MORE than £140 million was wiped off FirstGroup’s stock market value yesterday after the Aberdeen-based transport company warned of pressure on earnings from intensifying competition from airlines faced by North American business Greyhound and severe snowstorms.
Shares in FirstGroup dropped by 12 per cent or 11.65p to 84.4p after the company declared its outlook for adjusted earnings per share “is slightly reduced overall”.
The share-price fall reduced FirstGroup’s stock market worth to about £1.02 billion.
FirstGroup highlighted “extremely challenging weather conditions” in January for its school bus and transit operations in North America as well as for Greyhound.
The consensus City forecast, before yesterday’s trading update, was that the company would post adjusted earnings per share of 12.5p for the 12 months to March 31 this year. FirstGroup, which employs about 4,000 of its 100,000-plus global workforce in Scotland, raised its adjusted earnings per share to 12.4p in the year to March 31, 2017, from 10.3p in the prior 12 months.
In spite of the downgraded earnings guidance, FirstGroup emphasised there was “no change to management’s expectation of substantial cash generation” for the year to March 2018. The company saw a net cash inflow of £147m in the year to March 2017.
FirstGroup yesterday flagged estimated annual interest savings of £14m, from the year to March 2019 onwards, from refinancing.
However, it flagged driver shortages in its US school bus business.
FirstGroup chief executive Tim O’Toole said First Student’s “momentum continues to be tempered by the strength of the US employment market, with no easing of the driver shortages experienced in recent years”.
Coach operator Greyhound’s like-for-like revenue in the period from the end of September to January was down 2.8 per cent on a year earlier on a constant currency basis, as this business faced increasing competition from airlines on its long-haul routes. This followed growth in revenues at Greyhound on this basis in the six months to September.
FirstGroup said: “Our strong growth in the shorter point-to-point markets accelerated in the period, but this was more than offset by intensifying challenges in the larger long-haul segment in the face of low-cost airline competition, which also resulted in a disappointing holiday season.”
Citing ongoing rises in fleet maintenance and driver costs, it said it was “seeking further cost efficiencies to help mitigate the impact of the deterioration in long-haul volumes”.
Mr O’Toole said: “Although Greyhound’s point-to-point business continues to grow, this was more than offset by significant reductions in long-haul volumes in the period. Our North American businesses were also tested by the severe snowstorms which affected the Atlantic seaboard from Nova Scotia down to Florida in January 2018.”
Revenues in FirstGroup’s UK bus operations were, in the period from the end of September to January, up by 1.4 per cent on a year earlier on a like-for-like basis.
In FirstGroup’s UK rail business, like-for-like revenues in the period from the end of September to January were up by 3.2 per cent on a year earlier. The rail business comprises Great Western, South Western, TransPennine Express, and Hull Trains. First Student revenue over the period was up 0.3 per cent on a constant currency basis. First Transit revenue dipped by 0.1 per cent.
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