Firstgroup shares fall despite revenues boost after ScotRail deal hits buffers

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FirstGroup yesterday revealed that it had received a boost from stronger rail passenger revenues.

The Aberdeen-based group said like-for-like passenger revenues lifted by a bigger-than-expected 6.5 per cent in the six months to September 30, helped by growth in franchises such as First Great Western.

But shares fell after the firm was told by Transport Scotland it had missed out in the race for a new ten-year ScotRail contract, which it has operated since 2004, to Dutch rival Abellio from next April.

In recent months FirstGroup has lost its Caledonian Sleeper franchise to Serco, failed in its bid to win the Essex Thameside – retained by National Express – and seen its Capital Connect contract in London become swallowed up as part of the larger Thameslink franchise, which was awarded to Govia.

Its next large contract bid is for the East Coast service.

The operator is also in talks with the Department of Transport to operate its existing TransPennine Express contract until 2016 and to extend its largest franchise, First Great Western.

Analysts at HSBC recently underlined the importance of winning bids because paying off its debts, which stood at £1.3bn in May, “will be painfully slow unless the group can win rail franchises.”

In a trading update, the business said it was performing in line with expectations and it was making progress with its transformation plans.

Shore Capital analyst Greg Johnson said the statement was “very encouraging”.