FirstGroup hikes profit outlook on strong bus and rail demand

FirstGroup has upgraded its annual earnings guidance following strong demand for its rail and bus services over recent months.

The transport business now expects adjusted operating profits for the 2024 financial year will be around £14milion to £20million above previous guidance, while adjusted attributable profits will be approximately £7million to £10million higher.

Up to £15million of extra operating profits are set to come from the final variable fee payments due for First Rail management’s fee-based contracts in the previous fiscal year.

Raising forecasts: FirstGroup has upgraded its annual earnings guidance following substantial demand for its rail and bus services over recent months

For the 27 weeks ending September, the company said passenger levels on its open access operations, Lumo and Hull Trains, were ‘stronger than anticipated’ thanks to more people taking summer leisure trips.

Bumper passenger volumes also helped trading in FirstGroup’s bus division surpass forecasts despite widespread cost-of-living pressures.

During the period, the Aberdeen-based firm transferred First Bus employees enrolled in two local government pension funds onto a new retirement plan. It expects to save about £2million to £3million in annualised costs from the move.

Graham Sutherland, chief executive of FirstGroup, said: ‘Over the last few months, we have successfully built on the strong financial performance we reported at our full-year results in June.

‘Our updated outlook for FY 2024 reflects a strong performance in our First Rail division, which is testament to the hard work and capabilities of our teams.’

‘In First Bus, we are delivering sustainable revenue growth as passenger volumes increase, and we continue to benefit from the actions we have taken to transform the business.’

FirstGroup is one of the UK’s largest regional bus operators, transporting more than one million passengers each day on over 4,500 vehicles.

But, while it transports more people on buses, the firm derives the overwhelming majority of revenue from its rail services.

First Rail runs two open-access route operators and three management fee-based train companies: Avanti West Coast, Great Western Railway and South Western Railway.

Last month, the UK Government renewed a nine-year contract for Avanti, which is 70 per cent owned by FirstGroup and manages long-distance passenger services on the West Coast Main Line.

The announcement generated controversy because of Avanti’s poor record on punctuality and train cancellations, partly caused by drivers refusing to work overtime shifts.

Defending the decision, the Department for Transport said the train operator had slashed the proportion of axed services from 25 per cent to ‘as low as’ 1.1 per cent over the previous year.

FirstGroup was stripped of its contract to run the TransPennine Express franchise in May due to continuous delays and cancellations.

FirstGroup shares were 4.2 per cent up at 152.7p on Wednesday morning, making them the second-highest riser on the FTSE 250 Index. They have expanded by around 36 per cent over the past 12 months.

This post first appeared on Dailymail.co.uk