Investors were enthused by an update from transport firm First Group yesterday despite falling oil prices affecting its iconic Greyhound bus service in the US.
Shares in the Aberdeen-based firm rose almost 7% yesterday after it said its moves to improve the business were “on track”.
In a third quarter update to the stock market, First said that rapidly falling fuel prices in the US mean that users of its long haul Greyhound bus service can afford to drive their cars instead. First said Greyhound’s like-for-like revenues decreased by 1.1% in the quarter to 1 October 2014.
First’s UK rail business also enjoyed healthy 7.3% passenger revenue growth in a year that it has lost three of its five rail franchises.
The firm said it is negotiating with the Department for Transport (DfT) to extend its largest rail franchise, First Great Western, to March 2019.
Last year First lost out in a bid to run the East Coast mainline to rival Stagecoach and Virgin. It also failed to retain the ScotRail franchise it has held for the past 10 years, with Dutch rival Abellio taking over from April 1.
FirstGroup lost its Caledonian Sleeper services to Serco, failed in its bid for the Essex Thameside contract and has seen its Capital Connect operation in London swallowed up as part of the larger Thameslink franchise, awarded to Govia.
The company’s US-based public transport division, First Transit, is also experiencing growth at the “higher end of our planning range”, First said. It expects revenues to rise 6% and margins to hit 7%. Its US “yellow bus” student division is also expected to improve profits by cutting costs.
Its UK bus division, which includes First Aberdeen, enjoyed overall like-for-like passenger revenue increases of 2.7% as it began raising prices in some of its operations.
Analysts currently expect FirstGroup to post pre-tax profits of £152.7million for the year to March 2015.
Tim O’Toole, chief executive, said: “Overall trading for the group is in line with our expectations.
“Our First Student and UK Bus transformation plans are on track and both divisions are delivering the expected improvements in financial performance.
“Demand for Greyhound services over the important holiday period was adversely affected by the significant and rapid reduction in fuel prices, which makes car travel more affordable and competitive with our services. This was offset by good performances in First Transit and our UK Rail operations, which are both achieving growth towards the top of our expectations with robust margins.
“Overall we are on course to meet our full year expectations for the group, and we are confident that our multi-year plans will deliver improved cash generation and create sustainable value over the medium term.”
FirstGroup shares rose 7% to 109.1p.