FirstGroup falls 9% as revenue, profits slip

Shares in Aberdeen-based bus and rail giant FirstGroup fell more than 9% after it said revenues in its third quarter fell by 9.5% due in part to UK flooding and a shortage of school bus drivers in North America driving up costs.

FirstGroup said its outlook for operating profit in the current financial year “is slightly lowered by trading in the period.”

The company said its First Bus revenues were affected by “lower than forecast high street retail footfall with exceptionally wet weather and flooding in some markets.”

FirstGroup said its First Rail business experienced slower passenger demand growth following the Paris terror attacks and in areas affected by flooding.

The firm said the timing of the school calendar hurt its North American school bus business First Student.

First Student had experienced higher costs related to “acute driver shortages in certain locations as a result of the tightening US employment market.”

“As previously indicated, First Student’s results this financial year will be impacted by fewer school days operated due to the timing of the school calendar,” said FirstGroup in an extensive trading statement.

“Schools will make these days up at the end of the academic year, which will fall into our 2016/17 financial year.”

The company’s First Transit business in North America “continues to be affected by the substantial reduction in the oil price in the third quarter of the prior financial year, which has resulted in lower demand for our shuttle services in the Canadian oil sands region.”

FirstGroup’s said like-for-like revenues at its Greyhound bus business fell in the third quarter by 5.2%, “continuing to reflect the reduced passenger demand experienced across the coach industry since fuel prices fell sharply in the prior year.”

FirstGroup chief executive Tim O’Toole said: “Our transformation plans continue to make headway despite a challenging third quarter trading period in our markets, with disappointing retail footfall and the terrible weather affecting First Bus, and our largest division First Student experiencing acute driver recruitment and retention challenges in certain locations.

“While these issues have slightly moderated our trading performance in the period they are not of a magnitude to materially affect our multi-year transformation plans, which we expect to deliver significantly improved cash generation in our next financial year as planned.

“Our ability to create sustainable value in the medium term continues to strengthen through our improvements to First Student’s contract pricing and cost efficiency, the transformation of Greyhound’s business model through improved systems and the restoration of profitable commercial passenger revenue growth to First Bus, while our disciplined but ambitious approach to rail franchising has resulted in the award of the TransPennine Express franchise to at least 2023.”

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