2nd Apr 2014 07:14
LONDON (Alliance News) - Bus and rail company FirstGroup PLC Wednesday said that its operating profit in its last financial year was in line with expectations, excluding a GBP14 million hit on its First Student and Greyhound bus operations from the severe winter weather in the US.
In a trading update for the financial year to the end of March, the company said US dollar revenue is expected to be down 1.8% on the year at First Student and down 2.9% at Greyhound due to the severe winter weather that regularly swept across the US between December and March.
The company, which has recently been under pressure from a US-based activist shareholder to spin off its US operations, said its First Student operation was hit by the loss of over 4,000 school days across 75% of its territory due to the weather. The unit's operating margin is expected to be about 1% below the level it had predicted in January, when it said it the margin would be slightly ahead of fiscal 2013.
It said like-for-like revenue at Greyhound would have been up about 2.1% in the fourth quarter if the impact of the severe weather is excluded, reflecting an improvement in the US economy.
FirstGroup said it is continuing to work on contract portfolio pricing at First Student, while reducing costs and going for business with higher returns, while its investment programme at Greyhound remains on track.
Its other operations have fared better. It said like-for-like US dollar revenue is expected to have grown by over 7%, while like-for-like passenger revenue growth is expected to be 5.9% in UK rail and 1.8% in its UK bus operations.
"We are broadly on track to achieve our medium term targets and while we are encouraged by the progress made so far, there remains a significant amount of work ahead," Chief Executive Tim O'Toole said in a statement.
Sandell Asset Management, which has a stake of about 3.1% in FirstGroup, has called on management to spin-off the US student transport and transit operations into a US-listed entity and sell the Greyhound operations, using the money to pay down debt, pay for upcoming UK rail franchise bids and the turnaround of its UK bus operations. It thinks the moves would increase shareholder value by more than 50%.
However, FirstGroup has rejected the proposal, saying it isn't compelling and "contains a number of structural flaws and inaccuracies." It has pledged to press on with its own plans.
FirstGroup shares were up 0.5% at 139.6 pence early Wednesday.
By Steve McGrath; [email protected]; @SteveMcGrath1
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