ii view: FirstGroup positive but under a political cloud

First-half results to 28 September

• Adjusted revenue up 2% £650 million
• Adjusted operating profit up 2% to £100.8 million
• Interim dividend of 1.7p per share, up from 1.5p last year
• New share buybacks of £50 million
• Net debt down 15% to £977 million

Chief executive Graham Sutherland said:

“We have reported a robust set of results for the first half of our 2025 financial year and are on course to make further progress in the second half, reinforcing our strong track record for delivery. 

“As a major bus and rail operator in the UK we have a critical role to play in supporting the country’s wider economic, social and environmental goals. We will continue to take a proactive approach, demonstrating our strengths as an experienced, trusted partner in public transport.”

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ii round-up:

FirstGroup (LSE:FGP) transported almost two million passengers per day via rail and bus over its last financial year to late March.

First Bus serves more than a fifth of the UK population via a fleet of approximately 4,800 buses. 

First Rail operates around 3,700 locomotives and carriages across the three train operating companies of Great Western Railways (GWR), Southern Western Railways (SWR) and the West Coast Partnership (WCP), as well as two open access routes. 

For a round-up of these latest results, please click here. 

ii view:

Headquartered in Aberdeen, FirstGroup employs around 30,000 people. The company supports the UK Government’s goal to remove all diesel-only trains from service by 2040 and is committed to operating a zero-emission bus fleet by 2035. Rail operations generated its biggest slice of profit during this latest period at 62%, with buses the balance of 38%. 

FirstGroup recently re-entered the London bus market, subject to regulatory approval, after acquiring RATP for £90 million, which holds a 12% market share of the capital’s bus services. The expected deal brings a further 1,000 buses and 3,700 employees. 

For investors, uncertainty regarding the ownership of railway contracts and the potential terms under which the new government might look to acquire them, persists. Rail profits are sizeable for FirstGroup. Company net debt when including lease liabilities is close to £1 billion, industrial staff relations for the industry have historically proved difficult, while an estimated price-to-net asset value comfortably above the three-year average may suggest the shares are not obviously cheap. 

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To the upside, passenger volumes for both bus and rail continue to improve from pandemic lows. The company’s recent acquisition of RATP adds to its bus interests and takes it back into the London market. The ongoing rollout of congestion charging schemes may push more people to use public transport, while long distance rail is proving to be more environmentally friendly than flying. 

For now, uncertainty regarding rail contracts is likely to leave potential new investors sidelined. However, FirstGroup’s arguable green credentials and a forecast dividend yield of over 3.5% are incentives to watch this stock.

Positives: 

• Environmental credentials given a need to reduce fossil fuel emissions
• New £50 million share buyback programme

Negatives:

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

The average rating of stock market analysts:

Buy