UK Bus sees improved profit margins and passenger numbers, though revenue and overall profits drop
FirstGroup has released its preliminary results for the year to March 31, 2014.
Overall revenue decreased by 2.7% to £6,717.4m. Profit before tax increased to £58.5m, a significant turnaround from the previous £28.9m loss. However, this was £16.6m less than expected, which First attributed to poor weather in the US disrupting its First Student operations. As a result of this, First failed to meet a pledge to pay out £50m to investors for 2014.
Across its other divisions, First Transit saw a record year of growth, maintaining its margin performance. In Greyhound, there was an underlying improvement in demand trends and the continuation of a profitable expansion of Greyhound Express, which was partially offset by weather disruption to the network. In UK Rail, strong revenue growth was underpinned by continued passenger volume increases.
In First’s UK Bus division, an overall passenger volume increase was achieved for the first time in several years, a 1.8% like-forlike increase once adjusted for the sale of the London business. The company attributed this to network transformations, fare reviews and significant investments in fleet and service during the year. Revenue declined to £930.2m (2013: £1,128.2m) and operating profit declined to £44.4m (2013: £50.8m), but operating margin increased to 4.8% from 4.5%.
Commenting, FirstGroup Chief Executive Tim O’Toole said: “We have made satisfactory progress on our key priorities in the year, delivering earnings growth despite the historically severe weather in North America. We saw good performances in four of our divisions partially offset by slower progress in First Student, where driving forward our detailed recovery plan is a key priority. Although part way through the current bid season, our programme to address contract portfolio pricing has made encouraging progress, though we recognise that we still have some way to go.
“The Group is broadly on track to achieve our medium term targets and, while we are encouraged by progress so far, there remains a significant amount of work ahead. We are confident that we have the right plans underway to build on our market leading positions, strengthen the resilience of the Group, and return to a profile of sustainable cash generation and value creation for the long term.” John McFarlane, who replaced FirstGroup’s long-standing Chairman, Martin Gilbert, said: “It will take some time before the group is able to deliver a profile of consistent surplus cash that can be distributed to shareholders. “First Transit, Greyhound and UK Rail are delivering returns broadly in line with what I would expect, though clearly we have significant opportunity for further improvement.
“On the other hand, two of our businesses, First Student and UK Bus, have not performed, and are well short of their potential and delivering lower margins than their competitors. Although both divisions have faced challenging economic conditions in their respective markets, we cannot escape that we should have managed them better. Progress has been made in addressing the performance of these two divisions, with headway being made in UK Bus in particular, but there remains much to do still. Fixing these and delivering the business plans we announced recently is the Group’s key priority.”