FirstGroup lifts profit expectations thanks to open access rail performance

FirstGroup expects annual earnings to be ‘slightly ahead’ of previous forecasts, following a strong performance by its rail business.

The Avanti West Coast owner told investors that open access operations within its rail division were benefitting from healthy demand, ‘effective yield management,’ and the resolution of one-off infrastructure claims.

Consequently, the Aberdeen-based firm said it expects to beat analysts forecasts of adjusted operating profits of £196.8million and adjusted earnings of £102.9million.

All aboard: Avanti West Coast owner FirstGroup noted that its rail division’s open access operations were benefitting from healthy demand

In the six months ending September, total journeys on the company’s trains grew by 8.9 per cent to 123.4 million compared to the same period the previous year, while passenger volumes on its buses rose by 12 per cent to 210 million.

Since then, the FTSE 100 business said trading at its bus division had performed well and was in line with expectations.

Graham Sutherland, chief executive of FirstGroup, said: ‘Our focus on operational delivery, driving demand for our services and growing and diversifying our portfolio has resulted in further progress in the second half of our financial year.

‘This leaves us well positioned to create further sustainable value for all our stakeholders.’

FirstGroup recently applied to operate an open-access rail service from London to Sheffield, and is holding discussions with Transport Scotland and Network Rail about extending some of its London-to-Edinburgh journeys to Glasgow.

FirstGroup owns open-access operators Lumo and Hull Trains; the former operates on the East Coast Main Line and the latter runs services between London and the Humber region.

Open access operators are firms that run trains on mainline routes but do not hold franchises with the UK government and receive no taxpayer funds.

The ORR said they can boost competition across the railway sector by cutting prices and increasing the number of destinations served.

Gerald Khoo, an analyst at broker Liberum, said: ‘The prospect of a Labour government that is likely to commit to the renationalisation of passenger rail contracts is adverse for sentiment towards FirstGroup’s Rail division. 

‘However, there is significant value in open access operations and non-train operating activities that ought to not be affected by renationalisation.’

FirstGroup slumped to a £68.4million first-half loss due to substantial one-off charges related to its withdrawal from two local government pension schemes.

FirstGroup shares were 1.9 per cent higher at 164.5p just after midday on Tuesday and have climbed by approximately 58 per cent over the past 12 months.

This post first appeared on Dailymail.co.uk