Commuters commonly vent their frustration via social media when trains are delayed or subject to overcrowding. So perhaps it's no suprise that FirstGroup (FGP) is spending £1.2bn over the next seven years to improve customer service on its South Western Rail (SWR) franchise. Adding new trains with more seats on existing routes should ease capacity issues, while Wi-Fi services and electrical plugs will make for a better journey. The franchise only contributed to the last four weeks of this reporting period but has already signficiantly boosted group revenues. Strip out SWR and overall group sales rose by just 0.9 per cent. The group's entire rail division – now known as 'First Rail' – saw a 13.7 per cent increase in revenue to £677m while adjusted operating profit was up 40.7 per cent to £31m.
'First Student' – the group’s North American school bus segment and the largest division by sales – has been making sure there are enough drivers during the academic year. But chief financial officer Matthew Gregory said this has become more difficult as unemployment rates fall in the US. Half-year sales at constant currency fell 1.9 per cent to £983m, although the first half tends to be more muted. Last year 90 per cent of First Student’s revenue was generated during the second half, and Mr Gregory is confident the usual rebound will occur by the year-end. An average price increase of 5.3 per cent, along with a climbing 83 per cent retention rate, should also help matters.
Sales from US cross-country transit service Greyhound rose 1.3 per cent at constant currency mainly thanks to demand for short-haul journeys, with like-for-like revenue from Greyhound Express up 7.8 per cent. This outperformed the long-haul routes, which have struggled to keep up with competition from budget airlines and less cross-border traffic in the US southwest following tighter immigration controls.
Analysts at Liberum expect pre-tax profit of £225m in the year to March 2018, giving EPS of 12.6p, compared to £207m and 12.4p in FY2017.
| FIRSTGROUP (FGP) | ||||
| ORD PRICE: | 107.7p | MARKET VALUE: | £ 1.3bn | |
| TOUCH: | 107.5-107.9p | 12-MONTH HIGH: | 155p | LOW: 100p |
| DIVIDEND YIELD: | nil | PE RATIO: | 12 | |
| NET ASSET VALUE: | 156p* | NET DEBT: | 62% | |
| Half-year to 30 Sept | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 2.56 | 11.1 | 0.7 | nil |
| 2017 | 2.77 | -1.9 | 0.2 | nil |
| % change | +8 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £1.94bn, or 161p s share | ||||
