Some investors evidently have faith in the turnaround story under way at FirstGroup (FGP). The transport group's shares initially rose nearly 5 per cent in response to news of a 14.7 per cent drop in adjusted operating profit to £88.4m. The most significant driver of that result was already well known - the loss of the Capital Connect and ScotRail franchises at the end of 2014 - so the market's reaction suggests the rest is not that bad.
Chief executive Tim O'Toole suggested investors saw a "clear path" to the rejuvenation of the group, and had taken comfort from his actions to tackle the fact that the "medicine we were applying was not as effective" in some parts of the business as in others. For example, management found £10m in further cost savings in First Bus in the period, thereby incurring £4m of restructuring costs that should not recur (unusually, FirstGroup includes restructuring costs in its adjusted profit figures).
However, the group's largest revenue earner - the US-focused First Student - saw operating profit drop by three-quarters in dollar terms to $1.4m (£0.92m). Its two other US-facing businesses - First Transit, which runs public transport services as well as private contracts, and the Greyhound bus brand - also saw operating profit drop by 6 per cent and 20 per cent, respectively.
Analysts at Liberum expect pre-tax profit of £157.6m for the current financial year, leading to EPS of 9.2p, compared with £163.9m and 9.8p for the year ended March 2015.
FIRSTGROUP (FGP) | ||||
---|---|---|---|---|
ORD PRICE: | 101p | MARKET VALUE: | £1.2bn | |
TOUCH: | 101-102p | 12-MONTH HIGH: | 130p | LOW: 89p |
DIVIDEND YIELD: | nil | PE RATIO: | 18 | |
NET ASSET VALUE: | 118p* | NET DEBT: | 116% |
Half-year to 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
---|---|---|---|---|
2014 | 2.94 | 9.9 | 0.3 | nil |
2015 | 2.44 | -7.5 | -0.4 | nil |
% change | -17 | -176 | -233 | - |
*Includes intangible assets of £1.78bn, or 148p a share |