Dividend setback again for transport investors

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FIRSTGROUP, which employs more than 4,200 people in Yorkshire, yesterday revealed that it will not pay a dividend to shareholders for the second year running.

The company admitted that it needs more time to revive its UK bus operation.

The group said the business and its FirstStudent arm, which transports six million students in North America every day, were performing well short of their potential and delivering lower margins than rivals.

In Yorkshire, the company operates 1,500 vehicles. The company’s network developments include park and ride schemes in Leeds and York which are due to be launched next month.

Improved trading in UK rail helped group profits for the year to March 31 to rise 23 per cent to £111.9m but ongoing turnaround costs and the need to reduce its debt burden mean the company will not pay a dividend.

The pay-out was scrapped last year after the botched bidding process surrounding the West Coast mainline franchise scuppered its turnaround plans.

It said at the time that it might restore the dividend this year but those hopes were dashed by new chairman John McFarlane, who asked for shareholder patience while the group works to revive UK bus and FirstStudent.

He said: “Although both divisions have faced challenging economic conditions in their respective markets, we cannot escape that we should have managed them better.

“Progress has been made in addressing the performance of these two divisions, with headway being made in UK bus in particular, but there remains much to do still.”

Profits in the division, which has a fleet of 7,400 buses carrying around 2.3 million passengers every day, fell to £44.4m from £50.8m.

While the operation is facing further reductions in public funding, passenger numbers rose for the first time in several years due to network changes, fare reviews and significant investment in fleet and service during the year.

Mr McFarlane added: “UK Bus, while still working through its transformation programme, is beginning to show that it is on the right track. First Student’s slower progress, however, which was heavily affected by the unusual winter weather, was disappointing.”

The US operation posted lower profits of £93.5m after it was impacted by an unprecedented number of school closures due to snow storms.

In UK rail, which runs the franchises Capital Connect, Great Western, ScotRail, TransPennine Express, passenger growth was 5.9 per cent on a like-for-like basis and resulted in a profits rise to £55.2m from £19.3m a year earlier.

Investec Securities analyst John Lawson said profits were stronger than the £110m forecast beforehand.

He added: “The main surprise is that the group has decided not to reinstate the payment of a modest dividend.”