FirstGroup hit by school bus business

11th Mar 2011 07:03

Bus and train group FirstGroup remains on track to hit full-year earnings and cash targets, but it's been a bumpy journey for the school bus business.Improving trends in UK rail and American coach unit Greyhound, plus a steady performance by UK bus and transit operations, have encouraged the Aberdeen-based firm.But that's offset by further pressure on First Student's margin due to poor weather and as school board's cut back on services. Trading in the fourth quarter was "disappointing", especially last month.FirstGroup, which runs about 60,000 yellow school buses in North America, says schools are changing routes to cut transport spend, increasing labour costs for the bus operators. It said in January that revenue would be slightly lower this year. Margins at the unit are put at around 8% for the year to 31 March 2011 and are likely to remain under pressure in the new financial year.Elsewhere, the UK bus division should deliver annual like-for-like passenger revenue growth of 1.4%, while UK rail is ahead of expectations at 5.1%.Like-for-like revenue at Greyhound is expected to increase by 0.6% following an encouraging return to revenue growth in the final quarter."The highly cash generative nature of the group, together with the expectation of moderate earnings growth this financial year supports the board's policy to increase dividends by at least 7% per annum alongside our net debt reduction programme, it says.