The market has given bus and rail company FirstGroup (FGP) a clear pat on the back for deftly navigating several speed bumps last year. Investors pushed the stock up as much as 10 per cent in early trading despite lower revenue at its rail division and flat operating profit: turnover at First Rail dropped by 41 per cent following the loss of the First Capital Connect and First ScotRail franchises. This should be partially mitigated by the extension of the Great Western Railway franchise, the TransPennine Express franchise win and open access services between London, north east England and Edinburgh this year. But the rate of passenger revenue growth is expected to slow in line with industry trends.
In its UK bus division, adjusted like-for-like passenger revenue nudged up 0.3 per cent, but passenger volumes were dented by several factors including lower high street footfall and flooding in some areas. Management said it had merged or closed six depots and reduced administrative overheads to maintain adjusted operating margins, which came in at 6 per cent compared with 5.8 per cent the previous period.
In the US, the implementation of its 'up or out' contract negotiation policy for bus division First Student seems to be working. But as previously indicated, fewer school days meant adjusted operating profit was marginally down, and $14m worth of efficiency savings fell short of targets due to additional costs relating to driver shortages. Sister division First Transit was hit due to "significantly reduced activity in the Canadian oil sands region", although it still won 18 new contracts.
Analysts at JPMorgan revised their 2017 forecasts down and now expect pre-tax profit of £192m for the year to March 2017, leading to EPS of 12p, compared with £168m and 10.3p for FY2016.
| FIRSTGROUP (FGP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 114p | MARKET VALUE: | £1.37bn | |
| TOUCH: | 113-114p | 12-MONTH HIGH: | 130p | LOW: 80p |
| DIVIDEND YIELD: | nil | PE RATIO: | 15 | |
| NET ASSET VALUE: | 134p* | NET DEBT: | 86% | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 6.68 | 280 | 42.7 | 23.67 |
| 2013 | 6.90 | -29.0 | -3.0 | 7.62 |
| 2014 | 6.72 | 58.5 | 5.1 | nil |
| 2015 | 6.05 | 106 | 6.2 | nil |
| 2016 | 5.22 | 114 | 7.5 | nil |
| % change | -14 | +7 | +21 | - |
*Includes intangible assets of £1.89bn, or 158p a share | ||||
