First UK businesses seeing passenger growth

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Group appears on road to recovery, though Greyhound saw a weak quarter in the USA

FirstGroup has reported on its trading since October 1, 2014.

First said its UK Bus transformation programme is on track, with overall like-for-like passenger volume growth of 1.4% in the period. Overall like-for-like passenger revenue increasing by 2.7%, with some of local operations beginning to put through inflation-based price increases. Key elements of the group’s plans to restore double-digit margins in UK Bus over the medium term – including more disciplined operations, further fleet investment and mobile and smart ticketing initiatives – have continued to progress.

First’s UK rail businesses achieved like-for-like passenger revenue growth of 7.3%, underpinned by robust passenger volume growth.

In the USA, First Student’s operating performance in the period has benefitted from improved pricing achieved on contracts awarded in the 2014 bid season making an impact for the first time, the operator said. It added that market conditions are improving modestly with organic growth still limited. The company said it is delivering against its target of $50m per annum in cost efficiencies and remain confident of achieving approximately $20m in the current financial year, with margins in excess of 7.5%.

First Transit’s expect revenue growth stands at approximately 6%, with margins of around 7% for the current financial year.

Greyhound’s like-for-like US dollar revenues in the period decreased by 1.1%. First said in order to mitigate the impact of lower demand on our profitability, it is actively managing mileage and timetables, and are flexing ticket prices in order to remain competitive. Nevertheless it expects margins for the full year to be modestly below the prior year level.

The group expects total cash outflow for the full year of approximately £100m, principally due to the cash outflow of approximately £70m associated with the end of the First Capital Connect franchise.

Chief Executive Tim O’Toole said: “Overall trading for the Group is in line with our expectations. Our First Student and UK Bus transformation plans are on track and both divisions are delivering the expected improvements in financial performance.

“Demand for Greyhound services over the important holiday period was adversely affected by the significant and rapid reduction in fuel prices, which makes car travel more affordable and competitive with our services. This was offset by good performances in First Transit and our UK Rail operations, which are both achieving growth towards the top of our expectations with robust margins. Overall we are on course to meet our full year expectations for the Group and we are confident that our multi-year plans will deliver improved cash generation and create sustainable value over the medium term.”