Wednesday, 15 July 2021 09:20

FirstGroup advances cost efficiency plans

FirstGroup advances cost efficiency plans

Aberdeen-based transport firm, FirstGroup, has said it is “advancing cost efficiency plans” within its UK bus service as it looks to offset the loss of a number of rail franchises.

The transport operator has released a trading update for its first quarter of the 2015/16 financial year.

Over the quarter, its rail division delivered like-for-like passenger revenue growth of 6.3%. However the firm is warning that the division’s contribution to the Group’s earnings will be “substantially lower in the first half and for the current year,” following the end of the First Capital Connect and First ScotRail franchises.

First’s UK bus division also saw an increase in like-for-like revenue of 1.4%, with commercial passenger revenue growing more than 2%, which the firm says is partially offset by a decrease in concessionary revenue.

Currently the firm is progressing through a “transformation programme,” which included a recent order of 385 low carbon-certified buses worth £77.7million. First also says the other key element of this phase is cost efficiency.

As a result, the firm is making “a number of changes to our depot portfolio” in order to accelerate toward its medium-term target of “double digit margins.” In doing so, First will also experience one-time costs of around £7million.

Overall, First is expecting net cash flow for the year to be “broadly flat before the UK Rail end of franchise outflows of approximately £30million.”

Chief Executive, Tim O'Toole, said: “Overall trading for the Group during the first quarter was in line with our expectations and we remain focused on delivering further progress from our transformation plans.

“With three quarters of the current bid season concluded, First Student continues to achieve slightly higher average price increases than the prior year. UK Bus delivered further growth with concessionary revenues moderating continued commercial passenger revenue growth, and we continue to take action to improve our cost efficiency on a market-by-market basis.

“We anticipate strong progress for the current year in our non-rail businesses, mainly from the First Student and UK Bus turnarounds, to largely offset the reduced size of our UK Rail franchise portfolio compared with the prior year.

“We are on track to meet our financial objectives through our multi-year transformation plans, and thereby return to a position of sustainable strong cash flow and value creation.”

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