FirstGroup hikes full-year forecasts after encouraging first half

11th Oct 2023 07:37

(Sharecast News) - Passenger transport operator FirstGroup issued an encouraging trading update for the 27 weeks ended 30 September on Wednesday, revealing a robust performance ahead of expectations.

The company said the First Rail division experienced a stronger-than-anticipated demand, especially within its open access operations, Lumo and Hull Trains, as the summer period saw an uptick in leisure travel, pushing demand upwards.

Furthermore, final variable fee payments due for management fee-based contracts for the 2023 financial year were agreed with the Department for Transport (DfT) at a rate superior to the amounts recorded in the group's 2023 financial statements.

As a result, First Rail's adjusted operating profit for 2024 was now projected to exceed expectations by £12, to £15m.

First Bus, despite navigating through ongoing inflationary pressures, also managed to trade slightly above expectations during the initial six months of the financial year.

Its performance was attributed to sturdy passenger volumes and productivity enhancements, spawned by transformative management actions.

Notably, in September, First Bus wrapped up consultations concerning its participation in two Local Government Pension Funds.

The division would terminate its involvement in these funds as of 31 October, and affected employees would be transitioned into the First Bus Retirement Savings Plan.

FirstGroup said it forecast an annualised cost saving of £2m to £3m, with an anticipated saving of roughly £1m in the 2024 period.

Furthermore, the settlement of pension obligations, slated to be determined on the termination date, was projected to usher in an estimated group net cash inflow of up to £15m, following deductions for related costs.

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

"Our updated outlook for 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."

At 1044 BST, shares in FirstGroup were up 4.3% at 152.8p.

Reporting by Josh White for Sharecast.com.