FirstGroup increases profit outlook due to strong bus and rail demand

FirstGroup has raised its annual profit forecast due to strong demand for its rail and bus services in recent months.

The transport business now expects adjusted operating profit for the 2024 financial year to be around £14m to £20m higher than previous guidance, while adjusted attributable profit will be around £7m to £10m higher.

Up to £15 million of additional operating profits are expected to come from the final variable fee payments due on First Rail management’s fee-based contracts in the previous financial year.

Raising forecasts: FirstGroup has raised its annual profit forecast due to strong demand for its rail and bus services in recent months

For the 27 weeks to September, the company said passenger numbers on its open-access Lumo and Hull Trains operations were “stronger than expected” as more people took summer holiday trips.

High passenger volumes also helped trading in FirstGroup’s bus division beat forecasts despite widespread pressure on the cost of living.

During the period, Aberdeen-based First Bus transferred employees enrolled in two local government pension funds into a new pension plan. The move is expected to save around £2 million to £3 million annually.

Graham Sutherland, CEO of FirstGroup, said: “Over the last few months we have successfully built on the strong financial performance we reported in our full year results in June.”

“Our updated outlook for fiscal 2024 reflects strong performance across our First Rail business, which is a testament to the hard work and skills of our teams.”

“At First Bus we are achieving sustainable revenue growth as passenger volumes increase and continue to benefit from the measures we have taken to transform the business.”

FirstGroup is one of the UK’s largest regional bus operators, transporting more than a million passengers every day in over 4,500 vehicles.

But while the company is moving more people on buses, the company derives the vast majority of its revenue from its rail services.

First Rail operates two open access route operators and three management fee-based railway companies: Avanti West Coast, Great Western Railway and South Western Railway.

Last month the British government extended a nine-year contract for Avanti, which is 70 percent owned by FirstGroup and manages long-haul passenger services on the West Coast Main Line.

The announcement sparked controversy as Avanti had a poor record of punctuality and train cancellations, due in part to drivers refusing to work overtime.

The Transport Ministry defended the decision, saying the rail operator had reduced the proportion of services suspended from 25 percent to “only” 1.1 percent compared to the previous year.

FirstGroup was stripped of its contract to run the TransPennine Express franchise in May due to continued delays and cancellations.

FirstGroup shares rose 4.2 per cent to 152.7p on Wednesday morning, making them the second-biggest rise in the FTSE 250 index. They have grown by around 36 percent in the last 12 months.