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FirstGroup drives back to profit
From the Financial Times of Wed, 05 Nov 2014 15:21:02 GMT
A FirstGroup Plc train arrives at Paddington railway station in London, U.K., on Thursday, Jan. 3 2013. Rail commuters have been hit by inflation busting fare increases of up to 10 per cent, adding hundreds of pounds to the cost of annual season tickets. Photographer: Chris Ratcliffe/Bloomberg©Bloomberg

FirstGroup swung to a profit in the first half of the year as it restructured the business following an emergency rights issue last year.

The company, which operates trains and buses in the UK and US, reported a pre-tax profit of £9.9m, compared with a loss of £8m for the same period last year. Its shares jumped nearly 4 per cent in early trading to 119.5p.

The UK rail division drove the turnround with a 55 per cent jump in profit to £40m, even though the company lost three major rail franchise bids this year. The division benefited from strong passenger growth, with numbers rising to a postwar high of 1.6bn nationwide in 2013-14, the company said.

Tim O’Toole, chief executive, said; “Trading during the first half was in line with our expectations for the group and our transformation programmes continue to make progress as planned.”

FirstGroup has been trying to turn round its business since mid-2013 when a heavily discounted £615m rights issue saved it from a debt downgrade.

The group is still looking for a new chairman after John McFarlane announced he was to leave the company in April 2015, having only joined at the start of this year. Mr McFarlane was recently named chairman of Barclays.

Mr O’Toole faced controversy earlier this year when his remuneration almost doubled at the same time as the £50m dividend was cancelled for shareholders.

“On a very tough wicket he has made progress,” said Damian Brewer, analyst at RBC Capital Markets.

FirstGroup is awaiting news on the award of the East Coast rail franchise later this month. The company has already lost out on the Thameslink, Essex Thameside and Scotrail franchises.

Mr O’Toole said FirstGroup’s bids were trumped by other companies bidding significantly higher.

“The numbers weren’t even on our radar screen. We can’t go for a winning headline by bidding uneconomically,” he said.

Failing to win the East Coast franchise would not change the outlook for the medium term, he added.

Total revenue fell 10.9 per cent to £2.94bn, from £3.3bn for the first half of 2013, primarily due to accounting changes in the way government premiums and charges are paid.

Profits in First Student, the biggest US operator of student transport, fell 65 per cent to $6m on sales of over $1bn. The yellow bus business was hit by fewer school days falling in the first half of the year, and should recuperate sales in the second half.

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