Shares of Aberdeen-headquartered transport firm FirstGroup plc rose about 15% on Thursday after it beat annual profit forecasts as its bus passenger numbers were helped by a government scheme to cap fares in England and the free travel scheme for the under 22s in Scotland.
FirstGroup also launched an additional buyback of shares worth £115 million following receipt of proceeds from exiting the North American market.
The group’s adjusted operating profit from continuing operations rose more than 50% to £161 million for the year ended March 25, 2023.
That beat the £149.1 million expected by analysts in a company-compiled consensus.
In its annual results, FirstGroup said revenue from continuing operations increased to £4.755 billion from £4.591 billion “principally reflecting improving passenger volumes in First Bus …”
Full year dividend will rise to 3.8p from 1.1p.
On First Bus, the company said: “The division’s total revenue increased significantly in FY 2023, to £902.5m, from £789.9m in FY 2022. Total passenger revenue increased by £90.0m to £660.0m …
“Total passenger volumes increased by 20% from FY 2022 levels during the year. The £2 fare cap scheme in England that was introduced in January 2023 and recently extended to November 2024, with an increase in the cap to £2.50 from November 2023, and the free travel for Under 22s scheme in Scotland, in place since January 2022, have both positively impacted volumes.”
Last month, the UK government’s Transport Secretary Mark Harper announced he would not renew or extend FirstGroup’s contract for the Transpennine Express (TPE) business at the end of May.
First Rail, overall, reported 263 million passenger journeys in FY 2023, up from 201 million. Great Western Railway was awarded the National Rail Contract to June 2025 with an option for the DfT to extend it to June 2028, and the South Western Railway contract was extended to May 2025. The West Coast Partnership (incorporating Avanti West Coast) contract was extended to October 2023 and discussions with the Department for Transport on a National Rail Contract for WCP are ongoing.
On First Rail, the firm said: “In May 2023 the DfT announced its decision not to exercise its option to extend TPE’s NRC and its Operator of Last Resort has now taken over the delivery of passenger services on the network.
“The decline in TPE’s service levels was due to circumstances largely out of our control, mainly the challenging industrial relations environment including the withdrawal of longstanding industry-standard overtime arrangements when TPE was undertaking unprecedented driver training requirements due to infrastructure upgrades.
“The loss of the contract was a huge disappointment for our team which has worked extremely hard to improve services and to successfully recruit and train more drivers than ever before.
“We had also worked closely with the DfT and Transport for the North on an agreed recovery plan, which had led to a c.40% reduction in cancellations in May 2023.
“The decision has not altered our belief in the important role of private rail operators in the delivery of vital, environmentally friendly transport for customers and communities across the UK.”
FirstGroup CEO Graham Sutherland said: “We have delivered a strong financial performance in FY 2023.
“In First Rail, our teams have worked extremely hard on our service objectives, and the notable success of our open access operations is further recognition of the considerable expertise and ambition of our team.
“In First Bus, we are seeing the benefits of actions we have taken to transform the business, and we are establishing ourselves as leaders in decarbonisation as we accelerate the electrification of our bus fleet to deliver value not just for FirstGroup but for all our stakeholders.
“Our leading positions in bus and rail, together with the strength of our balance sheet, will allow FirstGroup to create long-term shareholder value while delivering the vital services and innovation that are key to achieving society’s sustainability and economic goals.”