Firstgroup trading in line; UK Rail stands out

Transport operator Firstgroup said overall trading is in line with management’s expectations and its mult-year transformation plans continue to progress, despite a more challenging trading environment in some of the group’s markets.

In a trading update for the six months to the end of September, Firstgroup said UK Rail delivered further strong passenger volume growth, underpinning expected like-for-like passenger revenue growth of approximately 7%. Overall financial performance was toward the top of its range of expectations.

For its UK Bus division, the group’s transformation plan continued to deliver growth in commercial passenger revenues of more than 2% in the first half. However, this was partially offset by the ongoing weakness in concessionary revenues being seen across the industry. Overall like-for-like revenue growth for the division is expected to be 1.3% in the first half, it said.

The company said for First Student, it concluded this year's bid season with higher average price increases than in the previous year at approximately 5.3% while the contract retention rate was modestly ahead of its expectations at over 85%. Firstgroup said the contract pricing progress it has made will principally benefit results for its largest business in the second half and beyond.

In addition, Firstgroup said its Greyhound brand continues to actively manage its timetables and variable costs to mitigate the adverse impact on passenger demand experienced across the intercity coach industry since fuel prices fell sharply in October/November 2014.

It expects passenger demand will remain muted if current oil prices are sustained throughout the year, with LFL revenues expected to fall 6.2% in the first half, with the most substantial reductions in demand on longer haul journeys. Greyhound Express remains more resilient, with LFL revenues expected to decrease by 3.1%.

Chief executive Tim O’Toole said: “For the full year, we expect the progress of our non-rail businesses to largely offset the reduced size of our UK Rail franchise portfolio compared with the prior year, and remain confident that our multi-year transformation plans will achieve our medium term goal of sustainable cash generation from improved margins.”