Great Western exit hits FirstGroup

11th May 2011 10:43

Rail and bus operator FirstGroup has decided not to take up an option to extend the First Great Western franchise that operates between London and the west.The decision, which sees First Great Western exiting the franchise in 2013, three years early, results in a £59.9m charge that appears in its full-year results to 31 March.Pre-tax profits declined to £127.2m from £175.3m over the same period the previous year, on revenues that rose to £6.43bn from £6.26bn.The decision to exit the Great Western franchise comes as FirstGroup sets its sights on a bigger contract in the area."The government has announced franchise reform and major investment in the region including the redevelopment of Reading station, resignalling and electrification of the Great Western Main Line, the Intercity Express Programme and Crossrail," chief executive Tim O' Toole said."With our unique knowledge of the franchise we believe we are best placed to manage these projects and capture the benefits through a longer-term franchise."FirstGroup has also seen margins come under pressure at its US school bus business, which has been hurt by restraints on school board budgets.The company said that it has been encouraged by improving trends in UK rail and its US bus business Greyhound, while bus operations in the UK remain steady. "The group is well placed with market leading positions in a sector that is a key enabler of economic growth," O' Toole said. "With diverse operations that are fundamentally robust and a team with a clear focus on creating a stronger business, the group has good prospects in all of its key markets to continue to deliver long-term value for shareholders."---RG