Firstgroup hails turnaround signs

The group, which earlier this year tapped investors for £615m and cancelled its dividend, said a number of its local bus markets face continued “challenging economic conditions”.

Aberdeen-based First grew underlying pre-tax profits by 43.7 per cent to £28.3m in the six months to the end of September but after exceptional items the group slumped to an £8m loss.

Revenues in its UK bus arm, which serves cities including Sheffield, Plymouth, Bristol and Glasgow, fell 14 per cent to £490.7m after it sold its London bus business. Operating profits fell 18 per cent to £17.3m as higher fuel costs and the absence of last year’s Olympic Games weighed on the business.

But bus passenger revenues edged up 1.7 per cent on a like-for-like basis and First said it saw underlying growth in passenger volumes of 0.7 per cent - the first rise since 2008 - including an increase of nearly five per cemt in the North.

First is trying to boost passenger numbers by tailoring fares and networks to local market conditions - including cutting some fares by up to 25 per cent in York - but said this will be an “ongoing process”. Meanwhile it is battling tough markets in cities such as Glasgow.

First, which operates the Capital Connect, Great Western, ScotRail, TransPennine Express and Hull Trains routes, said underlying rail passenger volumes rose by 3.6 per cent, with like-for-like passenger revenues rising by 5.7 per cent.

It is bidding to take over franchises including Essex Thameside and plans to apply to run the East Coast Mainline.

First has been battered by the tough economy, shrinking government support for public transport and delays in rail re-franchising.

Chief executive Tim O’Toole said the “foundations are in place” for its turnaround.

He said: “Although it is early days in our multi-year plan to improve our returns, resilience and growth prospects, we are seeing clear indications that we are making progress.”

Revenues edged up 1.6 per cent to £3.3bn and First’s debt mountain shrunk 30.5 per cent to £1.45bn.

First said depending on its performance it may pay a final dividend for the year to the end of March.

It added its US Greyhound bus division continues to struggle, while recovery in its US student bus division is on track.