UK bus revenue was flat in the final quarter of 2015

 

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FirstGroup has warned that its full year 2015/16 profits will be hit by lower than expected patronage at its UK bus division and further cost increases at its US school bus business.

In a trading update covering the last three months of 2015, First said bus passenger numbers in the UK had been affected by fewer people than expected using high street shops in the run up to Christmas, and flooding in the north of England. UK bus revenue was flat during the three months, with a small 0.9% rise in commercial revenue offset by falls in concessionary revenue.

However, with recent patronage trends across the UK bus industry as a whole also below expectations, finance director Chris Gregory acknowledged that it is unclear whether wider issues, such as growth in online shopping, may also be having an impact on business. “It’s a little bit difficult to really work out whether the reduction is down to particular rain aspects or whether it’s down to timing, or whether there’s a particular fundamental slowdown,” he told City analysts.

However, he added there was no sign as yet that lower petrol prices are resulting in people shifting from public transport to car use, as in First’s North American coach business. “We haven’t seen that specifically,” he commented.

In the US school bus business, profits were hit by ongoing “acute recruitment and retention challenges” creating driver shortages, which will cause $14m of additional costs in the six months to April 2016.

Gerald Khoo, an analyst at Liberum, said that First’s continuing “unfortunate record of disappointing updates” masked progress in turning round the business and created the risk that medium term profit recovery targets would be postponed. “In turn, this increases the attraction of alternative options, such as a full or partial break-up of the group,” he commented.

 

This article appears inside the latest issue of Passenger Transport.

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