FirstGroup Posts Lower Profit In H1 - Update

(RTTNews) - U.K.-based transport operator FirstGroup Plc (FGP.L, FGROF.PK) reported Wednesday a decline in first-half profit, reflecting increased fuel costs and the impact of recession on Greyhound division revenue. However, the company said its overall trading remains in line with expectations. FirstGroup has also proposed an interim dividend, with an increase of 10% from the prior year.

For the half year, the company's profit before tax declined to GBP 30.3 million from GBP 54.4 million in the same period previous year. Profit for the period attributable to equity shareholders of parent was GBP 18.8 million or 3.9 pence per share, compared to a profit of GBP 23.4 million or 4.9 pence per share in the prior year.

Results for the period include amortization charges of GBP 17 million, hedge ineffectiveness on financial derivatives of GBP 4 million, other non-recurring items of GBP 25.1 million and loss on disposal of properties amounting GBP 1.2 million.

Excluding items, adjusted earnings were GBP 44.5 million, lower than GBP 73.1 million last year. Adjusted earnings per share dropped to 9.2 pence from 15.5 pence per share a year ago.

Revenues for the first half grew 4.8% to GBP 2.9 billion from GBP 2.77 billion in the same period last year. The Group said it is currently organized into four operating divisions : UK Bus, UK Rail, North America and Greyhound. In the UK Bus division, revenues for the half year increased to GBP 585.6 million from GBP 578.6 million in the previous year. UK Rail posted revenues of GBP 949.1 million, compared to GBP 960.6 million a year ago. North America revenues were GBP 1.05 billion, up from GBP 895.9 million last year. According to FirstGroup, First Student is the largest provider of student transportation in North America with about 60,000 yellow school buses operating every day across the US and Canada. The company also operates a transit contracting and management business in North America and provides vehicle fleet maintenance and support services. In North American division, nearly 75% of revenues derive from the less cyclical contracted businesses of Student, Transit and Services. Revenue from contract businesses was marginally reduced to US$1.65 billion from US$1.73 billion in the previous year. However operating profit increased to US$89.1 million or GBP 60.2 million from US$83.9 million or GBP 44.4 million a year ago, reflecting the positive impact of the cost reduction actions and margin improvement programme, which has more than offset the increase in hedged fuel costs.

Revenues from Greyhound decreased to GBP 309.4 million from GBP 326 million a year earlier. Operating profit for the half year was GBP 123.1 million, down from GBP 128.5 million in the previous year.

Operating costs before loss on disposal of properties increased to GBP 2.78 billion from GBP 2.64 billion a year earlier. Loss on disposal of properties was GBP 1.2 million, down from GBP 2.8 million in the comparable period a year ago.

Finance costs increased to GBP 93.8 million from GBP 77.9 million in the preceding year, as a result of the issue of bonds in September 2008 and April 2009. The company said it experienced increased hedged fuel costs across its businesses, most of which will be reversed in 2010/11. Sir Moir Lockhead, chief executive said, "The Group has delivered a good performance in the first half against a tough economic backdrop and increased fuel costs. During the full year the Group will absorb a significant increase of approximately £100m in its hedged fuel costs which is set to recover in 2010/11."

FirstGroup stated that the successful implementation of cost reduction plan will achieve annual savings of at least GBP 200 million in the current financial year. As part of the cost reduction programme, the company said it implemented headcount reductions of 2,700 during the period, bringing the total headcount reductions to 4,400. "While the current economic environment presents a number of challenges for the transport industry, the Board remains confident in the underlying strength and resilience of the Group," added Lockhead. In addition, the company has proposed an interim dividend of 6.65 pence per share, an increase of 10% from prior-year's 6.05 pence, to shareholders of record on January 8, 2010, payable on February 3.

FirstGroup employs more than 130,000 staff and transport some 2.5 billion passengers a year. FGP.L is currently trading at 383.2 pence, up 8 pence or 2.13%, on a volume of 859 thousand shares. In the past 52 weeks, the shares have been trading in a range of 192.9 pence - 493.5 pence on the LSE.

FGROF.PK last traded on October 23 at $6.67 on the OTC.

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