Rail success for FirstGroup but bus division hit by weaker demand

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Transport operator FirstGroup reported a strong performance at its UK rail business, but warned that demand for bus travel is being hit by the deteriorating econ-omy.

Operating profits at the group’s rail division, which runs First Great Western, TransPennine Express, First Capital Connect and Scotrail, increased 15 per cent to £55.7m in the six months to September 30.

Passenger revenues rose nine per cent after it benefited from higher prices and increased demand as people ditched their cars due to rising petrol prices. The UK bus business, which operates services in cities such as Leeds, Sheffield, Manchester, Glasgow and Bristol, reported a seven per cent increase in profits to £59.4m despite a slight decline in revenues as the economy weakened.

It warned that the trading conditions for its bus network will “remain challenging as a result of lower economic activity in the major urban areas where we operate”.

Across the whole of the group, which also operates Greyhound coach and school bus services throughout North America, operating profits rose 25 per cent to £216.3m.

The UK bus division is also facing additional challenges from a reduction in Government funding.

FirstGroup said it will invest some £160m in 1,000 new vehicles to create “a step change” to the profile of its fleet over the next two years.

John Lawson, an analyst at Investec, said that the UK rail division had witnessed further strong growth but added that the company’s bus division “needs watching”.