FirstGroup chief executive Tim O’Toole says the group’s UK bus business has to change direction after passengers reject January fare increases.

Shares in FirstGroup have lost a fifth of their value since the group warned last week of a worse than expected financial performance at its UK bus business.

The group’s attempt to offset rising costs with fare increases in January backfired in some parts of the country, resulting in disappointing yields. Year-on-year revenue growth has slumped to 1.5% and UK bus operating profit margins are now expected to drop to “as low as 8%” next year.

Speaking to analysts, O’Toole said: “The only good thing to come out of January was we could see that the old time religion [of raising fares] definitely doesn’t work and to change direction we really have no choice.”

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