FirstGroup reassures with UK bus and US student turnaround

21st Jan 2015 11:46

Although its US Greyhound bus services suffered from increased competition, FirstGroup revealed a largely reassuring third-quarter update with full-year performance likely to be in line with expectations.Strength from the UK rail and US First Transit businesses more than offset issues at Greyhound, where demand over the important holiday period was hit by tumbling fuel prices making car travel more competitive with its services.Greyhound's like-for-like US dollar revenues in the period decreased 1.1% and margins are likely to be "modestly" hit, despite active efforts to mitigate the effect by flexing mileage, timetables and ticket prices in order to remain competitive."Overall trading for the group is in line with our expectations," said chief executive Tim O'Toole.He added that transformation plans for First Student and UK bus, the group's biggest divisions, were on track and both divisions were delivering the expected improvements in financial performance, and achieved growth towards the top of internal expectations with robust margins."Overall we are on course to meet our full year expectations for the group," said O'Toole, "and we are confident that our multi-year plans will deliver improved cash generation and create sustainable value over the medium term."The UK bus arm enjoyed overall like-for-like passenger volume growth of 1.4% in the period, with volumes of commercial passengers responding to selected fare rebasing, network redesigns and additional investment in fleet and ticketing.As hoped, First Group began to achieve positive yield from UK buses in the period with overall like-for-like passenger revenue increasing by 2.7%, with some of our local operations beginning to put through inflation-based price increases.At First Student, the improved pricing achieved on contracts awarded in the 2014 bid season made an impact for the first time and market conditions were said to be "improving modestly" and cost efficiency gains on track to enable it to meet medium-term targets of double-digit margins.Analysts at Liberum said: "Although this mix shift is a slight negative, importantly the turnaround at the biggest divisions (Student and UK Bus) appears on track, with UK Bus seeing strong volume growth and positive yield development.