New Firstgroup chief looks to get firm back on track

● Mixed figures reveal jump in revenues and underlying profit but rail proves drag

Firstgroup, the Aberdeenheadquartered transport giant, has appointed a new chief executive and posted a jump in revenues but signalled an amber light over earnings at its rail division.

The group, which is a joint venture partner in the strikehit line South Western Railway, said interim chief operating officer Matthew Gregory had taken on the top job with immediate effect.

His appointment comes after former boss Tim O’toole resigned abruptly in May following results showing the group swung to a large fullyear loss. Executive chairman Wolfhart Hauser had taken over at the helm following O’toole’s departure, but will now revert back to his nonexecutive chairman’s role.

Details of the changes came as the group reported interim pre-tax losses widening to £4.6 million in the six months to 30 September from £1.9m a year earlier due to restructuring and reorganisation costs from the withdrawal of Greyhound services in Western Canada.

But revenues rose 19.2 per cent to £3.3 billion and on an underlying and constant currency basis, pre-tax profits jumped 63.4 per cent to £42m, while earnings lifted 9.2 per cent to £92.4m.

But Firstgroup warned that its rail arm, which includes the South Western Railway (SWR) and Great Western Railway franchises, would see annual underlying operating profits fall year-on-year. Half-year underlying rail earnings reversed 5.8 per cent to £29.3m.

On the rail performance, Firstgroup said: “Industry conditions remain very challenging with macroeconomic uncertainty, infrastructure upgrade works across our networks and the industrial action in SWR all affecting our franchise performance levels.”

The group’s overall performance has been weighed down by woes at its Greyhound bus service in the US, which has been struggling amid the rising popularity of low-cost airline competition. Greyhound’s interim underlying operating profits more than halved to £10.2m from £23.5m a year ago. But the firm said its group-wide performance was “encouraging” in the first half and maintained its overall outlook for the full-year.

Gregory said: “Our First Rail operations continued to focus on improving services for our passengers while maintaining overall profitability in a more challenging industry environment during the period.”

John Moore, senior investment manager at Brewin Dolphin Scotland, said: “In 2014, Firstgroup ceased paying dividends in order to reduce debt and refocus the business.

“However, shareholders have yet to see the benefits of this action in terms of positive return. [These] results highlight that, at best, the immediate position remains mixed.

“In theory, Firstgroup has potential; but, given past performance, you would forgive investors for taking it with a pinch of salt.”