17th Jan 2014 08:34
LONDON (Alliance News) - Transport operator FirstGroup PLC Friday said that it had traded in line with its expectations in its fiscal third quarter, with good performances in its UK rail and bus operations and its US greyhound and First Transit units offsetting a slowdown in its US First Student business.
The company made no mention of its ongoing talks with shareholder Sandell Asset Management Corp, which earlier this week urged the company to reconsider its rejection of Sandell's proposal that it should break itself up and spin off its US business, selling Greyhound as part of the process.
In its first update under new Chairman John McFarlane, FirstGroup said First Student's market remained tough and the business was experiencing limited opportunities to grow or raise prices. It said the operation was hit by bad weather conditions during the quarter to end-December, although it expects full-year unit revenues to be broadly flat on the year.
It said its cost savings programme at First Student remained on track to deliver USD100 million in annual savings in the current year, though progress towards its medium-term margin target would be slower than hoped because of the worsening in trading conditions. Margins this year will only be slightly ahead of last year, it said.
Trading in its other divisions was more positive.
It said like-for-like passenger revenue rose 6.3% in the third quarter in its UK rail business, which was also short-listed for the Intercity East Coast rail franchise Friday. It said all its current franchises had experienced volume growth.
Like-for-like passenger revenues were also up 2.0% in its UK bus unit as passenger volumes continued to rise. It said it is on track to return the division to double-digit margins in the medium term by cutting costs and improving operational efficiency.
In the US, like-for-like revenues were up 0.3% at Greyhound. with strong sales over Christmas and Thanksgiving partially offset by the bad weather during the period and as the weak US economy continued to impact Greyhound's typical customer base.
FirstGroup expects full-year revenue growth of over 7% in its First Transit business. Contract retention for the year-to-date is 95%, it said.
Still, FirstGroup shares were down 2.2% at 139.9 pence early Friday, one of the biggest declines on the FTSE 250.
By Steve McGrath; [email protected]; @SteveMcGrath1
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