Firstgroup profit drops on the back of rail franchise losses

Bus and train operator Firstgroup posted a 33% drop in first-half pre-tax profit as revenue fell due to the loss of certain rail franchises and a later than normal start to this school year for US students.

For the six months to the end of September, adjusted pre-tax profit came in at £22.4m from £33.3m in the same period last year, on revenue of £2.44bn, down 17%.

The drop in revenue was mostly down to loss of the Capital Connect and ScotRail franchises, as well as fewer operating days in First Student as a result of a later than normal start to this school year.

Fewer First Student operating days this year reduced revenue by £18.3m and operating profit by £7.8m, the company said.

In terms of the different divisions, First Student delivered contract pricing increases, although cost efficiency benefits were moderated by driver shortages and fewer operating days.

The First Transit unit won more contracts, which helped to offset reduced Canadian oil sands activity.

First Bus experienced mixed trading conditions, although cost actions taken in the business are on track.

Chief executive Tim O’Toole said: “Overall trading for the group during the first half was in line with our expectations, with outperformance in some areas offsetting the more challenging market environment in others.

"Our expectations for the group's overall trading performance for the full year are slightly increased as a result of the change in the basis of estimate for rail pensions. We continue to expect underlying net cash flow for the full year to be broadly flat. Our multi-year transformation plans are now driving the improvements in our underlying performance that are central to sustainable value creation and cash generation over the medium term.”