Shares in FirstGroup, the bus and train operator, rose more than 17 percent on Thursday after the Aberdeen-based company’s results came in well above market expectations, despite the company losing a major rail contract.
FirstGroup’s adjusted attributable profit for continuing operations, a figure excluding central costs, cash interest and tax, for the 52 weeks ended March 25, more than doubled to £82.1 million from £36.2 million the year before.
The main discontinued operations were the company’s US bus business, including the Greyhound intercity bus business, the sale of which was announced in October 2021. Revenue from continuing operations rose 3.6 percent to £4.76 billion.
It lost the UK Department of Transport’s contract to operate the TransPennine Express (TPE) operation in northern England last month after it ran into problems with train cancellations. However, the company said its outlook for the current year was in line with expectations despite challenging economic and labor relations.
FirstGroup still holds the largest share of the Avanti West Coast and South Western Railway rail franchises, and also wholly owns the operator of the Great Western Railway franchise. The company has two fully commercial open access operations, Lumo, which provides services from London to Edinburgh, and Hull Trains, which run from London to Hull.
Graham Sutherland, CEO, said he was “obviously disappointed to lose (TPE)”. He added: “In terms of impact on the business, we are the largest private sector rail operator in the UK. It will have an impact, but overall we will deliver a rail business that is in line with expectations.”
Sutherland said TPE, like Avanti West Coast, suffered from reduced staff willingness to work on rest days, something both operators had relied on to keep trains running, especially on Sundays.
He noted that open access operations have had a “very, very strong year,” driven primarily by demand for leisure time. The open access operations have wage agreements with their staff that have allowed them to work normally during much of the industrial action that has hit other UK train operations over the past year.
Like other train operators, FirstGroup’s UK franchised operations are no longer exposed to the risk of fluctuating fare revenues borne by the DfT. Instead, management fees are paid depending on performance.
Avanti’s services, which were also going through a period of severe disruption, had recovered well, Sutherland said.
FirstRail reported an adjusted net operating profit of 42 percent to £125 million, while revenue rose 2.4 percent to £3.89 billion.
The company’s FirstBus bus division’s adjusted operating profit rose 29 percent to £58.4 million, while sales rose 14 percent to £903 million. Sutherland said the division had benefited from a cap on local bus fares of £2 in England and a Scottish Government policy of offering free bus travel to anyone under the age of 23.
On a statutory basis, the company posted a pre-tax profit of £129 million for the 52 weeks ended March 25, up from £654 million last year, on a 15 per cent drop in revenue to £4.76 billion.
At noon, shares of the company were up 20.2 pence to 138.9 pence.