Interactive Investor

ii view: FirstGroup heads north on profit cheer

10th March 2023 15:32

by Keith Bowman from interactive investor

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This FTSE 250 UK bus and rail operator has rallied year-to-date. We assess prospects. 


Second-half trading update 

Chief executive Graham Sutherland said:

“I am pleased by the Group’s progress in the second half of our 2023 financial year. We remain committed to working closely with our partners to deliver successful bus and rail networks that serve the needs of our customers and communities and to playing a central role in achieving many of society’s economic, social, and environmental aims.”

ii round-up:

Bus and rail service operator FirstGroup (LSE:FGP) today raised its current full-year profit expectation as more passengers returned to use its services. 

Bus passenger volumes had risen to 83% of their pre-pandemic 2020 levels, aided by English and Scottish government fare subsidy schemes introduced at the start of the year. Rail passenger demand had also risen for the two lines where it takes full revenue risk. 

Shares in the FTSE 250 company rose by more than 2% in UK trading on a day when the FTSE 250 index was down 2%. It came into this latest news up by 5% year-to-date. Fellow FTSE 250 transport operator National Express Group (LSE:NEX) also rose by a similar amount, leaving them up around 6% in 2023. The mid-cap index itself has risen by less than 1% year-to-date. 

The City had previously looked for profit for the year ending 25 March to come in at around £137 million, up from 2021’s adjusted operating profit of £123 million. 

In England, a £2 bus fare cap scheme introduced at the start of the year was recently extended to the end of June. Free bus travel for all under-22s in Scotland commenced at the start year and continues.  

In early March, FirstGroup and the UK’s second largest regional bus operator, announced an extra £35 million investment into the electrification of its bus fleet and related infrastructure. 

Annual results are scheduled for 8 June. 

ii view:

Started in 1986, FirstGroup today operates a fleet of 4,900 buses and 3,800 rail vehicles carrying around 1.5 million passengers per day. Its rail franchises include Avanti West Coast, Great Western Railways (GWR) and Hull Trains. Its UK buses serve two-thirds of the UK’s 15 largest conurbations.

It is committed to operating a zero-emission bus fleet by 2035 and to not purchase any new diesel buses after 2022. Its rail business supports the UK Government’s goal to remove all diesel-only trains from service by 2040. In 2022, it was named as one of the world's cleanest 200 public companies for the third consecutive year by sustainable business media group. 

For investors, elevated costs and potentially higher staff wages given ongoing union strikes need to be remembered. The geographical diversification enjoyed by its major rival National Express warrants consideration, as do political risks and possible changes of government when the goal posts for transport operators can move.

More favourably, mass transportation easing congestion and potentially taking fume emitting vehicles off the road arguably give it green credentials. The previous sale of its US business has strengthened its balance sheet, previous staff shortages have improved, while the dividend yield is forecast to increase from an historic 1% to nearer 2.5% in future. 

In all, and while the many variables which can impact transport companies make them higher risk, a current consensus analyst estimate of fair value at close to 130p per share gives grounds for cautious optimism. 


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


  • Subject to political change and risks
  • Elevated operating costs

The average rating of stock market analysts:


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