FirstGroup raises profit expectations thanks to open access rail performance
- FirstGroup owns the open access rail operators Hull Trains and Lumo
- The company said its open access business enjoyed healthy demand
FirstGroup expects full-year profit to be ‘slightly higher’ than previous forecasts, following strong performance from its rail business.
The owner of Avanti West Coast told investors that open access operations within its rail division were benefiting from healthy demand, “effective yield management” and the resolution of one-off infrastructure claims.
As a result, the Aberdeen-based company expects to beat analyst expectations of an adjusted operating profit of £196.8 million and an adjusted profit of £102.9 million.
Everyone on board: Avanti West Coast owner FirstGroup noted its rail division’s open access business benefited from healthy demand
In the six months ended September, total trips on the company’s trains grew 8.9 percent to 123.4 million compared to the same period last year, while passenger volumes on buses rose 12 percent to 210 million.
Since then, the FTSE 100 company said trading in its bus division had performed well and was in line with expectations.
Graham Sutherland, CEO of FirstGroup, said: “Our focus on operational delivery, driving demand for our services and growing and diversifying our portfolio has resulted in further progress in the second half of our financial year.
‘As a result, we are well positioned to create further sustainable value for all our stakeholders.’
FirstGroup recently applied to operate an open-access rail service from London to Sheffield and is in discussions with Transport Scotland and Network Rail about expanding some of its journeys from London to Edinburgh to Glasgow.
FirstGroup owns open-access operators Lumo and Hull Trains; the former operates the East Coast Main Line and the latter operates services between London and the Humber region.
Open access operators are companies that operate trains on mainline routes but do not have franchises with the UK government and receive no taxpayer money.
The ORR says they can boost competition in the rail sector by lowering prices and increasing the number of destinations.
Gerald Khoo, analyst at broker Liberum, said: ‘The prospect of a Labor government likely to commit to the renationalisation of passenger rail contracts is bad for sentiment towards FirstGroup’s Rail division.
‘However, there is significant value in open access operations and non-train activities that should not be affected by renationalisation.’
FirstGroup slumped to a loss of £68.4m in the first half due to significant one-off costs related to the withdrawal from two local government pension schemes.
FirstGroup shares were 1.9 per cent higher at 164.5p just after midday on Tuesday and are up around 58 per cent over the past twelve months.