First expecting modest commercial revenue growth in UK Bus

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First UK Bus revenues has struggled with weakness in concessionary revenues, which is offsetting commercial revenue. DAVID BELL
First UK Bus revenues has struggled with weakness in concessionary revenues, which is offsetting commercial revenue. DAVID BELL

FirstGroup has provided a trading update for the six months to September 30, 2015, ahead of its half-yearly results due to be announced on Thursday, November 12, 2015.

Commercial passenger revenues in the group’s UK Bus business grew by more than 2% in the first half, although First said 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 of the year.

First said it remains focused on the cost efficiency elements of its turnaround, including improved driver productivity, greater fuel efficiency and reductions in maintenance expense, as well as measures to optimise its depot portfolio. It expects these actions to result in a one-time cost for the full year of approximately £7m, with the majority incurred in the first half. In the year, First expects trading margins to improve by one percentage point and by slightly less when the one-time depot costs are included.

Chief Executive Tim O’Toole said: “Overall trading for FirstGroup during the first half was in line with our expectations. We continue to progress our transformation plans which will drive sustainable improvements in the financial performance and cash generation of the group, despite a more challenging trading environment in some of our markets in the period.

“In First Student we concluded this year’s bid season with higher average price increases than in the previous year and a solid contract retention rate, which will continue to enhance the margins and returns in our largest business.

“Our ongoing transformation of UK Bus continues to deliver growth in fare-paying passenger revenues and cost efficiencies, despite the recent weakness in concessionary revenues seen across the market.

“Our yield management project in Greyhound is on track and First Transit continues to win additional business, though as anticipated, recent trading in both divisions has been affected by the substantial reduction in the oil price.

“On a like-for-like basis, our UK Rail division is outperforming our expectations, with strong passenger demand growth. 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.”