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FirstGroup loses £14m in profits in US deep freeze

SCOTTISH bus and train operator FirstGroup has revealed severe winter weather wiped £14 million off the operating profits of its school transport and Greyhound coach businesses in North America in the three months to March.

frozen WASTE: FirstGroup in North America lost operating profits as lost school days doubled due to snowstorms and freezing temperatures
frozen WASTE: FirstGroup in North America lost operating profits as lost school days doubled due to snowstorms and freezing temperatures

But the company, which saw its shares plunge last May when it launched a deeply discounted £615m rights issue and said it would not pay a final dividend for the 2012/13 financial year, also declared yesterday that it was making "satisfactory" progress.

FirstGroup, citing the impact of severe weather, said revenue from its First Student school bus operation, in US dollar terms, was expected to be 1.8% lower in the year to March 31, 2014, than in the previous 12 months. A spokesman said the number of school days lost, amid snowstorms and freezing temperatures in the USA, had been about double what FirstGroup would expect in a typical winter.

Aberdeen-based FirstGroup has in recent months rejected calls by US-based hedge fund Sandell to sell Greyhound and hive off its remaining US operations.

Yesterday it highlighted growth in revenues in the year to March 31 in its UK rail and bus divisions, and at its First Transit unit in North America, which operates shuttle services in the likes of university campuses and at airports.

FirstGroup added that, excluding the impact of weather, like-for-like revenues at Greyhound in the quarter to March were expected to be about 2.1% higher than in the same period of its previous financial year, in part reflecting modestly improving economic conditions.

Chief executive Tim O'Toole said yesterday: "We have made satisfactory progress on our key priorities in the year, with good performances in four of our divisions partially offset by slower progress in First Student, where we have a detailed programme under way to reposition the contract portfolio, increase returns and drive further cost efficiencies. We will deliver earnings growth this year, albeit suppressed by the historically severe weather, particularly in North America. 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."

FirstGroup, which runs the ScotRail franchise, said that like-for-like passenger revenue in its UK rail division in the year to March 31 was expected to be up 5.9%. It added this revenue growth had been underpinned by continued strong growth in passenger volumes across all of its train operating companies, which also include the Great Western and TransPennine Express franchises.

The company said it expected like-for-like passenger revenue growth in its UK bus division in the year to March 31 to be 1.8%. It cited good growth in passenger volumes in its bus business, which includes big operations in Glasgow.

FirstGroup added: "This encouraging performance is despite the continued challenges posed by economic conditions in some of our local markets."

The company said overall revenues in the year to March 31 at Greyhound, including the impact of severe weather, were expected to be 2.9% lower than in the previous 12 months in dollar terms. It added that like-for-like revenue growth in its First Transit business in the year to March was expected to be more than 7%, in dollar terms.

Ahead of yesterday's trading statement, the consensus forecast among City analysts had been that FirstGroup would make underlying earnings before interest and tax of about £300m in the year to March 2014. Some analysts moved to reduce their forecasts on the back of the update on the impact of severe weather on the North American businesses and FirstGroup's guidance that costs associated with UK rail franchise bids and certain property disposals would no longer be treated as exceptional items.

FirstGroup shares, trading above 660p at the end of 2007, fell 1.7p or 1.2% to 137.3p after yesterday's trading statement.

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