10th Jun 2015 07:52
LONDON (Alliance News) - FirstGroup PLC Wednesday reported higher profits for its last financial year as its improvement plan delivered higher margins in its US First Student and UK bus operations, and while it expects its plan to drive further improvements in most businesses in the current year it is also facing a hit to its UK rail unit after it lost two key franchises.
The company pledged early last year that it would turnaround its underperforming businesses, after rebuffing demands by activist shareholder Sandell Asset Management to break itself up by spinning off its US operations. Sandell said a company breakup would improve shareholder returns, a claim disputed by FirstGroup, even though it currently isn't paying a dividend as it puts money into the turnaround plan.
That turnaround plan is working in some of its businesses.
It reported a pretax profit of GBP105.8 million for the year to end-March, up from GBP58.5 million a year earlier, while the closely-watched figure excluding amortisation charges and some other items rose to GBP163.9 million, from GBP111.9 million, meeting analysts' expectations for a figure of around GBP160.0 million.
"The pricing improvements we made in the 2014 bid season together with further cost savings mean we have made solid margin progress in First Student for the year, and we are also encouraged by the results achieved at this stage in the 2015 bid season. In UK Bus we continue to deliver passenger volume growth, positive yield and further cost efficiencies from our locally focused turnaround actions," Chief Executive Tom O'Toole said in a statement.
The improvement came even though revenue fell to GBP6.05 billion from GBP6.72 billion, as its US Greyhound bus operations were hit by bad winter weather, it lost the First ScotRail and First Capital Connect UK rail franchises, and due to the sale and closure of some UK bus operations.
The loss of the rail franchises is set to take the shine off improvements in other businesses in the current year.
"We intend to deliver further progress from our multi-year transformation plans in our 2015/16 financial year. We currently anticipate strong progression in our non-rail businesses, driven mainly by the ongoing turnarounds of First Student and UK Bus, to largely offset the substantially lower contribution from UK Rail as a result of the end of the First ScotRail and First Capital Connect
franchises," O'Toole said, admitting the company has more work to do if it is going to hit the target set out in its transformation plan.
"Our improved financial performance this year demonstrates that our multi-year transformation programme is making progress, though we must maintain the momentum of change to meet our medium term financial targets. Accordingly we will continue to work hard to deliver the considerable potential of the group and return to a consistent profile of cash generation and sustainable value creation," he said.
The results were largely flagged in a detailed trading update that FirstGroup gave in early April.
Separately, FirstGroup said that Finance Director Chris Surch has decided to retire for personal reasons and the company has started looking for a replacement. Surch's notice period ends on January 8, 2016.
FirstGroup shares were up 2.6% at 122.40 pence early Wednesday, amongst the best-performing stocks in the FTSE 250.
By Steve McGrath; [email protected]; @stevemcgrath1
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