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FirstGroup lowers outlook on US weakness

Cheap airline tickets made long-haul journeys on Greyhound bus routes less competitive
February 21, 2018

Overcapacity in the budget airline sector has made long-haul travel cheaper. This is good news for the average consumer, but bad news for transport company FirstGroup (FGP). Its Greyhound bus service suffered a 2.8 per cent fall in comparable revenue in the four months to January, after ticket sales for its shorter point-to-point routes failed to offset a decline in its longer journeys. Management "slightly" cut its earnings expectations for 2018, but cash generation remains on track. 

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Another of FirstGroup’s North American businesses also proved to be a challenge. The First Student school bus business found it more difficult to find drivers following a drop in US unemployment levels. Bad weather also meant that a number of school days were cancelled during the third quarter.

However, train operator First Rail continued to be the bright spot. Like-for-like passenger revenue improved by 3.2 per cent despite infrastructure challenges in the South West Rail (SWR) franchise. Development of the Intercity Express Train Service is on track, as are negotiations with the Department for Transport for a two-year extension to the Great Western Rail franchise. Group revenue is up 10.7 per cent so far this year, although strip out SWR and favourable exchange rates and sales improved by 1.1 per cent.