to hit its full-year tar­gets.

The Aberdeen-based firm re­ported a statu­tory pre-tax loss of £1.9 mil­lion for the six months to 30 Septem­ber, com­pared to a pre-tax profit of £11.1m 12 months pre­vi­ously. Rev­enues jumped 8.1 per cent to £2.8 bil­lion.

The­groupal­so­said­it­was­not propos­ing to pay a div­i­dend for the half, “but will con­tinue to re­view the ap­pro­pri­ate tim­ing for restart­ing div­i­dend pay­ments”.

Chief ex­ec­u­tive Tim O’toole told The Scots­man: “Over­all trad­ing for the group was con­sis­tent with what we set forth at the end of [the last] fis­cal year for the first half.” He also high­lighted cash­flow pro­gress­ing by £86.2m, with net cash in­flow to­talling £97m.

First Rail saw like-for-like pas­sen­ger rev­enue growth of 3.2 per cent, boosted by the South Western Rail­way fran­chise that started in Au­gust, and which O’toole ex­pects to sub­stan­tially grow ca­pac­ity.

First Bus ex­pe­ri­enced like­for-like pas­sen­ger rev­enue growth of 0.6 per cent, al­though the group said in­dus­try con­di­tions “re­main un­cer­tain, with high street re­tail foot­fall trends and con­ges­tion af­fect­ing pas­sen­ger de­mand in many of our mar­kets, par­tic­u­larly in the North and Scot­land”.

O’toole also flagged the in­tro­duc­tion of con­tact­less and mo­bile tick­et­ing in lo­ca­tions north of the Bor­der. “We’ve been work­ing with the Scottish au­thor­i­ties about deal­ing with con­ges­tion,” he added, not­ing en­cour­ag­ing de­vel­op­ments in this area.

“Busi­ness is ac­tu­ally hold­ing up al­right in Scot­land… the UK First Bus busi­ness has done a bit bet­ter than we had orig­i­nally fore­cast for this pe­riod.”

He added that over­all, the US has re­cently “re­ally held up the UK, and in this case the UK rail and bus did a bit bet­ter than ex­pected, al­low­ing us to off­set the im­pact of the hur­ri­canes in North Amer­ica, which were so ex­tra­or­di­nary this year”.

Ad­justed op­er­at­ing profit for its First Tran­sit unit was down by about $6m (£4.6m), which the group mainly at­trib­uted to the con­se­quences of hur­ri­cane Maria, which dev­as­tated Puerto Rico, where it runs three con­tracts. To­tal ad­justed pre-tax profit was up by about 40 per cent to £30.5m.

The first half also saw the group’s First Stu­dent arm ac­quire 94-bus op­er­a­tion Fal­con Trans­porta­tion in Illi­nois, with O’toole ex­pect­ing more deals of this kind to fol­low suit.

All told, he said the group ex­pects to hit its full-year goals. And he also stressed its cash de­liv­ery. “It’s go­ing to al­low us to delever­age and ul­ti­mately re­turn to a div­i­dend­pay­ing com­pany, so I re­ally think we’re well-po­si­tioned.”

Shore Cap­i­tal an­a­lyst Martin Brown said the re­sults largely aligned with ex­pec­ta­tions. “With the start of the debt re­fi­nanc­ing less than 12 months away, in­vestors should in­creas­ingly be fo­cused on the fore­cast strong cash gen­er­a­tion at First­group.”

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