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ii view: FirstGroup hails strong first half

Supporting the government’s goal to remove diesel-only trains, pushing towards a zero-emissions bus fleet and with the shares still near an 11-year high. We assess prospects for this FTSE 250 UK transport operator.

23rd November 2023 11:38

Keith Bowman from interactive investor

First-half results to 30 September

  • Adjusted operating profit of £100.6 million, up from £66.1 million
  • Reported or statutory loss of £68.5 million, down from a profit of £37 million last year
  • Interim dividend of 1.5p per share, up from 0.9p in H1 last year
  • £115m share buyback launched in August 2023
  • Net debt of £1.14 billion, down from £1.47 billion

Chief executive Graham Sutherland said:

"I am pleased to report another set of very strong results for the first half of our 2024 financial year. First Bus is delivering sustainable revenue growth as we continue to transform the business and our First Rail division also performed well. This is testament to the capabilities and continued hard work of all our teams across the Group."

ii round-up:

Bus and rail service operator FirstGroup (LSE:FGP) today detailed an increase in adjusted profits as bus passenger volumes increased and a previous shortage of drivers eased. 

First-half operating profit to the end of September increased to £100.6 million from last year’s £66.1 million, aiding an improvement in the interim dividend to 1.5p per share from 0.9p in H1 last year. However, on a statutory basis, a loss of £68.5 million contrasted with last year’s £37 million interim profit given required pension adjustments. 

Shares in the FTSE 250 company have traded at their highest in 11 years in recent weeks, but fell around 4% in UK trading having come into this latest news up by close to three-quarters year-to-date. That’s similar to cruise line operator Carnival (LSE:CCL), although in sharp contrast to the 50% loss at the former National Express renamed Mobico Group (LSE:MCG). The FTSE 250 index itself has drifted 2% in 2023. 

FirstGroup is the UK’s biggest rail operator, with services including Avanti West Coast and Great Western Railways (GWR), and its second largest regional bus operator. 

Passenger volumes for its bus division improved 8% from the first half last year pushing revenues up by almost a fifth to £505 million and despite a £19 million reduction in government funding.

Railway related sales declined 3.5% to £1.72 billion, but adjusted profits improved given open access and additional services sales to £77 million from last year’s £55 million. During the period, the division won a nine-year National Rail contract which included Avanti West Coast with a minimum three-year term to October 2026.

Earlier in November, FirstGroup signed a deal with Hitachi that will see it purchase up to 1,000 electric bus batteries as it works towards decarbonisation targets. 

A full-year trading update is likely to be announced in March. 
ii view:

Aberdeen headquartered FirstGroup transports more than 1.8 million passengers a day. Its rail franchises include Avanti, GWR, South Western Railways, Hull Trains and Lumo, with a fleet of more than 3,500 locomotives and rail carriages, and the division supporting the UK Government’s goal to remove all diesel-only trains from service by 2040. Its UK buses serve two-thirds of the UK’s 15 largest conurbations via a fleet of more than 4,500 buses and it's committed to operating a zero-emission fleet by 2035.

For investors, rail passenger volumes for the broader industry remain below the pre-pandemic 2019 levels. Rail contracts can be terminated by the government if service levels prove insufficient. Costs generally remain elevated and volatile given exposure to fuel and wage demands, while possible changes of government should not be ignored given the potential for the goal posts for transport operators to move. 

More favourably, passenger volumes from the pandemic have improved, and the continual rollout of congestion charging schemes may push more people to use public transport. Long distance rail is also proven to be more environmentally friendly than flying. The previous sale of its US business has strengthened its balance sheet, while a focus on shareholder returns exists given an ongoing share buyback programme, and there's a forecast dividend yield of over 2.5%. 

For now, and while the many variables which can impact transport companies make them higher risk, it is arguable that current performance and green credentials could grab the attention of investors.


  • Environmental credentials given a need to reduce fossil fuel emissions
  • Strengthened balance sheet


  • Subject to political change and risks
  • Many factors such as the weather outside of management control

The average rating of stock market analysts:


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