FirstGroup issues profits warning after flooding hits bus business

Prime Minister David Cameron visits York after the floods of December 2015

The Aberdeen-based group said revenues slumped 9.5% in its third quarter to the end of December as the extreme flooding across Cumbria and the north of England took its toll, while its US school bus division suffered a driver shortage.

Its bus services - which run a fleet of around 6,300 buses - were also impacted by lower-than-expected numbers of shoppers making trips into town centres in the run-up to Christmas, with like-for-like revenues in the division remaining flat.

FirstGroup warned its outlook for operating profits over the full year to the end of March was “slightly lowered” by the tough third quarter trading.

Shares dropped 5%.

Tim O’Toole, chief executive of FirstGroup, said: “Our transformation plans continue to make headway despite a challenging third quarter trading period in our markets, with disappointing retail footfall and the terrible weather affecting First Bus, and our largest division First Student experiencing acute driver recruitment and retention challenges in certain locations.”

The firm also said its rail arm, which operates the Great Western Railway and First TransPennine Express franchises, suffered a drop-off in demand from passengers in the weeks following the Paris terrorist attacks last November, as well as disruption from the recent flooding.

But it grew like-for-like revenues at First Rail by 5.6% in the third quarter and said the division’s full-year performance would not be impacted.

It insisted its turnaround of the First Student school bus business was making progress, despite facing higher costs to tackle an “acute” shortage of drivers in a tightening US labour market.

The group added that its third quarter revenue performance also reflected the loss of recent rail franchises over the past few years, such as the East Coast Line and ScotRail.

But last month it won a seven-year contract to continue running the TransPennine Express train line, while it has been shortlisted for the East Anglia franchise.