No surprises at FirstGroup

Overall, the half-year numbers held few surprises for investors. The end of government subsidies for the First Great Western and First Capital Connect franchises and a reduction in payments for the First ScotRail line hit the top line. But exclude these items and revenues grew 3.9 per cent. Adjusted operating profit rose 2.4 per cent to £104m, and - stripping out certain one-off charges and gains on property disposals - pre-tax profits jumped 70 per cent to £33.3m.

The improvement in operating profits largely reflected a better performance in FirstGroup's UK rail division - although this was offset by lower profits from its First Student brand in North America. This business suffered from the timing of the Easter school break in the US, which reduced the number of operating days in the period. Management says First Student's performance will be weighted to the second half even more than usual. Otherwise the division is performing well: FirstGroup achieved price increases of 4.5 per cent on those First Student contracts facing renewal this year, whilst still retaining 90 per cent of contracts.

The bidding process in rail has been less successful. It lost the high-profile bid for Thameslink to a subsidiary of rival company Go-Ahead (GOG) in May, and lost control of its existing ScotRail franchise to Dutch group Abellio in October. Next up for grabs is East Coast mainline; the Department for Transport (DfT) is expected to announce the winning bidder any day now. Meanwhile, FirstGroup's rail division is still growing. Operating profit rose to £40m in the first half (2013: £25.8m), thanks to 3.5 per cent growth in underlying passenger volumes.

Analysts at Investec expect pre-tax profits of £142m for the current financial year, giving EPS of 8.4p, up from £112m and 7.5p last year.