FirstGroup raises full-year profit expectations as travel recovers

London-listed bus and train operator FirstGroup hailed a significant recovery in the number of people riding on public transport over the winter, as it raised its profit guidance.

The FTSE 250 group said parts of its rail business had experienced “stronger than anticipated passenger demand”, while government initiatives and improved services had encouraged more people to use buses.

As a result, the company said its profit would be ahead of previous expectations for its 2023 financial year, which ends in March. Analysts had forecast an adjusted operating profit of £137.4mn for 2023.

Bus passenger volumes have returned to 83 per cent of 2020 levels, which FirstGroup said was driven partly by government initiatives, including a £2 fare cap in England and free bus travel for people under 22 in Scotland.

The government had repeatedly extended pandemic financial support for bus routes, which FirstGroup said had “helped protect vital services for passengers”.

The company said its own operational performance had also improved after it hired more drivers.

On the railways, passengers have returned more quickly than forecast at the two FirstGroup train operators that are fully privatised and where the company holds financial risk: Lumo and Hull Trains.

The UK government holds all financial risk at FirstGroup’s four other train companies after it nationalised many services in 2020 — Avanti West Coast, Great Western Railway, South Western Railway and TransPennine Express — and pays the company a fee to run the trains, shielding it from fluctuations in passenger numbers.

Still, Avanti and TransPennine Express have suffered from major disruption over the past nine months following a breakdown in relations between FirstGroup management and the drivers’ trade union.

UK government ministers have warned that these two services could be nationalised in the coming months, although operations at Avanti have improved.

“I am pleased by the group’s progress in the second half of our 2023 financial year,” said chief executive Graham Sutherland.

Shares in FirstGroup rose 1 per cent to 107.30p by mid-morning in London trading on Friday.